Category: Federal Tax Issues

Received an IRS Bitcoin Letter?  The IRS recently sent out approximately 10,000 letters across the US to those who have sold Bitcoin or other cryptocurrency (i.e., LiteCoin, Ethereum, etc.) in the past.  These letters signal the IRS’ intentions to increase enforcement of unreported Bitcoin and other cryptocurrency transactions as they stand to gain additional revenue through increased taxes, interest, and penalties to be assessed.  This action may not come as a surprise given the manic level of trading and publicity cryptocurrency has garnered at times since 2017 when Bitcoin hit its all-time high. It was also only a matter of time before the IRS stepped up enforcement efforts after it succeeded in its lawsuit against Coinbase, a cryptocurrency exchange, to turn over user data.  The question now is what to do about an IRS Bitcoin letter?

What to do About an IRS Bitcoin Letter?

The answer is to respond to the IRS Bitcoin letter as ignoring notices from the IRS is never advised. The IRS has the ability to make assessments against those people who don’t respond.   Further ignoring those assessments can result in wage garnishment, banking account levies, tax liens, etc.  Not to mention, the North Carolina Department of Revenue (NCDOR) will likely be following shortly behind to collect its share of unreported Bitcoin and other cryptocurrency income based on the adjustment made by the IRS.  In some case, the IRS may even pursue criminal charges as “virtual currency is an ongoing focus area for IRS Criminal Investigations” per Notice IR-2019-132 issued July 26, 2019.  As such, an IRS Bitcoin letter should be taken seriously.

How to Report Bitcoin on a Tax Return

To be fair, the IRS has not exactly provided much guidance on the issue since the issuance of IRS Notice 2014-21 despite multiple requests from taxpayer and tax professionals alike.  To add more confusion, such guidance seemingly conflicts with the information requested on the IRS Bitcoin letters recently issued.  The key take away is that the IRS considers Bitcoin and other cryptocurrencies to be property similar to stocks (and not a fiat currency like the US dollar, Mexican Peso, etc.).  As such, the value of the property needs to be calculated for each Bitcoin transaction or trade.  The IRS recommends that taxpayers file amended tax returns to proactively report their Bitcoin gains and losses before they get around to doing it for taxpayers (usually not to their advantage).  More specific detail pertaining to the the IRS Bitcoin letters can be found directly on the IRS website.

How to Calculate Bitcoin Gains and Losses

For most people, the starting point of calculating any gains or losses from the sale of Bitcoin or other cryptocurrencies is to calculate how much cash (in US dollars) was deposited into their Coinbase or other exchange (i.e., Binance, etc.) account plus additional fees incurred (i.e., bank “crypto” fees, etc.) before the first trade or transaction was made.  Then this amount is divided by the number of full and partial units of cryptocurrency purchased.  This produces the the initial price per unit.  If up until this point a person has done nothing else but let the units sit in the exchange or in a personal e-wallet or in a cold storage “hard wallet” (i.e., Ledger Nano) then its likely they have no reportable or taxable transactions.  However, the moment  a subsequent trade or purchase is made the person enters into the world of reportable and likely taxable transactions.  For each transaction one must recalculate the value per unit before the transaction to determine the gain or loss after the transaction.  It doesn’t matter if a person ends up losing more money than ever gained; each transaction must still be reported.  As if this all wasn’t tricky enough on its own, many people used cryptocurrencies to buy other cryptocurrencies or “Alt Coins”(i.e., Tron).

How to Calculate the Value of Alt Coins?

As an overview, Alt Coins are essentially virtual currency purchased with other virtual currency instead of fiat (cash).  This is analogous to buying 5 apple for $5 ($1 per apple) and then trading 4 apples for 2 oranges.  What then is the value of the oranges?  The orange would be worth $2 each. Let’s say that you then you sold both oranges for a total of $1.  What would be the gains or losses reported on IRS tax returns for these transactions? I won’t belabor the point further, but know that these are the types of issues that significantly increase the complexities regarding the reporting of Bitcoin and other cryptocurrencies and Alt Coins to the IRS on tax returns.

