Articles

If You Owe Money To The IRS, Your Credit Score May Be Going Up!

Tuesday, August 1st, 2017

For years, the three major credit reporting agencies (Experian, Equifax and TransUnion) have been including tax liens and civil judgments on credit reports—which obviously have had negative implications on credit scores.  But recent efforts by consumer advocacy groups, citing numerous errors resulting from this practice, finally convinced these agencies to stop doing so.

As of July 1, 2017, these agencies started enforcing stricter rules on the public records they collect and report, now only reporting public records containing the person’s name, address and either Social Security Number or Date of Birth.  Since neither Social Security Numbers nor birth dates are included on Notices of Federal Tax Lien, these should no longer be included on future credit reports.  Hence, if you have had a Notice of Federal Tax Lien filed against you, you should soon see them drop from your credit report, with the consequential increase in your overall credit score.

When you will see the effect is still somewhat unknown, but it should be relatively soon.

There are, however, other ways to have Notices of Federal Tax Liens removed from the public record—specifically, lien withdrawal.  If these liens are keeping you from buying or selling an asset, or from obtaining a needed loan, call the attorneys at Anderson & Jahde, P.C. to see if you might be eligible for one of these programs.

This entry was posted on Tuesday, August 1st, 2017 at 5:25 pm and is filed under Articles.

Why Today’s Families Need Modern, Protective Estate Planning

Wednesday, July 12th, 2017

Blended families have become normal, with second and subsequent marriages often making up the modern American family.  They may have children from a prior marriage and children together.  Estate planning complications for these families can result in inheritance errors.   This can harm family relationships, and, in a worst-case scenario, end in costly litigation that can, and should, be avoided with careful planning up front.

If you are bringing both assets and children into a new marriage, you may want some, all, or most of your assets to go to your own children.  Or, you may choose to leave all your assets to your new spouse for care during his or her lifetime.  Perhaps you would prefer to leave assets to both your surviving spouse and their children from a prior marriage, to ensure that everyone will receive a portion of an estate.  Without a proper estate plan guiding your specific wishes, accidental disinheritances may happen.  The wrong people can get everything, and the people you love, who you wanted to inherit from you, can be left with nothing—often with no legal remedy to undo what has gone wrong.

In some situations, your surviving spouse is not legally obliged to pass along the inheritance you intended for your children.  Though it may seem unlikely now, what happens if, after you pass, your spouse and children grow apart, or they have conflicting interests down the road?  Without a protective estate plan your surviving spouse always has the option to execute a new Will or Trust and disinherit your children.  You may have a surviving spouse that is young, and may deplete most of your children’s potential inheritance, leaving little or nothing to be transferred to your children when your surviving spouse dies.  If you plan your estate carefully, you can protect the people you love, and avoid an accidental, or, intentional disinheritance by your surviving spouse—contrary to your wishes.

There are modern solutions to these now common estate planning problems.  In a modernly drafted Will or Trust, you can control your specific wishes and goals, and achieve your objectives regarding your spouse, and all your children, the way you choose.

Many blended families have used Trusts to address their estate planning objectives.  Trusts and subtrusts can be designed for the specific person who is to inherit specific assets.  The surviving spouse can receive income for their benefit throughout their life.  They can also be restricted from accessing the trust’s principal, which, ultimately, can then be transferred to your children upon the passing of your surviving spouse.  Another protection available in trust planning can prevent your surviving spouse from changing the terms of your planning.  This stops a surviving spouse from disinheriting your separate children.

Another tool for blended family planning can expressly state that, upon your death, your surviving spouse must provide specifically identified assets—money or otherwise—to your children, so your children do not have to wait until your surviving spouse dies to receive assets from you.  In this manner, your children are guaranteed to benefit from your estate.

Some families also choose to use life insurance, to designate death benefits payable to their children.  With life insurance, your children can receive a large cash sum immediately upon your death, and remaining estate assets can be left to support your surviving spouse if you wish.

Modern estate planning should address issues modern families face, and most importantly, your specific wishes.  At Anderson & Jahde, we understand and regularly help modern families with these complicated issues.  Call us when you are ready to plan for your family.   We are here to help you.

This entry was posted on Wednesday, July 12th, 2017 at 2:36 pm and is filed under Articles.

How Long Can the I.R.S. Audit and Collect From Me?

