This guide will walk you through the steps, helping you understand the process, avoid common pitfalls, and see how tax professionals can make a difference.

Key Takeaways

• You don’t need a lawyer to settle with the IRS—CPAs and enrolled agents can handle the same process at a lower cost.
• Understanding the IRS Offer in Compromise process can help you reduce your tax debt without expensive legal fees.
• Professional tax relief services can simplify complex tax issues and increase your chances of success.
• If your Offer in Compromise is rejected, alternative solutions such as installment agreements or currently not collectible status can still provide relief.
• Seeking expert help can reduce the stress and confusion of dealing with the IRS, making the process more manageable.

Understanding the IRS Settlement Process

Navigating the IRS settlement process can seem complex, but it becomes more manageable when you understand the key steps. The IRS may agree to a tax settlement when they believe they won’t recover the full amount from you. 

In these cases, settling for a reduced amount is better than receiving nothing. The biggest benefit of a successful settlement is paying less than you owe. Other advantages include avoiding severe consequences like wage garnishments or bank levies.

Why You Don’t Need a Lawyer

Contrary to what you might think, you don’t always need a lawyer to settle with the IRS. Many individuals successfully handle their settlements with the help of tax professionals, such as the CPAs and enrolled agents (EAs) at Direct Tax Relief. 

These professionals are just as experienced as lawyers but come at a fraction of the cost, giving you both financial savings and more control over your case.

DIY Tax Settlement: Pros and Cons

Handling your tax settlement on your own can have its benefits, such as saving on legal fees and having direct control over your case. 

However, navigating the IRS process can be time-consuming and confusing, especially if you’re not familiar with tax laws. Mistakes in your application or documentation can lead to delays or rejections, which could worsen your situation.

Resources for Self-Representation

The IRS website provides a wealth of guides and forms to help you settle your taxes yourself. Additionally, you can find online courses, books, and tools to guide you through the process. 

However, tax professionals such as those at Direct Tax Relief can simplify this process by offering their expertise at a more affordable rate compared to lawyers.

Success Stories of Self-Negotiation

Many taxpayers have managed to reduce their debt through IRS settlements without hiring a lawyer. With dedication and the right resources, they’ve successfully negotiated settlements that allowed them to pay less than their total debt. 

These stories show that with careful preparation, it’s possible to resolve tax issues independently. However, the process can be simplified and more efficient when using a CPA or EA.

Common Pitfalls and How to Avoid Them

Dealing with Rejection from the IRS

It’s common for the IRS to reject initial settlement offers. If this happens, don’t panic—there are still options. You can appeal the decision or explore alternatives such as installment agreements or currently not collectible status. Staying calm and knowing your alternatives can make a big difference.

It’s also important to note that you don’t have to rely on a lawyer to handle these situations. A tax professional, like a CPA or EA, can handle appeals and explore alternative solutions on your behalf, often at a much lower cost than an attorney. 

Direct Tax Relief offers these services through their team of experienced tax professionals, ensuring you get the best possible outcome.

Preparing Your Financial Information

Gathering Necessary Documents

The first step in settling your IRS debt is gathering the necessary financial documents. These include pay stubs, bank statements, and other financial records. Having all your documentation in order will make the settlement process smoother and faster.

Creating a Financial Hardship Statement

Your financial hardship statement explains to the IRS why you can’t pay your full tax debt. Be honest and detailed, outlining your income, expenses, and any special circumstances, such as medical bills or job loss. 

A clear, well-prepared hardship statement can greatly improve your chances of getting an IRS settlement approved.

Calculating Your Offer Amount

The IRS requires Form-433 A (for individuals) or Form-433 B (for businesses) to calculate your offer amount. These forms detail your assets, income, and expenses. The offer must match the net realizable value of your assets plus any monthly income after expenses. 

Submitting a well-documented offer improves your chances of settlement success. It’s also crucial to file all your tax returns and pay any due amounts before submitting an offer.

Alternatives to Settling with the IRS

Installment Agreements

An installment agreement allows you to pay off your tax debt over time if you can’t make a lump-sum payment. This option divides your debt into manageable monthly payments.

While interest and penalties continue to accrue, an installment agreement is often more feasible than paying your entire balance upfront.

