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Tax Audit Entertainment Industry

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They’ve just done it again! The IRS has targeted the entertainment industry for tax audits. If you’re an actor, director, producer, entertainer, composer, writer, film star, rock star, producer, recording artist, musician, publisher, manager or in any other way related to the music entertainment, film or related industry, you can or probably should suspect that you will be a target for the IRS examination of your tax returns.

 

This October, the IRS has released its Entertainment Audit Technique Guide as guidance to assist IRS auditors in the audit of individuals and businesses involved the entertainment industry.  The audit technique guides were developed as part of a Market Segment Specialization Program to target certain industries in which the IRS will generally apply additional scrutiny or consideration in enforcing compliance with tax reporting.

 

On the income side, the IRS will review residuals, royalties, licensing fees, fringe benefits, advances and more to ensure that all applicable revenues are fully reported. On the expense side, the IRS will scrutinize your record keeping, reporting compliance, the failure to capitalize, depreciate and amortize expenses, employment taxes, home office deductions and more to ensure that deductions actually exist, are not “personal” in nature and are fully supported in accordance with the strict reporting requirements of travel, meals and entertainment deductions required by law.

 

Remember that an audit of this year’s targeted tax industries may not hit you until around two years from now unless your returns are specifically targeted for other reasons. That does not mean you have nothing to worry about for two years. What that means is that THIS year’s return may not be audited for another two years, but by that time its highly likely that your audit will include this year’s returns, next year’s returns and possibly the year after that — all at one time and all with the same audit issues. So the time to get your affairs in order is NOW so you don’t get killed on your tax audit later.

 

Many of the tax strategies previously overlooked are being specifically targeted as “suspect” from the write-off of entertainment expenses, equipment leasing contracts, reimbursements, fringe benefits, income characterization, home office deductions and more. On the up side, we can make certain affirmative elections to allow you to take expenses, or a portion thereof, currently, rather than capitalize and amortize up front costs over a much longer period of time that would otherwise be required by law.

 

Whatever the case may be, the key in successful tax negotiations lies in the planning – the early identification of tax issues, strategies and the implementation of those strategies early in the game to help achieve the most optimal success.

 

 

 

IRS Adopts “Taxpayer Bill of Rights” – Taxpayer Rights

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The Internal Revenue Service (IRS) this week announced the adoption of the Taxpayer Bill of Rights. For the most part, there’s really nothing new here. The IRS does not necessarily have the “final word”. The Taxpayer Bill of Rights gives taxpayers certain taxpayer rights to challenge the decisions made by the IRS that impact their tax obligations and payment of those taxes.

The Taxpayer Bill of Rights simply takes the existing rights and restates them into 10 broad categories; making them more visible and easier for taxpayers to find. Perhaps the most frequently asked questions regarding taxpayer’s rights concern the rights of appeal and challenge to IRS decisions and the right to retain representation in tax matters.

The Right to Challenge the IRS’s Position and Be Heard provides taxpayers with the right to object and provide additional information not previously considered in response to adverse IRS actions. In those cases that a taxpayer disagrees with an IRS position and can provide additional information that may benefit the taxpayer, taxpayers have the right to present additional information to be considerate and expect a prompt response to their objections even if the IRS does not agree with their position.

The Right to Appeal an IRS Decision in an Independent Forum gives taxpayers the right to a fair and impartial administrative appeal of most IRS decisions, and in less frequent cases, the right to take their tax cases to court. The right to appeals offers taxpayers a “fresh look” at their case by a new and impartial IRS representative where taxpayers were properly wronged or that new additional information was not considered.

Perhaps a taxpayer’s most important right is the Right to Retain Representation before the IRS, giving gives taxpayers the right to retain the services of a knowledgeable, licensed tax attorney, certified public accountant (CPA) or enrolled preparer to represent their interests. Navigating through complex tax law and IRS procedure (in the case of tax problem representation before the IRS) often requires professional guidance to gain the maximum benefits available to a taxpayer. The IRS is not independent; having a contrary position to that sought by taxpayers to seek the assessment and collection of federal income taxes. It is not the obligation of the IRS to provide taxpayers with the maximum tax relief benefits that are available.

The Taxpayer Bill of Rights has been redefined in the following 10 categories:

The Right to be Informed
The Right to Quality Service
The Right to Pay No More than the Correct Amount of Tax
The Right to Challenge the IRS’s Position and Be Heard
The Right to Appeal an IRS Decision in an Independent Forum
The Right to Finality
The Right to Privacy
The Right to Confidentiality
The Right to Retain Representation
The Right to A Fair and Just Tax System

If you, or someone you know, has a tax problem and needs professional assistance with dealing with the IRS, contact us for additional information to see how we can help you.