Thursday, May 11th, 2017

There are two phases to a tax case: the first part is when the IRS conducts an examination to determine how much you owe (“examination”) and the second part is when the IRS tries to collect from you (“collection”).  Of course, if you filed your tax return and did not pay all that was shown as due, the IRS will seek to collect the balance even if there was no examination.

How long to examine?

The general rule is the IRS has three years from the later of the due date (including extensions to file) or the actual date you filed your return.  For example, if you filed your 2016 Form 1040 on March 11, 2017 (before it was due on April 18, 2017), the IRS has until April 18, 2020 (three years from the due date) to examine your return.  This is the later of the due date or the actual filed date.  On the other hand, had you filed your 2015 Form 1040 on that same date (basically a year late), the IRS would have until March 11, 2020 (three years from the filing date).  What this also means is that you generally only have to maintain most of your tax records for three years.

There are a host of exceptions to this basic rule.  The most onerous is that there is no statute of limitations to examine your return if it was false or fraudulent with the intent to evade tax.  Also, if no tax return has been filed, the three year statute of limitations on assessment does not begin until a return is filed.

How long to collect?

The general rule is that the IRS has ten years to collect following an assessment—an assessment is the recording of the tax debt (including penalties and interest) on the books of the IRS.  That period is extended by certain actions taken by the taxpayer, such as requesting a CDP Hearing, filing a bankruptcy, requesting an installment agreement or an offer in compromise.

Once an assessment is made, the IRS will begin the collection process by sending a series of notices demanding payment.  These notices get more and more threatening the longer you go without paying.  Taxpayers do have rights and can work with the IRS to resolve their liabilities.

In 1998, Congress added a safeguard against the over-zealous actions of the IRS and gave taxpayers the opportunity to have a hearing before the IRS can take such actions (referred to as a Collection Due Process hearing, or “CDP hearing”) in which it is possible to propose alternative methods of payment, such as an installment agreement (pay the balance over several years) or an offer in compromise (where the IRS might be willing to accept less than the full amount the taxpayer owes).  This is where good representation is essential.  Nobody wants to have the IRS levy on their property.

Near the end of the ten years, the government can go to court to extend the ten years by reducing the assessment to a judgment.  Depending on the laws of the state in which you live, collecting on the judgment can go on for many, many years.

If you owe the IRS money, contact Anderson & Jahde for competent, professional tax help.

This entry was posted on Thursday, May 11th, 2017 at 10:21 am and is filed under Articles.

Things to Consider Before Renting that Spare Bedroom

Wednesday, April 12th, 2017

Owning rental property used to be an endeavor of the wealthy.  But in the new sharing economy, legions of people have become mini-entrepreneurs.  Thanks to Airbnb and other sharing sites, anyone can easily offer up a couch, a spare room or the entire house for a short-term rental (usually defined as fewer than 30 days).  However, there’s more to renting out your extra space than simply pocketing the cash.  If you’re thinking of becoming a landlord in your own home, keep the following in mind.

First, you must navigate the various rules.  Start by checking with your homeowners association and neighborhood zoning laws to see if short-term rentals (STRs) are allowed and under what conditions.  Your city or county may also have restrictions and requirements.  For example, Denver requires property owners to obtain a Short-Term Rental license.  The city also requires renters to pay a 10.75% Lodger’s Tax, Occupational Privilege Tax, and any other applicable taxes or fees associated with their rentals.  Aurora recently approved legislation that requires property owners to obtain a STR license that must be renewed every two years.  Owners also must pay the city a per-guest lodging tax of about 8 percent.  Boulder allows STRs, but only for 120 days a year.  It also imposes a 7.5 percent lodging tax on STRs.  The Boulder STR tax applies to property owners only and does not detail regulations for secondary properties or long-term rentals.

Other jurisdictions in the Denver Metro area, however, have not yet updated their laws to address sharing-economy rentals.  As vacation rental websites generally take a hands-off approach to local laws, it will be up to you to determine the legalities of renting your home.  Your city council or government website will be the best place to start your research.  It is important to remember that STRs are accessory to primary residential use, meaning the overall character of your property should remain residential.