Currently Not Collectible Status

If your financial situation makes it impossible to pay your tax debt, you can request “Currently Not Collectible” (CNC) status. This status temporarily stops the IRS from collecting your debt, though interest will still accumulate. 

While it’s not a permanent solution, CNC status can provide temporary relief while you get back on your feet.

Bankruptcy as a Last Resort

Filing for bankruptcy should be your last option. Although bankruptcy can eliminate some tax debt, it has serious long-term consequences for your credit. Make sure you’ve explored all other options before considering bankruptcy.

The Role of Tax Settlement Firms

What They Claim to Offer

Many tax settlement firms claim they can drastically reduce your IRS debt. These firms often advertise the use of former IRS employees to negotiate on your behalf. However, the reality is that only a small percentage of settlement offers are accepted by the IRS, and not all taxpayers qualify.

How to Choose a Reputable Firm

If you decide to seek professional help, be sure to choose a firm with a team of CPAs or EAs rather than just attorneys. Direct Tax Relief provides affordable services with a full team of tax professionals, ensuring you get quality assistance without the high fees lawyers often charge.

Tips for a Successful IRS Settlement

Communicating Effectively with the IRS

Polite and professional communication with the IRS is essential. Always respond promptly to any letters or requests for information. Keeping clear, organized records of your communications will help you stay on top of your case and make the process smoother.

Staying Organized Throughout the Process

The IRS requires thorough documentation, so keeping your financial records, tax returns, and IRS correspondence well-organized is critical. Staying on top of your paperwork ensures you don’t miss any important deadlines or steps.

Knowing When to Seek Professional Help

While handling your tax settlement independently can save money, it’s important to know when to seek professional help. CPAs and EAs can provide valuable assistance for a fraction of the cost of hiring a lawyer. Direct Tax Relief has an experienced team of EAs ready to guide you through the settlement process.

If you’re struggling with IRS issues, remember that you’re not alone. Our team at Direct Tax Relief is here to help you find the best solution for your tax problems.

The post Settlement With The IRS Without a Lawyer – Here’s How appeared first on Direct Tax Relief.

5 Key Takeaways

• 1. The IRS can revoke or deny your passport if you owe more than $50,000.
• 2. Penalties and interest count toward the $50,000 threshold, so the total adds up fast.
• 3. Residents in some states may need a passport for domestic air travel under the Real ID Act.
• 4. Exceptions exist for those in repayment programs or facing emergencies.
• 5. Working with tax professionals can help resolve debt and reinstate your passport.

What Is the IRS Passport Law?

In December 2015, a five-year infrastructure spending bill included a provision granting the IRS the authority to limit travel for people with significant tax debt. 

If you owe more than $50,000 (including penalties and interest), the State Department can deny your passport application or even revoke an existing passport.

This law is part of the government’s efforts to collect unpaid taxes, but it’s causing concern for many taxpayers, especially those unaware of their growing debt.

How Does It Affect You?

1. Debt Threshold Includes Penalties

The $50,000 limit isn’t just your original tax debt—it includes penalties and interest, which can increase the total quickly. For example, a smaller initial debt can snowball over time if left unpaid.

2. Domestic Travel Could Be Impacted

Residents of Minnesota, New York, New Hampshire, and Louisiana face unique challenges due to the Real ID Act. 

If these states don’t comply, residents may need a passport for domestic flights. For tax debtors in these states, this could restrict even domestic air travel.

3. Lower Thresholds in the Future?

While the current threshold is $50,000, it could change. Economic factors and the number of unresolved tax cases might prompt lawmakers to lower the limit, impacting more taxpayers.

Are There Exceptions?

1. Active Disputes

If you’re contesting a tax bill, the restriction doesn’t apply. Active disputes show the IRS that you’re addressing the issue, even if it’s not resolved yet. Filing an appeal or requesting a review can buy you time to avoid travel restrictions.

2. Installment Agreements

Those making regular payments through an IRS program, like an installment agreement, can keep their passports. 

These agreements show the IRS that you’re serious about repaying your debt. As long as you stay current with your payments, your passport won’t be affected.

3. Emergencies

In some cases, the State Department may issue passports for emergencies or humanitarian reasons, though the details remain unclear. 

This could include situations like medical needs or family emergencies abroad. However, approvals for these exceptions can be unpredictable and depend on the circumstances.