Handling the Payroll Tax Audit and Back Taxes

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Did you get a payroll tax audit letter or IRS notice of back payroll taxes you owe? Does your Company owe back taxes? Payroll tax audits are no fun and usually open up lots of tax problems for examination by the IRS. IRS audits can be costly to represent and time consuming. If you have a payroll tax problem you may need IRS representation right away.

Not Paying Payroll Taxes

When times are tough and you need the cash, it’s tempting to pay your payroll taxes to the IRS later and use the cash now. Not only are tax penalties quite harsh, but these problems have a way of snowballing from one period to the next and never get paid; which is what gets you in really big trouble.

Not paying your income taxes is one thing, but not paying your payroll taxes is much worse. Not paying your payroll taxes is a crime and you can be held both criminally and civilly liable. This is because the IRS gives special treatment to payroll taxes as it is viewed as not your money. Not paying your payroll taxes is viewed as not paying the IRS amounts that belong to your employees – not yours.

Steps to Solve Payroll Tax Problems

Well, the first thing you do is simply pay the taxes you owe. Unfortunately, if that’s all there was to it, you probably wouldn’t be here right now. So what’s your next option?

Your second step is to stop the bleeding. So you made a mistake, you needed the money and you used the payroll taxes to pay your bills. The problem is you probably have done this over and over again. This is what the IRS calls “cascading”. You need to show the IRS that the problem won’t happen again. How do you do this? You pay the most recent payroll taxes first. That’s right! Not the oldest taxes you owe, but the most recent. And you keep on paying your payroll taxes going forward on time.

Your third step is to deal with paying the old taxes. You can usually pay this through an installment agreement, or payment plan to pay your taxes over time. How much you need to pay and when will depend on how much cash you have available to pay your taxes going forward. A tax problem resolution specialist can help you complete the calculations and remit all the paperwork you’re going to need.

Strategies for Paying Back Taxes

As you can see, there are back tax payment strategies that can help you. There are other strategies of which taxes to pay and when to pay them as well. Now, don’t look to the IRS to help you – they won’t. It’s not in their best interest. But an experienced tax problem resolution specialist can. You just need to find the right tax problem specialist to help you and foot the bill.

How the IRS Collects the Tax Debt

Payroll taxes have a special place in the heart of the IRS. As previously stated, the IRS gives special treatment to payroll taxes as it is viewed as not your money. Accordingly, the IRS will hold business owners and other responsible persons personally liable for these taxes.

This means that if the IRS can’t get at the money because the business doesn’t have it, it will go after your personal bank accounts. If one owner doesn’t have the money either, it will go after the other, and so on until they find someone to pay it. It doesn’t even have to be the owner of the Company – it can be an employee, the bookkeeper, manager or accountant or just about any other “responsible person”.

If you think it’s unfair that the IRS is coming after you, or you work in a Company that’s not paying its payroll taxes and you have certain control over payroll, seek immediate professional help.

IRS Audit Tax and Payroll Tax Problems

At IRS Audit Tax you can get experienced, quality IRS representation to help you solve your tax problems and back taxes at a great price. Call today to find out more.

 

GOT A LETTER FROM THE IRS? IRS AUDITS

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So you got the IRS audit letter.  Lucky you!  Once you’ve calmed down you’re going to have to deal with it and we can help. There’s basically two main types of IRS audits – those that you reply by mail and those that ask you to call to schedule an appointment. The first type is called a correspondence exam. The IRS identifies issues that you may have reported incorrectly or simply require clarification. The second type is called an office visit or examination where the IRS is going on a fishing expedition by looking at all items on your tax return and see what pops up. IRS-Audit-Notice+3572[1]

In a correspondence exam, you’re often given a letter (CP-2000) indicating what the IRS believes are the changes needed to correct your return and pay your taxes. You have a chance to agree to all changes, some of the changes or simply disagree with all the changes that have been proposed. If you agree, you simply reply indicating the same. If you disagree, you need to reply indicating why and provide documentation supporting your position.

The office visit is much more comprehensive. This is usually reserved for self employed taxpayers or taxpayers where there are too many items on the return for the IRS to make its best guess what you owe. If your return is selected for an office visit, you are best advised to seek professional representation to protect your interests.

Once the examination is concluded, the proposed changes (Form 4549) are sent to you for your agreement. Shortly thereafter, you will be asked to pay the additional tax. If the audit shows that your income and taxes were under reported, you can pretty much count on your audit being expanded to other tax years (sometimes the year before and sometimes the year after). If you have the same issues in other tax years, you can often expect your taxes to be increased in other years as well.

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But what if you don’t agree!

If you don’t agree, you can first request a supervisory review of your issues. This is your first line of defense. In most cases, you won’t be successful as the results are generally reviewed first before you receive them by this same individual. You can also request an administrative appeal. The appeal gives you the right to bring the case before a brand new IRS person who takes a fresh look at your case and why you disagree. If all else fails, you can also bring your case to tax court. Each of these taxpayer rights is time limited, so its always best to act as quickly as possible where you can.