How Do I Find the Value of my Bitcoin or Alt Coin From the Past?

There are many sites that can be found upon a quick Google search that will report the value of Bitcoin’s high, low, and average price for a certain day in the past.   However, it appears the IRS is now currently demanding the specific value at the point in time a transaction was made converted to US dollars.  A lot of this historic information can be found by logging into the exchange used to transact the Bitcoin and other cryptocurrency and to run through the calculation steps provided above.  However, many exchanges such as Coinbase and Binance have different versions of their user interfaces that vary in detail provided and complexity in understanding data outputs.  Luckily, it does appear that the exchanges are making strides to summarize data for users; however, it still has major limitations in its actual usefulness when preparing returns.

In closing, the sale of Bitcoin and other cryptocurrencies, similar to stocks, are considered property and not cash. Therefore, in general, the exchange of cryptocurrency will trigger an event that is reportable for tax purposes which may result in a gain or loss.  In either case, these transactions must be reported on annual tax returns to the IRS and states (i.e., NCDOR). The recent increased enforcement of cryptocurrency by the IRS appears to be just the tip of the iceberg as cryptocurrency seems here to stay.  As such, it’s best to proactively report the cryptocurrency transactions in a timely manner as accurately as possible and to respond to an IRS Bitcoin letter, if received.

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as tax liens, unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie
Lauren Massie, CPA, PLLC
8480 Honeycutt Road, Suite 200
Raleigh, NC 27615
(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

It’s hard to drive through a neighborhood these days without seeing an Opendoor “For Sale” sign proudly featured on the lawn.  This company and others like it have disrupted the traditional real estate market by allowing an alternative method for people to sell their homes.  But can a house with a tax lien be sold to online brokers like Opendoor, Zillow, Knock, Offerpad, etc?  The answer is “yes” BUT… you may need to obtain a discharge from the tax lien from the IRS and/or state taxing authority (i.e., North Carolina Department of Revenue for North Carolina residents) before closing or ensure that the proceeds of the sale will cover the tax debt in full at closing.

Can I Sell a House with a Tax Lien?

First, it is important to understand that the IRS and state taxing authority (i.e., NCDOR) only file a lien against a person who owes back taxes to protect the government’s interest.  Although a lien technically arises once any tax debt is assessed it isn’t made a matter of public record until an actual tax lien document is filed at a local courthouse.  Once filed, the tax lien will show up on a title report conducted by the closing attorney and will prevent the passing of a clean title (i.e., ownership) to the buyer thus killing the deal is most cases.  As such, the tax lien matter must be proactively dealt with sooner rather than later once a decision has been made to sell a house with a tax lien.  It can often take the IRS and NCDOR upwards of 30 days to review cases.

How to Sell a House with a Tax Lien

A house with a tax lien can be sold if the seller obtains permission from the IRS or state by creating an agreement whereby any proceeds of the sale go towards the tax debt in full or in part.  The IRS and NCDOR will release the lien upon payment of the full tax debt.  However, a conditional discharge of the tax lien will be needed before closing on the the house in cases where the proceeds will not cover the tax debt in full.

How to Get a Tax Lien Discharged to Sell a House

A tax lien discharge is required when the proceeds of the house sale won’t cover the amount of the tax debt associated with the lien in full.  In these cases, the IRS will require several pieces of documentation to assess whether the sale of a home with a tax lien is in the best interest of the government.  In other words, the IRS wants to make sure property is exchanged at an appropriate price so they get a fair shake at collecting the tax debt.  Common documentation required include a copy of the sales contract and an appraisal performed by a disinterested third-party.  Caution should be exercised to ensure that a disinterested third-party is involved in the appraisal process when utilizing an online or e-broker (or i-broker) such as Opendoor, Zillow, Knock, Offerpad, etc. who may not include a third-party appraisal in their process.  In traditional real estate transactions it is often the buyer’s lender who serves as the disinterested third-party who orders the appraisal.