Celebrities like Iggy Azalea, who reportedly owes nearly $400,000, can still travel because they’re on repayment plans. If a public figure can find a solution, it’s a good reminder that resolving tax debt is possible with the right steps.

What Can You Do If You Owe Money to the IRS?

Ignoring tax debt isn’t an option. The IRS has powerful collection tools, including wage garnishments, tax liens, and now passport restrictions.

1. Understand Your Debt

Start by checking your tax transcripts or contacting the IRS directly to confirm your debt total. Remember, penalties and interest often make the actual amount much higher than you expect.

2. Consider Professional Help

Dealing with the IRS can be intimidating. Hiring a tax professional—like a CPA or enrolled agent—can save you time and stress. Tax professionals can help you negotiate repayment plans, challenge incorrect assessments, or even reduce your debt.

Unlike attorneys, services like Direct Tax Relief offer affordable solutions with a full team of experts. You don’t have to overpay for legal representation when a specialized team can handle it.

3. Act Quickly

The sooner you take action, the better. Penalties and interest add up daily, increasing your total debt and the likelihood of passport restrictions.

Why Hire a Tax Relief Professional?

Many people think they can handle tax issues themselves, but navigating IRS rules isn’t easy. A tax relief professional can:

1. Negotiate Favorable Terms

Professionals know how to secure better repayment terms or settle for less than the total owed.

2. Save Time

The IRS process is time-consuming. Experts handle the paperwork and communication for you.

3. Prevent Costly Mistakes

Filing incorrect forms or missing deadlines can worsen your situation.

Read more about choosing the right firm in What to Look for in a Tax Relief Firm.

Can the IRS Reinstate Your Passport?

If your passport is revoked, resolving your tax debt is the only way to get it back. Options include:

1. Paying in Full

This clears the debt and removes restrictions.

2. Entering an Agreement

Setting up an installment plan or an offer in compromise can lift the travel restriction.

3. Appealing the Debt

If you believe the IRS made an error, you can contest the amount owed.

For more details on resolving state tax issues, check out this guide.

How to Check If You’re at Risk

If you’re worried about passport restrictions, start by reviewing your tax records. You can request a transcript directly from the IRS or use an online tax account. This will help you understand your total debt, including penalties and interest.

Once you know where you stand, take action to address any unpaid taxes. The IRS typically notifies you if your debt qualifies for passport restrictions. Acting before receiving this notice can prevent further complications.

The Risks of Ignoring IRS Notices

Ignoring IRS notices can escalate the situation quickly. Unpaid taxes can lead to wage garnishments, tax liens, or even legal actions. Passport restrictions are just one of many enforcement tools the IRS uses.

Delaying resolution also increases penalties and interest, making your debt harder to pay off. Tax professionals can help you respond to IRS notices and avoid further consequences. It’s better to act sooner rather than later.

Need help with tax debt? Visit Direct Tax Relief to learn how professionals can assist you.

Final Thoughts

The IRS passport law is a wake-up call for taxpayers. Owing over $50,000 can restrict your freedom to travel, but it doesn’t have to. With the right help, you can resolve your debt, protect your rights, and avoid these restrictions.

Direct Tax Relief offers affordable, professional assistance to help you navigate IRS challenges. Call today to get started on restoring your financial freedom.

The post New IRS Passport Law Limits Travel to Those in Tax Debt appeared first on Direct Tax Relief.

One of the most recognizable names in the entertainment industry, Beyoncé Knowles-Carter, has found herself in hot water with the IRS. According to a Notice of Deficiency dated January 18, 2023, the world-famous performer and businesswoman owes approximately $2.7 million in taxes and penalties, which have accumulated over two years: 

• 2018: $805,850.00 additional tax + $161,170.00 penalty
• 2019: $1,442,747.00 additional tax + $288,549.40 penalty

And that’s not all; the above amounts have accrued interest.

Disputing the Deficiency: Queen Bey vs. the IRS

Knowles-Carter earns income through various means: her music and acting career, endorsements, business ventures, and more. The net worth of this multi-award-winning singer-songwriter, actress, entrepreneur, and philanthropist is estimated to be around $500 million. Now, almost $3 million of that value is at risk.