Can you Do It Yourself?

Sometimes. In correspondence exams this is much easier. You simply reply by letter indicating your agreement and pay your taxes.  If you can’t pay, that’s another story. You can even represent yourself in an office examination – by why would you? You need to be on equal footing with the IRS so they don’t walk all over you. Even the best negotiators know their limitations. You don’t know your rights, you don’t know tax law and you don’t know IRS procedure. The more complex the issues and the greater the tax can be, the more you need professional representation.

HELP! I CAN’T PAY MY TAX BILL -360 DEDREES OF TAXES

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You’re almost done with your federal income tax return, and you’re already thinking of ways to spend your refund. Then, the unthinkable happens–instead of a refund, you find that you owe $3,000. Or perhaps you’ve just received an IRS notice in the mail claiming that you owe $9,000 for the retirement plan distribution you took two years ago. You thought it was tax free at the time. Whatever the reason, you’re now in the unenviable position of owing money to the IRS–and you don’t have the cash. What do you do now? Help! I can’t pay my tax bill – 360 Degrees of Taxes

IRS ENFORCED COLLECTON ACTIONS ON THERISE

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IRSIn 2009, the number of IRS levy notices served on employers and banks rose over 25% to almost 3.5 million, as compares to 2.6 million in 2008.  In other words, the IRS issued a levy or garnishment for 1 out of every 42 people in the U.S. that filed a tax return.  The trend for enforced collection actions on IRS levy or IRS garnishment continues to escalate.

If you receive a Notice of Levy you must act fairly quickly to stop an IRS levy. You can stop an IRS levy by paying back taxes you owe, getting a short-term extension of time to pay, entering into an installment agreement or a variety of other actions you can take to stop the IRS levy.

The IRS takes collection activities very seriously.  And so should you! Be proactive. Seek immediate professional help right away. The longer you delay, the more difficult it is to release or stop the IRS levy.

DO NEW FEDERAL TAX LIEN RELIEF PROCEDURES APPLY TO YOU?

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What Are the Effects of A Federal Tax Lien?

When the IRS files a Federal Tax Lien, it makes a claim to a taxpayer’s property as security or payment for a tax debt. As this notice becomes public record, it not only serves to secure the IRS’s interest in collecting the tax debt, but informs other creditors of its priority position in collecting the debt and advises new potential creditors to carefully evaluate lending to the taxpayer in consideration of its preferred position.

Why Is This A Problem?

  • The filing of a federal tax lien may prevent the taxpayer from borrowing additional monies from other lenders until such time that the federal tax lien is removed;
  • Once recorded, the lien may damage a taxpayer’s credit score which may prevent the taxpayer from borrowing money that would otherwise have been available;
  • The recording of a tax lien may result in the taxpayer having to borrow money at a higher interest rate;
  • The inability of a business or individual to have available credit may result in missed opportunities that would otherwise have been profitable. Businesses without available credit will often fail in many ways.

Prior IRS Procedures

Prior to the new collection procedures, the IRS would generally not release a filed tax lien until the taxpayer satisfied all tax debt which includes taxes due, penalties and interest. Once the debt was satisfied, in most cases, the IRS would automatically release the lien within 30 days.

New IRS Procedures

Newer line procedures now require the IRS to withdraw the federal tax lien immediately once full payment of taxes are made if requested by the taxpayer. This is particularly important because the prior automatic release 30 days after the taxpayer paid the debt unfortunately does not always happen.
More importantly, the IRS will now allow lien withdrawals for taxpayers entering into a direct debit installment agreement, or where the taxpayer not only agrees to make periodic payments in full satisfaction of its debt.
Third, the IRS will withdraw liens on existing direct debit installment agreements upon the taxpayer’s request, after the taxpayer can show that the direct debit payments will be honored by the bank.
Fourth, the IRS will soon double the dollar thresholds to $10,000 when liens are generally filed (previously $5,000).

Summary

The new lien procedures were developed in response to the ineffectiveness of the IRS to collect taxes despite the significantly increased filing of tax liens by the government. The filing of tax liens has not only been ineffective, but further hurts the ability to collect as it damages the taxpayer’s ability to borrow from other sources, causes an increase in interest rates when the taxpayer can borrow, damages a taxpayer’s reputation amongst the business community and other creditors.
Even though the filing of a tax lien may be removed, the notification that a tax lien was filed remains for many years thereafter which ultimately hurts the taxpayer’s credit score resulting in more limited borrowing options and higher interest rates.
Taxpayer’s facing liens now have more options to eliminate the filing of these liens by entering into certain agreements that were not previously available.

Taxpayer’s who already have tax liens can help increase their ability to borrow by having existing liens removed even when the tax debt is not fully paid.