Then there are federal and state income tax consequences from STRs.  If you rent out your home for 14 or fewer days a year (e.g. when a big convention or tournament comes to town), you do not have to report the rental income.  However, if your rentals exceed 14 days a year, you’ll owe income tax on your rental income.  Report your rental income on Schedule E of your Form 1040 (your state and city will want to know about your rental income, too).

Of course, you can deduct costs related to your STR activity on Schedule E as well.  You do not have to divide expenses that pertain solely to the rental part of the property.  For example, if you paint a room that you rent and purchase new sheets and towels for that room, your entire cost is deductible.  On the other hand, if an expense is related to the whole house, such as home mortgage interest or utilities and maintenance, you must divide the expense between rental use and personal use.  You can use any reasonable method for dividing the expense.  Consult IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes), for more details.  Remember, you are treated as using your home for personal purposes each day of the year, regardless of how many days you might have rented a portion of it.  As a result, rental expenses can only reduce rental income to zero, they cannot generate a loss.

Other things to check before renting that extra space is your homeowners insurance and the applicable landlord-tenant laws.  You want to be protected if a tenant steals something, causes fire or water damage, or suffers an injury on your property and holds you liable.   Consult with your insurance agent regarding what will be covered or excluded.  Depending on how many rental days and tenants will be involved, you may have to switch policies which probably will cost more.  Also, review the Colorado Landlord-Tenant laws which may vary from county to county or city to city.  For example, you probably are not legally allowed to enter your tenant’s room without giving advance notice.  It may be your house, but the tenant is king as far as that rented room goes.  You will be responsible for complying with all laws applicable to your unique rental situation.

These are just some of the considerations to keep in mind before putting a paying guest under your roof.  The applicable local rules and statutes are numerous and can be confusing.  And as is often the case, understanding the tax consequences of renting just a portion of your home or the entire residence is not a simple matter.  At Anderson & Jahde, PC, we can help you navigate these waters and avoid penalties.

This entry was posted on Wednesday, April 12th, 2017 at 3:07 pm and is filed under Articles.

Can I resolve my IRS tax debt for pennies on the dollar?

Wednesday, March 8th, 2017

Taxpayers are barraged by television and radio advertisers claiming they can settle IRS debts for mere pennies on the dollar. These ads leave you believing that IRS will let anyone off on their tax debts for less than what is due and owing. Not so! We have had many clients over the years that have fallen for these pitch men, only to have $5,000.00 to $10,000.00 taken from them with absolutely no resolution to their tax problems. BE VERY CAREFUL! If it seems too good to be true, it probably is.

To be sure, the IRS will, in some very specific circumstances, allow taxpayers to compromise their tax debts under a program known as an “Offer in Compromise—Doubt as to Collectability” (the “Offer Program”). But this should be done by a professional with plenty of experience in this area.

Under the Offer Program, the IRS will agree to accept less than the full amount due and owing by a taxpayer, if, and only if, the IRS determines that it cannot collect the amount due from the taxpayer. To be accepted into the Offer Program, the taxpayer must prove, from their specific financial circumstances, that they do not have the ability to full pay their tax debt. In many instances, this is simply impossible.

The IRS will analyze a taxpayer’s net assets and income to see how much the IRS could collect if it were to exercise all of its collection powers—Federal Tax Liens, Levy, Seizure and Sale. Consideration will be given to: (1) the total amount of the debt, and (2) the time remaining on the 10-year statute of limitations on collection.

We have had numerous taxpayers come to us for help after they have already paid $5,000.00-$10,000.00 to one of the companies claiming that they can help them settle their tax debts for mere pennies on the dollar. In many instances, these clients were never even eligible for the Offer Program in the first instance. Yet, these alleged professionals (sometimes known as “tax resolution” firms) hire sales people to “sell” taxpayers on the idea that they will be able to accomplish a settlement with the IRS, without knowing anything about the taxpayer’s financial situation. In the end, many of these taxpayers throw away thousands of dollars they could not afford, only to get nothing accomplished with the IRS.

Taxpayers should educate themselves on the Offer Program, and the eligibility requirements, before hiring anyone to assist them. Taxpayers should be very cautious of anyone promoting the Offer Program as the solution to your tax problem. Don’t fall for a pressured sales pitch. There may be multiple solutions to your tax debt, not just the Offer Program. Often the high pressured sales companies will not know how to advocate for you if the Offer Program does not work and you will have needlessly spent thousands of dollars and still be at risk for IRS levies taking your money.

