When the Government Appeals Your Tax Court Win

Can I recover court fees if I successfully defend against the government’s appeal?

Appeals can work both ways.  If you have been hit with an audit, subject to IRS collections, or had your offer in compromise rejected, you may be forced to file an action in tax court either with the IRS or your state tax department.  Should you lose, you often have the right to appeal this negative decision. In an appeal, you will contest a specific aspect of the tax court’s decision, which could be an evidentiary error, inconsistency with existing tax laws, or other errors as to fact or law.  While appeals can prove vital for taxpayers who have lost in court, appeals can also be taken by the government. Your win in tax court could be subjected to a challenge by the government, which you will need to defend against to maintain your positive outcome.  

What Will Be Considered on Appeal

If you are facing a government appeal from your tax court win, it is important to understand that the appeal will focus on limited matters.  The appellate court will not reconsider all aspects of the case. Rather, the appeal will be limited to the record built by the trial court. Generally, new evidence will not be admitted during an appeal and the appeal is limited to the evidence considered by the trial court.  Further, the appeal will focus on those issues with merit raised by the government to the appellate court.

It will be vital for you to have the representation of a strong tax appeals attorney.  If the government’s appeal is successful, you risk reversal of the tax court’s decision, which could result in institution of the initial tax penalties.  You will not only lose out on your gains in tax court, but you will have also incurred considerable expense bringing the matter to court in the first place. You can potentially avoid such an outcome by retaining the assistance of an experienced tax appeals attorney who will diligently review the record, file a strong brief, and fight to uphold your tax court win.  

Defending against the government’s appeal will require that you incur some expense.  However, if you are successful and the appellate court upholds the tax court’s decision, then you may be able to recoup some of your costs reasonably incurred in defending against the action.  Contact a tax appeals attorney at the first sign of trouble to protect your legal rights today.

Filing Taxes Under the New Tax Code

How will my 1040 form change under the Tax Cuts and Jobs Act?

The Tax Cuts and Jobs Act will bring about significant changes to our taxes in the coming year.  Filing for taxes will involve several new considerations and even your tax return form itself will be different.  To ensure you comply with the new tax code so as to avoid any potential problems with the IRS, you should review the most important changes coming to the tax filing process before tax season hits.

Your Tax Form Will Change

You will no longer file using a Form 1040A or 1040-EZ.  Instead, you will use the newly designed Form 1040.  This form consists of two pages and will summarize your income, deductions, and credits.  For many filers who hire a professional to do their taxes or who do their taxes online will not likely notice a difference with the form.

Your Tax Rate May Drop

Per the Tax Cuts and Jobs Act, the IRS will still use seven tax brackets, but many brackets will owe a reduced tax rate.  The top tax rate has reduced from 39.6% to 37%, for example.  However, not every filer will save.  With altered tax ceilings, some filers may actually be bumped to a higher tax bracket.

The Standard Deduction Has Increased

On your return, you will still have the ability to ether take an itemized deduction or standard deduction, however the standard deduction amount has greatly increased. Now, the standard deduction will be nearly double as compared to 2017’s deductions.  Joint filers can claim a $24,000 standard deduction, while singles can claim $12,000. With the increased standard deduction, it is likely that more filers will take the standard deduction rather than itemizing their deductions.

Your Exemptions Have Changed

Whereas before you could claim exemptions for yourself and your spouse, these exemptions have now been eliminated.  The rationale is that the increased child tax credit, which jumped to double from 2017, will more than make up for the old personal and dependency exemptions.  These are just a few of the many changes you will see on your 2018 tax return.  Contact a tax attorney for more assistance with any tax issues you may face.

 

Reaching an Installment Plan for Repayment of Your Taxes

Who will be eligible to enter into an installment plan to pay back taxes?

Taxpayers who have fallen behind on their taxes may find themselves unable to make repayment in full.  Being delinquent on your federal taxes can have serious negative consequences resulting in potentially hefty fines.  Individuals who owe back taxes will be relieved to know that there are some options to repay the back taxes over a period of time.  For some delinquent taxpayers, the IRS will allow a repayment plan.  There are several options when it comes to repayment, and each plan comes with potential benefits and drawbacks.  Our Atlanta installment agreement attorney explains the basics of entering into an installment plan with the IRS below.

Eligibility to Enter into an Installment Plan

The IRS is not required to allow every taxpayer to enter into an installment plan. Only certain circumstances will require that the IRS allow an installment plan. If the following are met, you can quickly enter into a guaranteed installment agreement:

  • The amount of taxes owed is less than $10,000;
  • You have filed your tax returns for the previous five years and paid your taxes, without a previous installment plan;
  • The IRS has determined you cannot repay the full tax debt at once;
  • You will repay the debt within 36 months;
  • You will file all returns and pay taxes owed during repayment.

Even if you do not meet the above conditions, you may still be able to get the IRS to agree to an installment plan.  You will need to develop a repayment plan that the IRS will approve.  Your tax attorney will prove essential in assisting you to create a proposed repayment plan which will benefit you and be accepted by the IRS.

The first step towards developing a repayment plan will be assessing how much you can realistically afford to pay in each installment.  The IRS will not accept a repayment plan that you are unlikely able to stick to.  Take a look at your income and deduct your basic living expenses to arrive at your disposable income left over each month.  With your attorney’s help, consider whether a long term or short term repayment plan is best for your life and budget.  Remember that if you default on the repayment plan, you will face fees, interest, and loss of the ability to continue the installment plan.  As such, enter into any repayment plan with care.

 

Why Was I Chosen for an Audit?