Of course, Knowles-Carter is contesting the matter in the U.S. Tax Court. In a 20-page petition filed on April 17, 2023, she disputed the additional taxes and penalties. One of her claims is that the IRS erroneously disallowed millions of dollars’ worth of deductions that she is entitled to, including a charitable contribution carryover of $868,766. Other expenses mentioned are insurance, legal fees, management fees, professional services, utilities, depreciation, etc.

According to Section 6622(a) of the tax code, accuracy-related penalties are calculated at 20% of the underpayment of tax. Knowles-Carter also addressed that in her petition, stating that if it is determined that tax is in fact due, the penalties should be waived because she “acted reasonably and in good faith.” Furthermore, the professional tax advice that Knowles-Carter relied on will be taken into account by the judge when determining the outcome of her case.

The pop icon has requested that the trial take place in Los Angeles, California, where she lives. Because this is a civil matter, the burden of proof will rest on the petitioner—in this case, Knowles-Carter (as an individual taxpayer)—to show that the IRS is wrong.

Next Steps for the Star

Knowles-Carter filed for the redetermination just before the deadline, as taxpayers have 90 days from the date of the Notice of Deficiency to challenge the taxes and other amounts. There is a possibility that the matter will settle out of court, before the trial takes place. Until then, we’ll be keenly following the status of this high-profile tax battle involving one of the world’s most influential entertainers.

However, Knowles-Carter isn’t the first superstar songstress to contest government claims of million-dollar tax fines. Colombian singer and songwriter Shakira has been embroiled in a tax controversy that began in 2017 with the Paradise Papers and that has culminated in an upcoming trial for six counts of tax fraud. Spanish prosecutors have accused her of failing to pay the equivalent of over $15 million; if found guilty on all counts, she might face a jail sentence of 8+ years as well as more than $25 million in fines. In 2013, another Grammy award-winning artist, Lauryn Hill, was sentenced to three months in federal prison and subsequently three months of house arrest after evading taxes on over $2 million of earnings.Though regular taxpayers may not face fines as high as those of celebrities, it still pays to have an experienced consultant on one’s side. If you have any tax-related issues or concerns, we’d be happy to help. Contact us today, and we’ll get you started with a free and confidential consultation with one of our trusted professionals.

The post Beyoncé Braces for Tax Court to Contest Over $2 Million appeared first on Direct Tax Relief.

This comprehensive bill targets making health care and prescription drugs more affordable, fighting climate change, taxing wealthy corporations, and more funding for the IRS.

Although the President has signed this bill, some savings in the bill won’t kick in right away. For example, efforts to lower drug prices, including caps on their costs for seniors, won’t take effect until 2025.  Studies have also shown the bill won’t reduce inflation, but others argue it will. Only time will tell.

Pivotal items in this legislation include: 

• The creation of a 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals will not be increased, and stock buybacks by corporations will have a 1% excise tax.
  
• Prescription drug price reform: Medicare will be allowed to negotiate the price of certain prescription drugs, bringing down the price recipients will pay for their medications. Starting in 2025, Medicare receivers will have a $2,000 cap on annual out-of-pocket prescription drug costs.
  
• IRS tax enforcement: For several years the IRS has declared they are understaffed and funded poorly, making it impossible to operate at full capacity.The bill invests $80 billion in the IRS over the next 10 years, allowing them to upgrade their systems and adequately staff their offices for resolving taxpayer issues.
  
• The IRS commissioner has pledged not to use the extra funding to audit small business or lower income taxpayers who earn less than $400,000.  He noted that other resources would be invested in hiring, training, and IT systems that will allow the agency to better serve all taxpayers.
  
• Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which were scheduled to expire at the end of this year, will be extended through 2025.
  
• Energy security and climate change investments: The bill includes numerous investments in climate protection, including tax credits for households to offset energy costs, investments in clean energy production, and tax credits aimed at reducing carbon emissions.

By signing this bill into law, President Biden hopes the Inflation Reduction Act will tackle the climate crisis, uplift the lower classes, and support American workers by creating good-paying, union jobs across the country.

The post Everything You Need to Know About the Inflation Reduction Act appeared first on Direct Tax Relief.

