Reviewing legalbitstream.com, a comprehensive tax law database

So, Jim sent me an email earlier this morning to share that he and Tal had found a Tax Law and IRS Material database called Legal bitstream. This site has some value and some opportunity for improvement. Before we get into that, here is a brief description of Legal bitstream.

The site is owned and operated by Mayfield Publishing Company, located in Houston, TX, and has been live since 2003. It offers the ability to search all Tax cases from 1990 to the present. Also, you have the option of searching various IRS materials, including revenue rulings, executive orders, and Treasury decisions. The IRS materials date back to 1954, depending on the type of materials. In addition to those two database search capabilities, Legal bitstream provides links to government pages such as the Internal Revenue Code and IRS Forms & Publications.

Value

• A comprehensive one-stop shop for tax law and IRS-related information
• The ability to search all of these documents for particular keywords and phrases
• It's Free!

Opportunity for Improvement

The search feature needs some work. Search results include any documents that contains your keyword phrase. This means that it could be mentioned one time, way down near the bottom, as a part of the case description, while you were looking for cases that have that phrase as part of the subject (perhaps the plaintiff or defendant). Being able to search the subject and not the detailed description could help users find information much quicker.

Think about when you do a book search in a library database. It gives you the option of isolating your search among book titles, authors, publishers, or descriptions. If you don't choose any of those options, you can still search among all of those segments simultaneously. Having the same functionality on this site would be extremely powerful and would add so much value to what's already there.

Additionally, search is the only way to find information. There is no browse feature. So, you better know what you're looking for ahead of time.

Give Legal bitstream a shot. On the About Us page, they remind you that the site is free to use...for now. They are still deciding if and when this will be a fee based site.

IRS Debt...Avoiding the headaches

I currently manage a client base that typically owes the IRS in excess of $10,000 and one of the most common issues that I run into when trying to explain what options my clients have in resolving their tax debt is getting them to understand that they may have to adjust their lifestyle in order to obtain a successful resolution.

So what does "adjusting their lifestyle" mean? It means that when you owe the IRS, especially if you owe in excess of $25,000, you more than likely are going to have to give up some luxuries or some expenses that you have grown accustom to.

You see, the IRS is not a creditor and they are not a bank. Your debt with them is more serious and carries more consequences than any debt that you may owe, including credit cards and mortgage payments.

I often hear my clients complain that they cannot afford what the IRS is trying to make them pay per month, however what they often fail to understand is that the IRS is not going to allow you to have an extravagant lifestyle when you owe them money.

Now, that is not to say that most of my clients live an extravagant lifestyle, however the way the IRS views this, especially if you owe for multiple years and well in excess of $25,000, you would not have been able to afford the lifestyle that you are/were living had you actually paid the taxes you owed.

This is especially a problem for my clients who were from the mortgage or financial services industries. They once made enormous salaries, and in the process, also incurred enormous expenses, such as large car payments, huge mortgage payments and increased their debt load on their credit cards. Well, now their income is drastically less, however they still have the large expenses that they acquired during their booming years and to top if off, now the IRS is enforcing collection against them.

The problem is that the clients, are spending every nickel they have to pay the $900 a month car payment, the $4500 a month mortgage payment and their $750 a month credit card bills, but they are still not paying the IRS. They, then don't understand why the IRS wants them to pay $1200 a month, when from their perspective they are broke. In actuality, yes, they are broke, but from the IRS's perspective they can afford to make a payment. Why, because they are living above their means and the IRS isn't going to allow them to live in excess of their means when there is a balance owed to them.

First, the IRS isn't going to allow the credit card payment at all. That means the client can pay at least $750 per month to the IRS. Next the IRS isn't going to allow the entire car payment nor the entire mortgage payment either. The IRS will allow up to $489 for a car payment and the housing and utility standards for the clients area will determine the monthly total that they will allow. Any amount in excess of the allowable living standards, the IRS will construe as disposable income and will want it as part of an installment agreement.

In short, do yourself a favor... if you owe the IRS, take a good look at your expenses that you are paying on a monthly basis and ask yourself...."if someone owed me money, would I allow them to pay this expense before they paid me?"

Have an Offshore Account- It is Official- the IRS will be geared to chase you...

It is official...the IRS has asked the US Senate for over $128 million to hire 800 new IRS Agents to track down high income Americans who hide their assets overseas.

According to Treasury Secretary Timothy Geithner:

"A total of $332 million would be devoted to new Internal Revenue Service (IRS) enforcement efforts, including $128.1 million to add nearly 800 new IRS employees to combat offshore tax evasion and improve compliance with U.S. international tax laws by businesses and high-income individuals. Another $130 million would go to bolster the security of the IRS information technology, improve the efficiency of its business systems and upgrade its fraud detection capabilities."