If you have received the dreaded notice of an IRS audit, one of your first thoughts may be, “why was I selected?”  For those who have filed their taxes diligently and honestly for years, being chosen for an audit can be frustrating and downright alarming.  It is important for taxpayers to understand that there are many potential ways in which the IRS determines who it will audit, and many have nothing to do with fraud or concerns of illegal reporting.  Nonetheless, all audits must be taken seriously and responded to in an informed and measured manner.

IRS Selection Criteria for Audits

There are several methods the IRS uses to determine who will be subject to an audit.  Audit selection methods can include:

  • Purely random selection
  • Prior audit results
  • Third party information
  • Computer screening
  • Return entries

As you can see, most of these criteria do not involve an issue with the tax return or the taxpayer’s information per se.  Often, a mix up internally or with information fed by a third party will result in the IRS electing to take a closer look at the return.  As such, tax payers should not panic when they receive notice of an audit.  Rather, it is best to remain calm and retain the assistance of a tax professional.

The Audit Process

Audits can be conducted either through the mail by a Correspondence Examination or in person.  Through the mail examinations are typically more cost effective and in today’s era of diminishing IRS budgets, Correspondence Examinations may be favored.  Should you receive a Correspondence Examination letter, you will need to send back supporting documents that will resolve the cited tax issue.  Your tax attorney can help you with preparing a strong response that provides the information needed, without anything additional.

If an in-person review is requested, your authorized representative can typically appear on your behalf, negating your need to personally be at the meeting.  An authorized representative could include an attorney, CPA, or enrolled agent.  It is critical that you select the right authorized representative who will timely and appropriately respond to the audit so as to swiftly resolve the matter.  Remember that failure to respond to the audit could result in harsh penalties, so take action immediately upon receipt of your audit notice.

 

Waiting Too Long to File for Bankruptcy Can Further Harm Your Finances

What could happen to my finances if I put off filing for bankruptcy?

Filing for bankruptcy is a major decision, and understandably it is one that many people approach with trepidation.  Fear over the stigma associated with bankruptcy or its possible repercussions can lead many potential filers to put off declaring bankruptcy. A recent report from the Notre Dame Law Review found that putting off filing for bankruptcy when doing so is in your best interests can damage your finances even further.  Our Atlanta consumer bankruptcy lawyers discuss why waiting to file for bankruptcy can harm your finances and when you should consider declaring bankruptcy below.

“Life in the Sweatbox”

A recent study published in the Notre Dame Law Review called “Life in the Sweatbox” examined data from the Consumer Bankruptcy Project.  Data was gathered from over 3,000 bankruptcy cases during a three-year period between 2013 and 2016, along with survey information from a third of the filers.

The report found that among the filers surveyed, over 66 percent had been struggling financially for over two years or more.  About a third waited in the “sweatbox,” or in a state of financial depletion, for five years or more.  According to the survey, the longer people waited to file for bankruptcy, the worse their overall financial situation became.  Long term strugglers were left with half of the assets as other debtors, while the debt to income ratio was far higher among long strugglers.

What the study is ultimately revealing is that when you reach a point of serious financial struggle, delaying filing for bankruptcy will usually simply result in worsening of your situation.  As you wait to file, your funds are depleted in attempts to payback creditors.  You may be forced to sell off assets or have them seized in collection judgments.  Waiting can cause you to fall even more into a state of financial disrepair.

When to Consider Filing for Bankruptcy

Knowing the consequences of waiting too long, you should start to evaluate whether bankruptcy is in your best interests when you reach the point that your debts comprise more than 40 percent of your income.  If you are using loans and credit card debt to pay down other debt, you are likely in a financial down spiral.  If you feel your finances are out of control, contact a bankruptcy attorney for an evaluation as to whether filing for bankruptcy is right for you.

 

Tax Attorney vs. CPA

Should I use a CPA or tax attorney to defend against my tax audit?

If you are facing an audit by the IRS or a state entity, you need the assistance of a qualified advocate.  The IRS will allow representation by a Certified Public Accountant (CPA), tax attorney, or an Enrolled Agent (EA).  Hiring a professional to represent you in an audit can prove vital in protecting your legal rights.  Your advocate will ensure you provide only the information strictly necessary to comply with the audit, and will be in your corner working to minimize or eliminate tax liabilities.  While a CPA or EA may be allowed to represent you, there are several crucial benefits to using a tax attorney to defend against your IRS or state audit.

Legal Advocates

Attorneys are trained to be legal advocates for their clients, a skill not similarly found in the education of CPAs or EAs.  Your attorney will strongly advocate for your best interests and will know what actions best to take when issues arise in your defense.  Additionally, an attorney alone will have the power to litigate in any court, if necessary.  Whereas a CPA or EA is limited to defending you against the IRS audit, your attorney can bring the matter to federal or state court if it is necessary in pursuit of your best defense.

Comparable Fees

Perhaps the most common reason for those facing an audit to consider a CPA over an attorney is concern over costs.  There is a misconception that hiring an attorney will automatically mean more expense than retaining the help of a CPA.  In fact, many tax attorneys offer rates comparable to CPAs for audit defense, allowing you to pay the same rate for a trusted legal advocate.

Confidentiality

Your relationship with your attorney comes with a unique benefit not shared by CPAs or EAs.  Your communications with your attorney are strictly protected by the attorney-client privilege.  CPAs have only a limited privilege which applies to federal and state tax matters.  If your CPA is subpoenaed to testify against you in an IRS court case, he or she could divulge protected information.  Your attorney could not be forced to give like information under the attorney-client privilege.

An audit is a stressful and frightening experience, but with the assistance of an experienced tax attorney you can aggressively defend against underpayment allegations to achieve the best possible outcome.  Contact a tax attorney for help with your audit defense today.