Internal Revenue Service Tax Refund Backlog 

The biggest reasons for the Internal Revenue Service tax backlog are understaffing and paper tax filings. Most IRS tax refund forms are submitted to the IRS as paper documents. That paperwork takes time to process. For every paper filing, an Internal Revenue Service employee needs to review the document for errors. The amount of manual labor required to process the nation’s tax filings is extremely high. Outdated digital processing methods can largely be blamed for this problem. The COVID-19 pandemic made matters worse in the short term. In early 2020, the Internal Revenue Service was forced to temporarily shut down many of its offices. This dramatically impacted the speed of processing time for tax returns and other documents. As of May 2022, the IRS is still reporting as many as 9.8 million unfiled tax documents. For millions of Americans, that means their IRS tax refund is still being processed. And for many more, other crucial tax documents have gone untouched. But there may have been a positive to come out of this unprecedented backlog. The Internal Revenue Service even rented containers to accommodate the mail. In response to its current situation, the IRS has increased its efforts to integrate new technology into its operations.

Pilot Internal Revenue Service Program 

The Pilot Internal Revenue Service Program is a new measure taken by the IRS to overhaul its use of new technology. Those interested in the full scope of the Pilot IRS program can read about it on the IRS website. In short, what this program means for most people is filing taxes will be easier, and processing time will decrease. The biggest advantage offered by the Pilot IRS Program is enhanced scanning capabilities. Scanning-as-a-service (SCaaS) and Optical Character Recognition (OCR) solutions will cut processing times significantly for the IRS. For individuals who owe the IRS money, these new technologies can help in a handful of ways.

How the Pilot IRS Program Helps Those Who Owe Back Taxes

The simplest way this program benefits you if you owe back taxes is that processing time will be faster. The Internal Revenue Service will be able to scan and file documents more quickly, meaning your case can be resolved sooner. As anyone who has gone through this process knows, there is often a lot of paperwork involved. The less time spent waiting for your case to be processed, the faster your tax debt can be resolved. With new scanning capabilities, the IRS hopes to be able to prioritize “high need” requests. This can be especially beneficial to anyone who owes money or requires additional filing. In addition to accelerating processing time, the pilot IRS program also aims to streamline the process for individuals filing taxes. For those who owe back taxes, this should cut down drastically on uncertainty, and make repayment plans easier to follow. And, the IRS hopes, the streamlined process will cut down on filing errors overall.

If you are struggling with tax debt or back taxes, Direct Tax Relief can help. Do not hesitate to contact us today. Our IRS tax resolution experts will make sure you don’t pay a single cent more than you owe.

Sources:
https://www.irs.gov/about-irs/procurement/about-pilot-irs
https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue

The post How The IRS Is Trying To Speed Up The Paperwork Process appeared first on Direct Tax Relief.

TAX LIENS. The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien. That amount is now $10,000. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.

When a taxpayer meets certain requirements and pays off their tax debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing using Form 12277, Application for Withdrawal.

Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a Direct Debit installment agreement. Taxpayers also need to request this in writing by using Form 12277.

If a taxpayer defaults on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.

INSTALLMENT AGREEMENT. The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS generally will not need a financial statement, they may need some financial information from the taxpayer. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have Web access you may file Form 9465, Installment Agreement, to apply.

Taxpayers in need of installment agreements for tax debts more than $50,000 or longer than six years still need to provide the IRS with a financial statement. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F.

OFFER IN COMPROMISE. An Offer in Compromise is an agreement that allows taxpayers to settle their tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program. The IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers.

Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.

If you have an unresolved IRS tax debt relief situation, contact Direct Tax Relief.  Our team of tax attorneys will review your tax situation and determine if the IRS Fresh Start program is the best approach.

Source: https://www.irs.gov/newsroom

The post IRS Fresh Start Program Helps Taxpayers Who Owe the IRS appeared first on Direct Tax Relief.

The Obama years saw the Bush tax cuts made permanent for all but the wealthiest, plus new Obamacare levies. Now the question of how much of your paycheck you’ll get to keep—and who should pay more or less—is back on the table in a big way.

Clinton’s Tax Plans

Clinton promises to avoid raising taxes on anyone making less than $250,000 a year. But for the wealthy, she proposes pegging the value of most deductions (with the exception of charitable contributions) at 28% of taxable income, lessening their value for anyone in or above the 33% tax bracket, which kicks in at $231,450 for joint filers, $190,150 for singles.