The IRS appears, at least politically, serious about chasing down clandestine foreign bank accounts. Whether this will bear any fruit remains to be seen.

The deadline for filing the Treasury Form TD F 90-22.1 is June 30th. Miss the deadline or past deadlines and the IRS promises it will use its resources to find you and enforce penalties for non-compliance.

IRS Levy, Certified Letters, Wage Garnishment...Don't wait

It's that time of the year for the IRS to being stepping up their enforcement. So, what does that mean? It means liens and levies...lots of them.

So what do you do if you receive a notice of intent to levy?
Well, first don't wait and do nothing, because they are coming and they are not going to wait on you. You need to be proactive and do several things.

1. Make sure all of your tax returns are filed, at least for the past 6 years. Why, you ask? Because the IRS is going to require them before they stop any enforced collection or release any type of levy.

If all of your returns are not filed, then find a tax preparer who can file outstanding returns and one who will verify your income against IRS records to ensure they are properly prepared. Make sure that they also date stamp your returns to ensure IRS compliance is met.

2. Determine the total amount that you owe for all years, not just the years that are listed on the levy notice if you know you owe for more years. This will be important to getting your levy released or to prevent the levy before it happens.

Why is this important? Because the IRS is going to require that you resolve all of your outstanding tax issues at once before they are going to release or stop any levies.

The total amount of taxes owed for all years combined will help determine what options are available to you to resolve your tax debts. The rest is determined by your current financial situation.

If your liability is less then $25,000 in total for all years, then the simplest and easiest resolution to obtain to prevent or release any levies is what is know as a "Streamlined Installment Agreement".

This will allow you to pay of your entire liability at a set payment per month over a 60 month period. As long as you make that payment then the IRS will simply leave you alone.

If you owe over $25,000 or if you cannot afford to make the streamlined payment amount then be prepared to go through a full financial investigation. This investigation will compare your current household income and expenses to what the IRS will allow as necessary living expenses for the area in which you live in. There are expenses that the IRS allows and there are expenses that the IRS does not allow, such as credit card payments.

So if you owe less than $25,000 and the only reason you cannot afford the streamlined amount is due to a monthly credit card payment, do yourself a favor, save yourself some time and headaches by forgetting about the credit card payment and agree to the streamlined payment, because the IRS isn't going to allow the payment anyway if you decide to go through the full financial disclosure, and they will then want at least the amount of that payment as a monthly payment to them and potentially more.

If you don't feel you understand the information that the IRS is requesting from you or you don't understand the documents and forms they are sending to you, then seek professional help.

In General, you should seek professional help anytime you owe in excess of $25,000, as it substantially more difficult to get into resolution with the IRS when you are in excess of $25,000.

Don't seek someone who is going to promise you a "settlement" as there is a 99% change that it will never happen. They know it, and you shouldn't fall for it. Find someone or a firm that will be brutally honest with you and tell you exactly what can be done, rather than giving you false promises that will never come true.

Wage Garnishment? Wage Levy?...Here's what to do

Do you have or are you about to receive a wage garnishment, otherwise known as a levy?...Here's what to do.

If your employer has already received the notice of the levy, IRS form 668W, or 668A, then your next paycheck will be drastically affected by the levy. If you are a W-2 employee, the IRS can levy you for up to 85% of your gross income. If you are self employed and receive 1099 (or "independent contractor") income then the IRS can levy you for up to 100% of your income.

This is obviously going to affect your ability to pay your normal household bills. In order for the levy to stop, you have to secure a release of levy from the IRS.

Here's how....

First, you are going to have to make sure that you are compliant with all of your tax return filings. Meaning, you at minimum, are going to have to make sure that you have filed all returns from 2002 through 2008. If you are missing any of those tax returns, the IRS is not going to even consider releasing the levy, i.e. until you have met the IRS's policy of compliance. So, get your returns prepared and get them done quickly and accurately. HINT: you will want to make sure the income on the returns match up to your IRS Wage and Income Transcripts or IRP files for each tax year.

Next, you will need a resolution for your liability. Meaning, that you will have to secure with the IRS either an Installment Agreement, a Currently Not Collectible status, or submit an Offer In Compromise. Once the resolution is established and agreed to by the IRS, you will need to then have the IRS fax a Release of Levy to your payroll department.

Once the Release of Levy is received by your payroll department, your next paycheck will not be affected by the levy. Now, some levy releases are full releases and some are partial releases. It will all depend on your individual circumstances, total liability, history of compliance and the type of resolution secured.

