IRS overwhelmed by Offer in Compromise requests, changes made

According to the Treasury Inspector General for Tax Administration (TIGTA) report, the IRS was overwhelmed by Offer in Compromise (OIC) requests.  Due to the backlog of OIC requests, TIGTA recommended changes to the OIC program.  The IRS did implement some of the recommended changes.

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IRS Fiscal year 2011 Data Book

The IRS issued their fiscal year 2011 Data Book.  The 2011 Data Book provides a snap snapshot of agency activities for the year.  For example, the IRS collected $2.4 trillion and processed more than 234 million tax returns.  Below are some interesting statistics related to tax resolution.

82% of annual individual tax returns selected for audit resulted in a change.  On average, the changes made resulted in about $11,000 of additional taxes per return.

71% of annual business tax returns selected for audit resulted in a change.  On average, the changes made resulted in about $850,000 of additional taxes per return.

30% of the annual individual income tax returns selected for audit claimed the Earn Income Tax Credit (EITC).

The IRS Substitute for Return program resulted in $14.4 billion of additional taxes.

The IRS assessed $31 billion in penalties.  The IRS abated $11 billion in penalties.

On average, 34% of individual penalties were abated and 44% of business penalties were abated.

There were 59,000 Offer in Compromises (settlements) filed.  33% of the offers submitted were accepted.

IRS issued 3.7 billion levies.  This is an increase of 4% compared to 2010.

If you need relief from the IRS, ALG Tax Solutions, P.C. can help.  Call us at 855-MI-TaxHelp. (855-648-2943)

IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.


Do not let your taxes snowball out of control (Part Two)

Having discussed Sally’s tax delinquencies and the corrective action taken by ALG Tax Solutions in Do not let your taxes snowball out of control (Part One), the following narrative is about an independent contractor named George.  Name and location changes to protect client confidentiality are in effect.  This is another real life example demonstrating how back taxes can become as threatening as an out-of-control snow ball rolling down the hill. Continue reading…


Do not let your taxes snowball out of controll (Part One)

I have helped a considerable number of clients resolve their back taxes.  One thing that surprises most of my clients is the sheer amount of taxes, interest, and penalties owed.  How do people get into this situation?  Owing taxes can be compared to a snowball that starts to roll from the top of a hill and gets increasingly larger as the snowball progresses down the hill toward the bottom.  Given a long ride, that snowball gets too big to handle.  The following narrative, which includes name and location changes to protect client confidentiality, demonstrates how back taxes can erupt out of control. Continue reading…


Are you a real estate professional?

If you own rental property, the rental activity is generally treated by the IRS as a “passive activity.”  This is important to understand because if you operated rental property and sustained a loss, the loss can be claimed against active income, such as wages.  This loss deduction is limited to $25,000 for the claimed tax year.  The $25,000 loss deduction may be further limited by Adjusted Gross Income (AGI).  However, if you are a bona fide real estate professional, the rental activity is treated as an “active activity.”  Therefore, there is no limit on the amount of losses that can be deducted. Continue reading…


How does a tax resolution company find out about your tax problem?

Taxpayers with IRS problems are being cold-called or are receiving letters from companies urgently seeking contact and promising that your tax problems can be easily resolved.  Some companies are being creative, sending out letters to taxpayers that contain personal information which often mimic official IRS letters.  Companies gain access to personal information due to a tax lien being filed by the IRS.

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