The rich would get even more bad news, including a 4% surcharge on income above $5 million and a top estate tax rate of 65% (up from 40%) on the largest estates: $500 million for a single, $1 billion for a couple. Also, there’s the Buffett Rule, a minimum overall income tax rate of 30% for those earning more than $1 million. “Millionaires shouldn’t be paying a lower rate than the middle class,” says Clinton adviser Michael Shapiro, echoing Clinton fan Warren Buffett, who has said his effective tax rate is lower than his secretary’s.

Trump’s Plan

Trump wants a tax cut “across the board.” He proposes increasing the standard deduction (what you use when you don’t itemize) to $30,000 for joint filers, from $12,600 now, ensuring that families earning less than that would owe no income taxes.

However, Trump would also deep-six the personal exemption—the $4,050 write-off you can claim for each member of a household—eliminating a boon for parents. To simplify the tax code, he would pare the current seven brackets, ranging from 10% to 39.6%, to three. And he wants to scrap the estate tax, the alternative minimum tax, and, as part of repealing Obamacare, the 3.8% surtax on investment income, paid by those earning more than $250,000 ($200,000 if single).

Most dramatic is what he would do for business owners. He proposes lowering the corporate tax rate to 15% from 35% and—this is the radical part—he has floated the idea of applying that lower rate not just to large, public companies but also to the self-employed and business owners. In other words, dentists, law partners, and Trump himself.

What the Presidential Tax Plans Mean for You

The size of your tax bill isn’t likely to change much if Clinton wins unless you are wealthy. Those earning $133,000 and up would see an average tax hike of about $1,600, according to the Tax Foundation. But as the graphic below shows, under Clinton’s plans, the highest earners will bear the brunt of that.

With Trump’s framework, the Tax Foundation analysis shows that even middle-class earners—those making roughly $50,000 a year—get more than $1,000 back. But Trump’s plan to end personal exemptions could leave some parents behind. The top 1% of earners, on the other hand, would be up by more than $100,000. They “will make out like a bandit,” says Tax Policy Center fellow Roberton Williams.

Regardless of which party wins the Presidential election, let Direct Tax Relief assist with tax preparation services to help you win.  We can prepare your taxes as well as help with tax debt relief for outstanding taxes. Contact us today for a no-cost or obligation consultation with one of our case managers.

The post Where the Candidates Stand on Your Taxes appeared first on Direct Tax Relief.

A Treasury statement said the final rules would “balance the operational needs of companies while preventing the erosion of our U.S. corporate tax base,” by exempting foreign subsidiaries of multinationals, S-corporations, mutual funds, real estate investment trusts and transactions between banks from a regime that would allow the IRS to treat transactions as part debt and part equity when calculating taxes, rather than wholly one or the other.

Floated as part of a larger plan to curb corporate inversions overseas earlier this year under Section 385 of the Internal Revenue Code, the original version caught flak for its sweeping nature and unintended consequences for wholly domestic transactions. The final rules also move back the compliance date to 2018 and allow the relevant documents to be filed along with a corporation’s tax return. The changes were made, according to the department, in order to accommodate suggestions and avoid problems in normal-course-of-business transactions.

“These purported debt instruments do not finance any new investment in the operations of the borrower and therefore have the potential to create significant federal tax benefits, including interest deductions that erode the U.S. tax base, without having meaningful non-tax significance,” the department’s new rules said.

In addition to the exemptions for the banking industry and certain kinds of corporations, all taxpayers will be able to exempt $50 million in debt from recharacterization under the final rules. The department estimated that the final rules could affect some 6,300 companies, and require $224 million in total startup costs for compliance and $56 million annual compliance costs. On the other side of the ledger, the rules could allow the IRS to take in another $461 million to $600 million in annual revenue.

Shortly after the rules’ release Sen. Orrin Hatch, R-Utah, blasted the administration for “completing rules that could jeopardize American businesses and the economy here at home.” He said the rule falls into a larger pattern of President Barack Obama’s administrative agencies creating new rules out of whole cloth without consulting Congress.