The best way to keep a levy from happening is to resolve your tax issues prior to the levy being issued. The IRS will send notice's to you of their intent to levy prior to the issuance of the levy. This preview comes in the form of certified mail, notice CP504 Notice of Intent to Levy. If you receive this letter, you have a limited amount of time before the IRS starts to issue levies to your employer, your bank, or your accounts receivable. Don't wait, get your situation resolved immediately or risk losing all or the majority of your income!

IRS Tax Debt and Collection: What Are My Options?

Just a refresher for all who want a concise summary of the options that are used most of the time to resolve tax debt and IRS collection issues.

Owing the IRS money can be overwhelming, especially with threats of liens and levies hanging over your head. You know you should take action and get your situation under control, but what can you do? You don’t have the money to pay the balance in full, but ignoring the IRS is not an option.

Fortunately, there are several resolution options available to tax payers, and the right one for you will depend upon your current financial situation. Please note that the options below do not argue the validity of the tax liability, but are agreements with the IRS to help resolve the tax debt you owe. Although full paying the liability is often the best option (and cheapest), most people are not able to acquire the funds necessary to do so. If you are one of these people, one of the following options might work for you.

*Installment Agreements
*Streamlined Installment Agreement
*Installment Agreement based on ability to pay
*Lifestyle Adjustment Installment Agreement
*Partial Pay Installment Agreement
*Currently Non-Collectible
*Offer in Compromise
*Other options

It is important to note that each of the agreements above will require past, present and future compliance. Generally, this means that you must file at least the past 6 years tax returns, the current year’s tax return, and you must file and pay all future years’ taxes. Failure to do so will cause you to default any agreement that you have with the IRS. Also, it is important to know that interest will continue to accrue until the balance is paid in full, but will accrue at a lesser rate once an agreement is set up.

Installment Agreements- Monthly Payment Plan

An installment agreement is the most common resolution used by taxpayers who owe money to the IRS but cannot afford to full pay. Basically, an installment agreement is a monthly payment plan to pay off the balance due. There are many different types of installment agreements as listed below.

Streamlined-Installment Agreement:

A streamlined installment agreement is a five-year payment plan for those who owe less than $25,000 to the IRS. In order to qualify for this type of agreement, the taxpayer must meet the following criteria:
*File all tax returns for the current year and at least the past 6 years
*Provide employer name, bank name, and date of birth to the IRS
*The collection statute does not expire within 5 years
*The assessed balance is below $25,000
*The taxpayer can afford the required monthly payment amount, which is equal
to the total liability divided by 50 months (Ex: $24,000/50= $480 per month).

Ability to Pay Installment Agreement

For taxpayers who cannot afford to pay the streamlined installment amount, the IRS will consider setting up an installment agreement based on the individual’s current financial situation or their “ability to pay”. The IRS will look at an individual’s monthly income and expenses to determine the amount of money left over each month. This “leftover” amount is known as monthly disposable income. Generally, the amount of monthly disposable income will be the amount of your monthly payment.

This type of agreement will require a completed and signed IRS Collection Information Statement, Form 433-A or Form 433-F (depending on your situation) and all accompanying documents. The IRS will use these documents to verify the monthly payment amount. Please note that the IRS will only allow necessary living expenses and the amounts allowed as necessary may be limited by local and national allowable living expense standards. In order to qualify for this agreement, the taxpayer must meet the following criteria:
*Satisfy to the IRS that you do not have assets to pay the liability in full
*File all tax returns for the current year and at least the past 6 years
*File and pay all future taxes
*Ensure that your payment is received by the IRS timely each month
*Submit all requested IRS forms and financial documentation.
*The liability will be paid in full before the collection statute expires

Please note that the IRS will generally file a tax lien on you if you enter into an installment agreement on any ability to pay installment agreement. In some instances if your liability is below $25,000, the IRS will not file a tax lien. In any event, you should expect a tax lien on any ability to pay installment agreements.

Lifestyle Adjustment
Occasionally taxpayers might qualify for a specific resolution known as a Lifestyle Adjustment Installment agreement. Many taxpayers find that their necessary living expenses are above the local and national standards but are unable to pay the required amount due to other financial obligations, such as a high mortgage or car payment. The IRS will consider allowing the taxpayer to make monthly payments based on his/her actual expenses for 12-months to give the taxpayer time to adjust their lifestyle (ex: refinance a home or find a car with a lower car payment) to reduce their monthly expenses to the level of the local or national standards. Then, the monthly payment amount will increase to the amount of the monthly disposable income based on the local and national living expense standards. The requirements for this type of agreement are listed below:
*Satisfy to the IRS that you do not have assets to pay the liability in full
*File all tax returns for the current year and at least the past 6 years
*File and pay all future taxes
*Ensure that your payment is received on time each month
*Submit all requested IRS forms and financial documentation
*The liability will be paid before the collection statute expires
*Pay a lower payment for one year and then increase payment amount

Please note that the IRS will generally file a tax lien on you if you enter into this type of installment agreement.

