Category Archives: Dealing With The IRS

IRS Survey, Compliance Check & Examination Defined – Paul Gaulkin CPA

person inspecting

There are three types of ways the IRS will generally check a tax return for proper accuracy and accounting. These three include the survey method, compliance check and examination. Survey Method Returns can be surveyed by the IRS without the taxpayer ever being notified. Agents can survey a return if they believe an examination would result in no material change in tax liability. This procedure is available only if the agent has not contacted the taxpayer or the taxpayer’s representative, … Read more

Estimated Tax Payments & Underpayment Penalties – Paul Gaulkin CPA

Adding Machine Tape

Generally, if someone is an employee of a company, the withholding that is taken out of their paycheck should cover the tax liability at the end of the year. If a person is self employed, this is not the case and estimated payments much be made each quarter. This is generally called a declaration of estimated tax for which the taxpayer indicated their intent to make estimated payments. Understanding an Underpayment If the total amount of tax paid through withholding … Read more

Tip Income & Reporting to the IRS – Paul Gaulkin CPA

Tip Jar

The IRS considered any tip income received as income by a taxpayer to be compensation for services rendered and must be included in the taxpayer’s gross income. The most important part of tip income is the recording of the tips by the taxpayer throughout the year. This is a requirement by the IRS and cannot be avoided. In the event the taxpayer does not record their tip income throughout the year, the IRS will use measures to reconstruct the income … Read more

IRS Offshore Voluntary Disclosure Program Updated – Paul Gaulkin CPA

currency from other countries

In early 2011, the IRS announced their second Offshore Voluntary Disclosure Initiative, which is designed to bring offshore money back into the United States tax system. The idea is to help those who have hidden accounts overseas to bring their money back to the US and become current with their taxes. Then again in early 2012, the IRS announced it would be reopening the voluntary disclosure initiative for the third time. This is in response to the US government’s ongoing … Read more

Non Liable Spouse & Offer in Compromise – Paul Gaulkin CPA

trust

In the event an Offer in Compromise based on doubt as to collectability is submitted by a married taxpayer whose spouse is not liable for the tax debt, the assets and income attributable to the non liable spouse will not be considered in determining reasonable collection potential. This means that the IRS will generally not pursue the assets and income of the non liable spouse when negotiating an Offer in Compromise that is based on doubt as to collectability. The … Read more

Doubt as to Collectability Offer in Compromise – Paul Gaulkin CPA

Big letter stamp IRS

If a taxpayer wishes to submit an offer in compromise on the basis of doubt as to collectability, they will need to show the IRS: 1. It is unlikely that the tax liability can be collected in full 2. The amount offered in satisfaction of the liability reflects the reasonable collection potential Without proving these two points to the IRS, it is likely that an offer will be denied on the basis of doubt as to collectability. Reasonable collection potential … Read more

Tax Returns Due after Filing for Bankruptcy – Paul Gaulkin CPA

Writing on Chapter 13 Bankruptcy

Generally, a debtor must file their tax returns that are due after the bankruptcy petition has been filed. If this is not completed within 90 days from the petition date, the taxing authority can request the court to dismiss the bankruptcy case. In the case of a Chapter 7 bankruptcy, they can have the court convert it to a Chapter 13. If the taxpayer is unable to file their tax returns within this 90 day window, they should request an … Read more

Voluntary Classification Settlement Program Form 8952 – Paul Gaulkin CPA

Workers that are on a construction site

It is a known fact that millions of workers are misclassified by employers are independent contractors when reality, they are actually employees. This problem deprives the federal government of huge sums of tax revenue because of underreporting income and related unpaid employment taxes. In order to combat this problem, the IRS has established a few ways in which to correctly classify workers. Voluntary Classification Settlement Program The voluntary classification settlement program is a program designed to provide relief to eligible … Read more

Tax Return Audit Mathematical Error Correction – Paul Gaulkin CPA

Screen showing error message

When the IRS decides to audit a return, they have the ability to correct mathematical errors inside the Service Center when they process the return. The IRS has a program called the mathematical/clerical error abatement program which is designed to assess additional tax resulting from errors on a tax return. A key point to understand is that corrections made by the Service Center for mathematical errors are not subject to Notice of Deficiency procedures. Defining a Mathematical Error Typically a … Read more

Offer in Compromise Framework – Paul Gaulkin CPA

Sign saying expect results

The Internal Revenue Code provides statutory authority for the IRS to compromise or settle any tax liability for less than the full amount owed. This authority is discretionary on the part of the IRS, and there are no statutory rules that require acceptance of an offer in compromise under any circumstances. The IRS has to authority to reject any offer in compromise it chooses to and usually only will compromise a debt under certain circumstances. Chance of Acceptance It should … Read more