Please feel free to contact me if you need help with resolving IRS or state (i.e., NCDOR) tax lien issues.  The main focus of my CPA practice is income tax representation for individuals facing issues with the IRS or the North Carolina Department of Revenue.  As such, I often work with sellers, real estate agents, and real estate attorneys to resolve tax lien and judgment issues so that homes can be successfully sold. I can be contacted by phone at (919) 792-8511 or you can email me directly using this link.

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  She regularly assists clients with issues such as tax liens, unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

Surprised to owe taxes this year?  The new tax laws that went into effect with the 2018 tax returns have caught more than a few North Carolina residents off guard.  For many people, this will be the first time in a long time (or ever) owing the IRS and/or the North Carolina Department of Revenue (NCDOR).  To add insult to injury, the IRS and NCDOR typically impose an underpayment penalty if not enough taxes were paid in throughout the year which increases the overall amount owed.  Fortunately, on March 22, 2019, the IRS decided to grant taxpayers additional tax relief to reduce and/or eliminate the underpayment penalty imposed on 2018 tax returns.  Below is information about underpayment penalties, how to avoid them, and how to get a refund of an underpayment penalty paid.

What is an Underpayment Penalty?

Starting with the basics, a tax return simply serves to reconcile the amount of tax you owe according to tax laws with the amount of taxes you have paid in throughout the year. For employees, Federal and North Carolina income taxes are withheld from each paycheck and remitted by their employers on their behalf.  For self-employed people, taxes are self-remitted through paying in taxes on a quarterly basis directly to the IRS and the NCDOR.  Uncle Sam and his cousin, NCDOR, want to collect their money from taxpayers year-round and not just every April when most individual income tax returns are due.  As such, they impose underpayment penalties on people who don’t pay in enough throughout the year.

How to Avoid Underpayment Tax Penalty

Taxpayers must pay in a minimum amount throughout the year to avoid underpayment penalties.  Underpayment penalties don’t typically apply if the tax owed on a return is less than $1,000.  However, for federal purposes, if the amount owed is $1,000 or greater a person must typically pay in the lesser of (1) 90% of the actual tax shown on their tax returns filed or (2) 100% of the tax shown on the tax return filed in the prior year (or 110% if the individual’s adjusted gross income exceeded $150,000) in order to avoid the underpayment penalty.  For North Carolina purposes, if the amount owed is $1,000 or greater a person must typically pay in the lesser of (1) 90% of the actual tax shown on their tax returns filed or (2) 100% of the tax shown on the North Carolina tax return filed in the prior year in order to avoid the underpayment penalty.

How to Get a Refund of Tax Penalties

The new tax laws that went into effect with the 2018 tax returns created a lot of uncertainty and confusion.  As such, many taxpayers were not aware that they weren’t remitting the proper amount of taxes throughout the year.  As such, IRS recently granted penalty relief by lowering the 90% threshold mentioned above to 80% upon request.  To request this treatment a taxpayer must fill out IRS Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trust and submit it along with their 2018 tax return.  Part II, box A, of the form should be checked and include the statement  “80% waiver of estimated tax penalty” on the form.  What if the 2018 return has already been filed and the underpayment penalty has been paid? In this case, you can request a refund of overpaid penalty by filling out Form 843, Claim for Refund and Request for Abatement and referencing IRC Code Section 6654(d)(1)(B) as the type of penalty to be waived.  As of the date of publishing, the NCDOR has not announced similar underpayment penalty relief.

Other Tax Penalty Relief

There are other tax penalty relief options which apply to other types of tax penalties imposed by the IRS and the NCDOR.  However, these penalty relief options are granted on a case-by-case basis and require further analysis to determine eligibility.