Partial Pay Installment Agreement

A partial pay installment agreement follows essentially the same process as a regular installment agreement but will not allow the taxpayer to pay the total liability over the life of the collection statute. For example, if you owe the IRS $50,000 and the collection statute is 36 months away and your monthly disposable income is $300, you will not have the chance to pay off the total liability before the collection statute expires (i.e. you will pay only 36 months @$300, or $10,800- a “partial” amount of your total liability before the liability expires due to statute).

This type of agreement is similar to an Offer in Compromise, but does not require a down payment nor does it extend the collection statute.

Please note that the IRS will review this type of agreement every two years to make sure that the taxpayer’s financial situation has not improved. The IRS will also file a lien if this agreement is accepted.

Requirements of a Partial Pay Installment Agreement:
*Satisfy to the IRS that you do not have assets to pay the liability in full
*File all tax returns for the current year and at least the past 6 years
*File and pay all future taxes
*Ensure that your payment is received on time each month
*Submit all requested IRS forms and financial documentation
*The liability will be paid before the collection statute expires


Currently Non-Collectible (“CNC”)

If your current financial situation does not allow you to reasonably make monthly payments and you do not have any assets to borrow against and pay the liability in full, the IRS will place you into a currently non-collectible status. While you are in this status, you are not required to make monthly payments towards your tax liability and the IRS will stop most collection activity, such as levies. This type of agreement will require a completed and signed IRS Collection Information Statement, Form 433-A or Form 433-B and all accompanying documents to verify that you cannot afford to make monthly payments.

Also, this is a last resort for the IRS. Consequently they will want you to use any assets available to pay down your debt first. If you cannot afford to make monthly payments but do have equity in your home or an investment or retirement account, they will want you to use the available funds to pay your liability before considering placing you in CNC.

The IRS will file a lien and will review your situation every year to make sure your financial situation hasn’t improved.

CNC Qualifications & Requirements:
*Negative monthly disposable income after necessary living expenses are paid
*Satisfy to the IRS that you do not or have liquidated all assets to full or partially pay the liability
*File all tax returns for the current year and at least the past 6 years
*Submit all requested IRS forms and financial documentation.

Offer In Compromise- the “settlement”

Occasionally, the IRS may consider settling the debt for less than the actual amount owed. This agreement, known as an Offer in Compromise, is extremely difficult to achieve and has strict guidelines that must be met in order to be considered. The IRS will only accept an Offer in Compromise if they conclude that the taxpayer will never be able to pay the total amount of the tax liability over the life of the collection statute or if they determine that collecting the tax would be unfair or inequitable.

The IRS will look at your reasonable collection potential (“RCP standard”) to determine whether or not they would have the ability to collect the total amount of the tax over the life of the statute. If they determine that your reasonable collection potential is less than the total amount of the liability, the IRS may settle your tax debt. Your reasonable collection potential can be calculated by multiplying your monthly disposable income by months remaining on the collection statute of limitations. An Offer in Compromise (a short-term cash offer) is calculated by multiplying your MDI by 48 months and adding that number to the amount of the net equity you have in your assets. If this amount is less than the liability, this becomes your “offer amount.”

Example:

A taxpayer who owes $100,000 to the IRS and has $500 in a checking account and $30,000 net equity in their home. Their MDI is $55 per month. The Offer Amount would be (note that the client will meet the prerequisite RCP standard):

$500 + $30,000 + ($55*48) = $33,140

This will involve a full financial investigation of income, assets, and expenses and can take anywhere from 6 months to two years to be reviewed by the IRS.

The IRS will also take your age, health, education and employment history into consideration. If you're 80 years old, for example, and are living on a fixed income and cannot afford payments to absolve the debt, the IRS may consider settling your debt as you do not have the means to pay the amount over the life of the collection statute. If you're 30 with a career ahead of you, it's presumable that in the coming years your financial situation may improve and your reasonable collection potential will increase. The IRS will generally not accept an Offer in Compromise if they believe you will have the ability to pay in the future.

OIC Qualifications & Requirements:
1. Satisfy to the IRS that you do not have equity in assets to pay the liability in full
2. Ensure that your Offer in Compromise meets the Reasonable Collection
Potential Standard
3. Establish that you have not dissolved or dissipated any assets that could have been used to pay the tax (the “dissolution period” starts when your tax is assessed or should be been assessed, whichever is earlier)
4. File current year’s tax return and all past due returns
5. File timely and pay all taxes for the next 5 years
6. Agree to give your tax refund for the current year to the IRS
7. Complete IRS form 656, 433-A, and submit to IRS will all attachments