The U.S. Chamber of Commerce issued a statement expressing doubts about the rule — the group has already launched a challenge contending that a different rulemaking in the broader anti-inversion push went beyond its statutory authority — saying the agency appears to have addressed some of its concerns.

“We continue to believe punitive, one-off changes to the tax law do nothing to address the root of the purported ‘inversion problem’: our antiquated and anticompetitive tax code,” the group said. “If we are seeking to make the United States a competitive place to do business, we need to focus on achieving comprehensive tax reform.”

Critics have included business and trade groups, as well as both Democrats and Republicans, who’ve called out the proposal as overly broad and beyond the Treasury Department’s authority, while also contending it’s been rushed through without proper consideration for public comments.

Just one day after the Treasury Department announced the anti-inversion package, the U.S. pharmaceutical giant Pfizer Inc. and its Irish rival Allergan PLC called off their intended $160 billion merger, saying their decision was “driven by the actions announced by the U.S. Department of Treasury.”

The agency pushed back on criticism that the rules went beyond its authority with the revisions issued Thursday, saying that the Treasury secretary has the authority to issue tax rules that address such particular situations without applying more broadly. Those final rules, according to the agency, take into account several thousand comments and input from the industry.

“The Treasury Department and the IRS carefully considered those comments in revising the proposed rules to significantly reduce compliance burdens and in developing the regulatory impact analysis of costs and benefits that accompanies and supports the final and temporary regulations,” it said.

Furthermore, the agency said, the law does not require the Treasury Department to keep within the “four corners” of a transaction — the parties involved, funds exchanged and terms they operate under. The final rules allow it to take into analysis the surrounding context of a transaction, which carries over from the common law understandings of debt and equity, the agency said.

It also noted that there is an element of urgency to issuing the final rules, as the three-year lookback period under the current formulation would capture debt instruments issued this year.

–Additional reporting by Vidya Kauri and Bryan Koenig. Editing by Brian Baresch.

–Additional reporting by Vidya Kauri and Bryan Koenig. Editing by Brian Baresch.

Correction: An earlier story misidentified the rule the U.S. Chamber of Commerce challenged.

The post Treasury Issues Final Controversial Debt-To-Equity Rules appeared first on Direct Tax Relief.

NEW DELHI (AP) – Indian police have arrested 70 people and are questioning hundreds more after uncovering a massive scam to cheat thousands of Americans out of millions of dollars by posing as U.S. tax authorities and demanding unpaid taxes, a police officer said Thursday.

According to police in Mumbai, the yearlong scam involved running fake call centers which sent voice mail messages telling U.S. nationals to call back because they owed back taxes.

Those who called back and believed the threats would fork out thousands of dollars to “settle” their case, Mumbai police officer Parag Marere said Thursday.

The scam brought in more than $150,000 a day, Marere said without giving a total sum. If the scam netted that amount daily, it would have made almost $55 million in one year.

Some victims were also told to buy gift vouchers from various companies, and hand over the voucher ID numbers which the impostors then used to make purchases, Marere said.

Police said they are likely to file charges against many of the 600 or more people still being questioned on suspicion of running the fake call centers, housed on several stories of a Mumbai office building.

Those arrested so far include several of the alleged ringleaders, as well as people accused of providing equipment and setting up the fake call centers. The criminal charges filed against the suspects include extortion, impersonation and violations of India’s information technology laws.

“We are questioning those who were involved in the fraud, including those posing as tax investigators,” Marere said.

Police raided the offices this week and seized hundreds of hard disks, hard disks, high-end servers and other electronic equipment.

Indian media reports said 70 percent of the scam’s proceeds were retained by the suspects in India, while the rest was paid to collaborators in the U.S.

Indian news broadcaster NDTV reported that one U.S.-based company allegedly collected the victims’ personal information and passed it to the fake call centers.

The IRS reports receiving more than 900,000 complaints about similar scam calls since October 2013. More than 5,000 people have fallen for the scam, paying out more than $26 million collectively as a result of scams.

The IRS has yet to comment on this recent arrest in India.

The IRS warns it will never call and demand immediate payment. It will never require you to use a specific payment method for your taxes, like a gift card or prepaid debit card. The agency will never ask for credit card numbers over the phone.

If you receive a call from someone claiming to be from the IRS and asking for money, you should never give out personal information. Report the call to the IRS using their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.

