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Orange County Tax Law Blog

Part II: 3 problems with tax debt collection by private agencies

A law passed in 2015 requires the Internal Revenue Service (IRS) outsource collection of certain tax debt to private debt collection (PDC) programs. This is not the first attempt at using third party businesses to collect on tax debt. In 2004, Congress granted the IRS to create a similar program. After three years, the IRS chose not to renew the program due to inefficiencies.

Part I: How much tax debt are private agencies collecting?

The estimated tax gap for fiscal 2017 – the difference between the amount owed and the amount collected – was $197 billion. For about two years the IRS has been contracting with private collection agencies in an attempt to narrow it.

Legislation passed in 2015 required the Service to identify certain types of inactive tax debt cases to send to the private debt collection (PDC) program. Since April 2017, the PDC has been pursuing these debts. The Government Accountability Office (GAO) recently reviewed the effectiveness of the PDC.

3 things to avoid during an IRS audit

A letter from the Internal Revenue Service (IRS) is rarely cause for celebration. Likely the only exception is when the agency sends a refund check. Other than that, a mailing from the IRS can cause stress. In some cases, the agency may simply be asking for more information, in others the letter could be notification of an impending audit.

10 do’s and don’ts when facing an IRS audit

Facing an audit from the IRS, simply put, can be terrifying. Whether the IRS notifies you of an upcoming audit of your personal finances or your business, you may worry what will come from an audit conducted by mail or worse, in person.

Fortunately, many taxpayers across California and the U.S. will not have to endure an IRS audit over their lifetimes. However, when you do face an audit, it is necessary to be thoroughly prepared. Accounting Today put together a list of “Ten Commandments” of what to do and what not to do when facing an audit:

IRSwhistleblower program sets payout record, but is not best done DIY

The IRS paid out a record amount last year in financial awards to tipsters who told the agency about others’ failure to pay taxes.

If you are concerned about your organization’s noncompliant tax behavior, however, the path to pursuing an award for informing the IRS is not an easy one. It is generally best done with guidance from a specialized tax attorney who can help you prepare your submission, not by trying to do it yourself (DIY).

Standing in the way of a simplified tax filing process

Back in 2004, a Stanford tax professor attempted to simplify the tax filing process with a California pilot. His proposal was called ReadyReturn and started with a pre-populated tax return with income generated from government records. The taxpayer could make corrections and add expenses and deductions.

Of those in the pilot, 99% said they’d use it again. A NPR podcast details what happened next. On the federal side, a bill titled the Taxpayer First Act seeks to block the IRS’s ability to develop its own Free File program.

If you haven’t done taxes for years, this is what can happen

When business is going really well, there may not be any time to sit down and focus on taxes. Having a bookkeeper do data entry is often not enough. After a couple years go by, it might even amount to a months-long project to get caught up.

But this isn’t the worst of it, the penalties and interest can cause a debt to balloon. The IRS is also a creditor with special tools, such as passport denial and account levies. In this post, we share a story out of Texas.

5 FAQs on filing an extension

Sure, some people tend to wait until the last minute to file taxes. But needing more time can happen for several reasons, such as running into a serious life event or missing key documents.

Regardless of the reason why you need it, it's important to know that you have a right to an automatic 6-month extension on filing your federal taxes. In this post, we'll address five commonly asked questions about the process.

The newest internet tax scam: pretending to be QuickBooks

The deadline to file your federal income taxes with the IRS is almost here. Unfortunately, once again tax season is also phishing season here in Southern California.

As you probably know, “phishing” is an online form of fraud in which the scammer poses as a trusted business, acquaintance or government entity to try to convince you to give them your personal data. They reach out to their victims via email, which often look convincing at first glance.

What is the penalty for filing your tax return late?

It's April and that means the tax filing deadline of April 15, 2019 is quickly approaching. Tax professionals will be working extra hours, but there is no time to delay.

The IRS assesses two penalties if you do not file or pay your tax bill on time. The failure to file penalty is stiffer: 5 percent of your unpaid tax bill. It adds onto your tax bill each month or part of a month your return is late (it caps out at 25 percent).