In closing, there’s a special tax penalty relief option available for people to use on their 2018 tax returns for federal purposes.  The penalty relief can be requested with the filing of the returns.  However, it may be necessary to file an additional form to obtain a refund for those people who have already filed.  Additional tax relief options exist on a case-by-case basis for other types of penalties imposed by the IRS and NCDOR.

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as penalty abatement, unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

How many years of back tax returns need to be filed with the IRS or NCDOR?  Perhaps it’s been a while since you last filed a tax returns with the IRS or North Carolina Department of Revenue (NCDOR) and now you want to get back into tax compliance.  You may be happy to know that there is a limit on how many years a person needs to go back.  In most cases, you only need to file the last six (6) years of returns in order to be considered back in compliance and eligible for tax relief.  In some special cases, you only need to file the last three (3) years of returns if you need to file back tax returns in North Carolina.  It is expected that the IRS and NCDOR will be pursing more non-filers who will be required to file several years of back taxes due to recent advances in data matching capabilities and reporting.

Should I File All Back Tax Returns?

There are some reasons to file additional years although most people are only required to go back the last 6 years for the IRS and the last 3 to 6 years for the North Carolina Department of Revenue.  The most common reason to file back tax returns beyond that required is to reduce outstanding liabilities related to back taxes.  In some cases, when a person fails to voluntarily file a tax return the IRS and North Carolina Department of Revenue will create a return on behalf of person (called a Substitute for Return).  Substitute for Return filings often result in a higher balance than what would have been owed if a person filed the return on their own.  Going back beyond the 6 years to file a return on a year for which a Substitute for Return has been filed can lower or even eliminate back taxes owed granting immediate tax debt relief.  Another common reason for filing federal tax returns beyond the 6 year requirement is to obtain more favorable credits for Social Security purposes.

Settle Tax Debt by Filing Back Tax Returns

Filing multiple years of tax returns may result in a large amount owed especially once interest and penalties are added.  In cases where the amount owed cannot be paid in full at once it may be necessary to set up payment plans via IRS or North Carolina installment agreements. Other options to settle tax debt include filing an Offer-in-Compromise which will require you to pay a lesser amount.  These options will help prevent enforced collection actions such as wage garnishment and bank levies (aka clearing of banking accounts).  However, eligibility for the aforementioned options mandate that you have filed the required back tax returns to be granted tax relief.

In closing, you generally only need to go back six (6) years to file back tax returns in order to get back into tax compliance.  However, you are allowed to file additional years if you wish.  However, all required back tax returns must be filed in order to settle tax debt and to qualify for other tax relief options.

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

Many people are asking themselves “why do I owe taxes this year?” or “what happened to my refund?” for the first time in a long time or ever!  On the surface, the reason for owing taxes or getting a reduced refund when you file this year is due to massive tax law changes that recently went into effect.  However, at the root of the problem is a tax withholding issue.  Learn more about tax withholding, how to fix it, and what to do if you cannot pay the tax due all at once.

Why Do I Owe Taxes to the IRS or North Carolina?

The simplest explanation for why taxes are owed on individual income tax returns is that not enough taxes were paid in throughout the year.  For employees, Federal and North Carolina income taxes are withheld from each paycheck and remitted by their employer on their behalf.  For self-employed people, taxes are self-remitted through paying in taxes on a quarterly basis directly to the IRS and the North Carolina Department of Revenue (NCDOR).  A person’s true tax liability is calculated each year when tax returns are prepared.  If they paid in more taxes throughout the year through paycheck withholding or quarterly estimated tax payment than their true liability they will have a refund.  Unfortunately, if they did not pay in enough taxes throughout the year then they will owe taxes.

How Do I Fix IRS and North Carolina Tax Withholding?

The first step in fixing tax withholding is to understand the proper amount of taxes that should be withheld.  You can simply use your prior year tax return to gauge how much you need to have withheld in the current year in times when tax laws are relatively unchanged (not the current situation) and when no major changes to your income or major life changes (i.e., children, marriage, home purchase, etc.) are expected.  However, more precise methods to calculate your withholding can be found in the form of withholding calculators found on the respective IRS and North Carolina Department of Revenue websites.

