IRS Audit? How long does the IRS have to complete an audit once started?

The IRS cannot assess additional debt based on a tax return if three years have passed from the Tax Return’s original filing date.  See 26 USC Section 6501 – Limitations on assessment and collection

“Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed”

This means that the IRS cannot start an audit and than change the tax amount or “assess” the additional tax against you if 3 years have passed since you have filed your return.  If you filed the return before April 15 in the year it was due, the three year time starts to run on the due date or April 15th.

Some exceptions exist to this rule…of course:

Exception One

If you have understated your income by more than 25% this 3 year deadline can be extended to 6 years.

Exception Two

If you filed a fraudulent return, there isn’t a time limit for the IRS to finish the assessment.

Exception Three

Really a repeat of the general rule stated differently…the audit time limit period only starts to run when you file your return.  Un-filed tax returns are always subject to assessment by the IRS.

Exception Four

A partial exception exists in that the IRS Manual instructs the auditor to complete the adjusted assessment or close the audit within 28 months.  It sets this internal deadline to provide itself time to deal with any appeal you may file to the assessment.

If you are being audited, look backwards to the date you filed the tax return and than count forward 3 years.  The Auditor technically has that much time to make a decision and enter an assessment of the new amount the IRS thinks you should owe.

Michael Anderson, Tax Lawyer In ArizonaWritten By:

Anderson Tax Law
2158 N. Gilbert Rd. Ste 101
Mesa, Arizona 85203

Phone: (480) 507-5985
Fax: (480) 507-5988
Email: [email protected]
Website: https://taxlawyeraz.com

IRS Lien Withdrawal – The $25,000.00 Rule

IRS Lien Withdrawal – Get to $25,000.00 and it can happen

IRS Lien Withdrawal - The $25,000.00 RuleThe IRS Tax Lien hurts your credit.  It really does, and everyone is afraid of it as a result.  There are a few ways to get rid of it though or even avoid it in the first place for that matter.  Read more here

This Blog Post is only about one thing.  Your ability to have the IRS withdraw a Notice of Federal Tax Lien if your debt is $25,000.00 or less.

So…a few things about this that are important to understand:

1.  The $25,000.00 amount isn’t calculated or at least it shouldn’t be calculated based on what you currently owe.  It is based on the original amount that was owed (including any portion of penalty and interest assessed back then) when the return was filed.  Your current debt is likely much higher than the original amount as a result of penalty and interest.

2.  You have to be able financially to pay the debt within 5 years OR the remaining period left in the statute of limitations on collection, whichever is shorter.  The payments you make need to made by direct debit from your account.

3.  You can’t ask the IRS to withdraw the Lien until you have made at least three payments via the Direct Debit Installment Plan you set up.

4.  If you qualify to do this, you don’t have to provide the IRS any financial information.  No work info, no property info, nothing but the account and routing numbers for the bank account you are going to use for direct debit.

5.  You can pay down the debt to $25,000.00 in order to qualify for this type of Lien withdrawal.  If you have $28,000.00 intotal tax debt and the original assessed balance is still $26,000.00, you would need at least $1000.00 in order to get to the $25,000.00 threshold and then you could pay the $28,000.00 over 72 months if directly debited or the length of time remaining in the statute period, whichever is shorter.

6.  If you are in a IRS payment plan, and the debt is paid down to $25,000.00 as a result, you can convert the payment plan to a Direct Debit Plan for this purpose.

7.  If you are in an IRS payment plan and the original debt was less than $25,000.00 you should consider converting to the Direct Debit Plan.

8.  The Baby Elephant doesn’t really have anything to do with this.

Michael Anderson, Tax Lawyer In ArizonaWritten By:

Anderson Tax Law
2158 N. Gilbert Rd. Ste 101
Mesa, Arizona 85203

Phone: (480) 507-5985
Fax: (480) 507-5988
Email: [email protected]
Website: https://taxlawyeraz.com

401k Should Be Safe In Bankruptcy

401k and Bankruptcy

Bankruptcy is still considered by most people to be a last resort, and I don’t necessarily disagree, but thinking that way can result in a big mistake.

In an effort to avoid bankruptcy, the honest, hardworking, debtor sees his or her 401k as a way to stay afloat in the hope that things will turn around.  Funds are borrowed from the account initially and then it is often just cashed out.  Penalties and tax are withheld and the remainder goes to living expenses and debt payments.

The problem becomes apparent when things haven’t turned around and the 401k money is gone.  The debt still exists, a lawsuit or two is filed and thoughts of bankruptcy loom large.

When the Debtor visits with the Bankruptcy Attorney, he learns, often for the first time, that the funds in the 401k account were safe from creditors the entire time and would have been safe from the Bankruptcy Trustee had the filing been done with the 401k still intact.

In fact, funds in a 401k are not even property of the Bankruptcy Estate.  The Supreme Court has held that most retirement plans that contain enforceable “anti-alienation” clauses, aren’t property of the bankruptcy estate and aren’t subject to the jurisdiction of the Bankruptcy Court.

In 2005, this protection was extended to include a very large portion of Individual Retirement Accounts (IRA) as a result of the  Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or BAPCPA.

Michael Anderson, Tax Lawyer In ArizonaWritten By:

Anderson Tax Law
2158 N. Gilbert Rd. Ste 101
Mesa, Arizona 85203

Phone: (480) 507-5985
Fax: (480) 507-5988
Email: [email protected]
Website: https://taxlawyeraz.com