If, however, you or your business owes more than $10,000 in back taxes, contact Direct Tax Relief for a free, no-obligation consultation. Our team of tax attorneys can work with you to develop a strategy to resolve your IRS and state tax debt with a tax relief program. Leverage our ten years of experience and 95% success rate and achieve a custom tax resolution for your situation.

The post Dozens arrested at India call center linked to IRS scam calls appeared first on Direct Tax Relief.

Targeted Billionaires

One of the biggest recent stories has been the tax evasion trial of ex-billionaire Sam Wyly. The former owner of Michaels Stores, Inc. and Sterling Commerce has been accused of concealing over one billion dollars in offshore accounts. He and his brother Charles (deceased) claim the use of offshore tax havens was the result of bad legal and accounting advice. However, accepting bad advice doesn’t necessarily leave you unscathed. Judge Barbara Houser agreed, finding Wyly guilty of tax evasion and in debt to the IRS for hundreds of millions of dollars.

Beyond Swiss Banks

Last month, Michele Bergantino was convicted of assisting United States citizens with concealing over four billion dollars in Swiss tax havens to avoid paying taxes. Despite Bergantino being an Italian citizen living in Switzerland, he has been convicted by the IRS and will be extradited to America to serve up to five years in prison. And Swiss accounts aren’t the only financial institutions under scrutiny.

This June the IRS obtained account documents for Ching-Ye Hsiaw from UBS AG, a Swiss bank. An American citizen residing in China, Hsiaw has avoided paying income tax to the IRS by hiding money in offshore accounts. These records showed bank transfers to an institution in Singapore. Traditionally, Singapore will not provide banking information without the written consent of the account owner, but, under international comity, governments can operate under the laws of the accusing country. This means Singapore’s bank secrecy laws will not protect American citizens.

National Crackdowns

Last week, Argentine soccer star Lionel Messi was convicted of tax evasion by a Spanish court. He and his father were accused of funneling income from royalties and sponsorship deals to banks in Belize and Uruguay to avoid taxes. While Messi claimed ignorance of his financial dealings, the Spanish courts decided that ignorance was not a defense and sentenced Messi to 21 months in jail, along with the payment of back taxes.

Violators: Offshore Accounts Not Worth the Risk

Any US citizen must report any and all income, whether foreign or domestic when tax time hits. But that’s not all. Any individual with a financial interest or signature authority over foreign financial accounts must file a Foreign Bank and Financial Accounts (FBAR) statement. Failure to report foreign income or accounts may lead to prosecution and be considered tax evasion, plain and simple.

In this era of increasing globalization, offshore accounts are no longer an undetected way of dodging taxes. And with international agreements that allow countries to bend the rules for foreign entities, there are few laws that can protect your private, offshore assets. Instead, avoid the risk of bankruptcy penalties and possible jail time and make sure your accounts are in line with the IRS.

Do you have an offshore or a foreign bank account and owe back taxes?  You have options. Contact Direct Tax Relief and inquire about the IRS Streamline Filing Compliance Procedure that might be the best approach for your tax situation.

UPDATE FOR HISTORICAL PURPOSES:

The IRS closed the Offshore Voluntary Disclosure Program in early 2018.  Since the program started over 56,000 taxpayers utilized the program to voluntarily comply and pay over $11 billion back taxes, interest, and penalties.

Sources

• Sam Wyly https://www.wsj.com/articles/judge-says-businessman-sam-wyly-hid-wealth-offshore-1462976141
• Michele Bergantino https://www.accountingtoday.com/news/ex-credit-suisse-banker-pleads-guilty-in-tax-evasion-case
• Ching-Ye Hsaiw https://www.accountingtoday.com/news/ubs-gives-irs-records-on-us-citizens-account-in-singapore
• Lionel Messi https://www.forbes.com/sites/kellyphillipserb/2016/07/06/soccer-star-lionel-messi-found-guilty-of-tax-evasion-sentenced-to-21-months-in-prison/?sh=2099e6566f61
• Offshore Voluntary Disclosure Program: https://www.irs.gov/newsroom/irs-to-end-offshore-voluntary-disclosure-program-taxpayers-with-undisclosed-foreign-assets-urged-to-come-forward-now
• Streamlined Filing Compliance https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

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