What If I Cannot Pay Taxes Due to North Carolina or the IRS?

The simplest method to address taxes you owe that you are unable to pay at once is to setup a standard installment agreement with the IRS and the North Carolina Department of Revenue.  Both the IRS and NCDOR will allow you to pay the taxes due over time.  Generally, as long as you make timely payments you won’t have to worry about scary enforced collection actions such as wage garnishments and bank levies (aka clearing out your banking account). There are other tax relief options to negotiate lower amounts depending on your circumstances in the event that the amount of the standard installment agreement causes a financial hardship.   A qualified tax professional can be helpful in these instances and may even be able to put your account on hold or even help you to settle your tax debt altogether especially if there are other back tax balances.  Tempted to not file at all?  Please, please file the returns!  Not filing the returns will result in steep penalties for failure to file in addition to penalties for failure to pay whenever you eventually decide to file the return or even worse when the IRS or NCDOR decides to file the return for you on your behalf (also known as a Substitute-for-Return).

In closing, if you owe taxes it is because not enough taxes were paid in throughout the year.  The proper amount of taxes will need to be paid in through adjusting your withholding with your employer or by remitting taxes directly to the IRS or NCDOR to avoid owing taxes in future years.  Payment plans are available to pay amounts due over time if needed.  However, if the payment plan creates a hardship then other tax relief options do exists which are best explored by a qualified tax professional.

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC resides in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

“How much will the IRS accept to settle tax debt?” is a common question for people with back tax issues.  The IRS will agree to settle back tax debt in cases where a person is unable to pay back the tax debt in full within the time allowed by law.  IRS tax settlements are often accomplished through use of the Offer in Compromise program (also sometimes referred to as the Fresh Start Program).  In order to qualify to settle IRS tax debt under this program you must have filed all required back tax returns and be remitting the proper amount of tax for the current year.  Additionally, how much the IRS will accept is based on Reasonable Collection Potential (RCP) which is explained in more detail below.

What is Reasonable Collection Potential?

The amount to offer the IRS to settle tax debt is based on a calculation involving a person’s net assets, monthly income, and monthly expenses.  Examples of net assets include retirement and investment accounts, equity in a home or vehicle, and cash in the bank.  Examples of expenses considered include food, clothing, housing, utilities, vehicle ownership and operating costs, life insurance, daycare, and child support to name a few.  The Reasonable Collection Potential is then calculated by subtracting monthly expenses from monthly income and then multiplying the result by 12 or 24 (see below).  This number is then added to the net assets referenced above. Note that the IRS has certain limits on amounts which can be claimed for certain expenses per their allowable standard guidelines.

How Much to Offer the IRS to Settle My Tax Debt?

The IRS offers two options for how to pay the amount of your offer.  The first option requires that you pay 20% of your offer amount upfront and then remit the remainder of the offer within 5 months from the date that an Offer in Compromise is accepted.  The second option doesn’t require the 20% upfront deposit but instead requires the first payment to be paid with the submission of the offer and for the remaining amount to be paid within 6 to 24 months in accordance with your proposed offer terms.  The formula to calculate your offer is below depending on which option is chosen.

• Option #1: (Lump Sum) = (monthly income – allowable monthly expenses = net income x 12) plus net assets = Offer Amount
• Option #2: (Monthly Payments) = (monthly income – allowable monthly expenses = net income x 24) plus net assets = Offer Amount

Note some taxpayer can qualify to submit an offer without paying a deposit or monthly payments.

Can I Just Pay the Actual Taxes Due and Not Interest and Penalties? 

Will the IRS agree to settle if I can pay them back all of the taxes and not the interest and penalty?  Unfortunately, the answer is no despite how logical this proposition seems.  Interest and penalties are imposed by law to incentivize people to timely pay their taxes each year.  With limited exceptions, interest and penalties cannot be removed.  Settling outstanding tax debt is most often accomplished by pursuing an Offer in Compromise.  However, other options to settle do exist in the form of partial pay installment agreement for example.

In closing, you can settle your tax debts with the IRS if you can demonstrate that you are unable to pay back the amount of tax, interest, and penalty in full and you submit an offer based on a Reasonable Collection Potential that is lower than the amount owed.

Video Reference: https://laurenmassie.com/reasonable-collection-potential/

About the Author:

Lauren Massie, CPA, EA, MBA resides in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.

Are tax debt relief companies a scam?  This is a valid and very logical question to ask especially if you are faced with back taxes and growing tax debts with the IRS or North Carolina Department of Revenue (NCDOR). Chances are that you’ve witnessed the TV and radio ads where you have happy people sharing their stories of how they settled their tax debts with the IRS for pennies-on-the-dollar.  You may have even done your own research on tax relief scams to find that many people have become victim to “tax relief” companies.  Some of those companies have since been forced to go out of business and others are currently under investigation by the Federal Trade Commission for false advertising. So to answer the original question posed; are tax relief companies a scam?  The answer is, not surprisingly, that some are and some aren’t.   Perhaps what is most important is that you be able to identify those companies which are truly invested in helping people to resolve their tax problems from those that are simply scamming people out of their money while utilizing unethical sales tactics.  Here are 3 red flags to be aware of when evaluating working with a tax debt relief company.

Red Flag #1: Guarantees to Settle Your Tax Debt with the IRS or North Carolina Department of Revenue

If anyone guarantees that they can settle your tax debt with the IRS or NCDOR just based on your initial conversation then run, run away fast!  Not even the most skilled and competent CPAs, tax attorneys, or other tax professionals can make a guarantee just based on a conversation.  True tax debt resolution that will benefit you will come as a result of an analysis of your IRS transcripts, NCDOR account, and your financial assets and liabilities.  Real opportunities to settle your tax debt DO exist; however, you must first be eligible.  Eligibility requirements are best determined by competent tax professionals, not the sales people you often encounter when you reach out to the TV/radio firms.

Red Flag #2:  Demand of a Large Upfront Fee

Don’t let fear and promises to instantly stop IRS collection actions cause you to part ways with large sums of money in the form of upfront fees.  As mentioned above, a true resolution to your tax problems will result from a thorough analysis of your individual tax situation.  As such, paying a one-size-solves-all amount will not benefit you!  A word of caution – there are certain actions that just about anyone (i.e., sales people) can do to temporarily delay IRS collections almost immediately.  Don’t confuse the value of this temporary action with an actual permanent solution.  To protect yourself ask questions – what specifically am I paying for (a temporary delay or a permanent solution)?  Can you provide a schedule of anticipated fees?  Make sure you aren’t parting with your hard-earned money only to be put into a temporary IRS collection delay situation.

Red Flag #3:  Lacks Proper Professional Credentials

Is the person offering you tax debt relief a competent tax professional (i.e., CPA, tax lawyer, enrolled agent, etc.) OR a sales person?  Competent tax professionals are often held to high standards by third-party governing boards which require specific educational requirements and experience as well as ongoing yearly ethical and technical training.  Additionally, the credentials of competent tax professionals can easily be verified. For example, a CPA licensed in North Carolina can been verified online by the state board (click here).  It is important that you have a good understanding of who is actually personally responsible and invested in getting the best outcome for you.  Therefore, it is advised that you speak directly to such professional.  If you will be assigned to a “team” consider asking questions about them too.  Are you really working with a “team of tax attorneys and CPAs”, a term popularly touted in many advertisements?  Be sure to ask questions.

About the Author:

Lauren Massie, CPA, EA, MBA is based in Raleigh, North Carolina.  The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue.  She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts.  Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.

I’m here to help!

Lauren Massie

Lauren Massie, CPA, PLLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

(919) 792-8511

www.laurenmassie.com

Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.