Importantly, the IRS does not “settle” tax debts the way another creditor might. People hear the word “settle” or “settlement” and they often think they can just offer to pay the IRS something, and that a back and forth negotiation with the IRS will take place. For example, a taxpayer may have $10,000.00 today and say, “I want to contact the IRS and tell it that I’ll pay the $10,000.00 today because that’s all I have, and that’s all the IRS is ever going to get from me.” But they may not qualify for any reduced settlement under the Offer Program.

Also important, before the IRS will even consider an Offer in Compromise, a taxpayer must be in compliance with their filing and payment obligations. This means filing any delinquent tax returns (generally for the last six years), making current estimated tax payments (if applicable) and making federal tax deposits if the taxpayer owns a business. If a taxpayer is not in compliance, the IRS will not even process an Offer in Compromise.

Once it has been determined that you meet the threshold requirement of being in compliance, there is an extensive financial analysis that must be completed to determine whether you fit within the Offer Program. This is done on a case-by-case basis and can be complex, depending on the taxpayer’s financial circumstances.

The bottom line: an Offer in Compromise is clearly not available for most taxpayers. The determination of whether you might qualify for the Offer Program should be determined by a competent, experienced tax controversy specialist, not a sales person simply trying to make money off of unwitting and scared taxpayers. An Offer in Compromise is not a one-size-fits-all solution to a tax problem. If the Offer Program does not work, there may be another solution to the problem that could be quicker and more cost effective for the taxpayer, including bankruptcy (for income taxes only), or disputing the taxpayer’s outstanding tax liabilities on the merits, where appropriate.

If you owe the IRS money, contact Anderson & Jahde for competent, professional tax help.

This entry was posted on Wednesday, March 8th, 2017 at 10:16 am and is filed under Articles.

The Maze of Colorado’s & Denver’s Sales and Use Tax Laws

Saturday, January 14th, 2017

Small businesses are the backbone of Colorado’s economy— 98% of all businesses in the state have fewer than 100 employees. Because Colorado’s Constitution allows “Home Rule” jurisdictions to enact their own sales and use tax ordinances inconsistent from Colorado’s sales and use tax laws, businesses often have great difficulty wending their way through the variations between Colorado’s tax laws and those of a Home Rule jurisdiction such as Denver. Failure to plan for, and accurately comply with, myriad conflicting state, county, and municipal laws can jeopardize businesses just as they are getting started. (more…)

This entry was posted on Saturday, January 14th, 2017 at 10:25 pm and is filed under Articles.

Protecting Gifted Property in Case Your Child Divorces

Thursday, December 15th, 2016

Clients often ask if there is a way they can financially provide for their children without making that money available for their child’s spouse to take in a divorce. Gifting property to the child outright without any legal protections is just asking for trouble.  The two best alternatives are a premarital agreement, and a discretionary, asset protection trust. (more…)

This entry was posted on Thursday, December 15th, 2016 at 10:29 am and is filed under Articles.

Good News for Taxpayers Who Owe Less Than $100,000!

Friday, October 14th, 2016

The IRS recently announced it will test an expansion of its Streamlined Installment Agreement Program for Taxpayers who owe less than $100,000.

In all Streamlined Installment Agreements, the dollar threshold is based on the “Unpaid Balance of Assessments,” which often may be less than the amount the Taxpayer actually owes.

For example, when a Taxpayer files a tax return, the IRS will usually assess the amount of tax, plus any interest and penalties accrued to the date of assessment.  Generally, these amounts, less any payments and withholdings, comprise the “Unpaid Balance of Assessments.”

But after the initial assessment, penalties and interest continue to accrue on the unpaid amount owing until it is paid in full, albeit they may not yet be “assessed.” As a result, Taxpayers who actually owe as much as $120,000 or more (even though some interest and penalties in excess of $100,000 have yet to be formally assessed) may still qualify for a “Streamlined Installment Agreement.”

And those who are over but close to the $100,000 mark, can pay down the liability (which must be done carefully to ensure it is applied to the correct portion of the liability) to bring it within the $100,000 Streamlined criteria.

The primary benefit: an automatic installment agreement (i.e. without having to provide detailed financial information), as long as the Taxpayer agrees to a Direct Debit Installment Agreement (“DDIA,” where the IRS automatically deducts the monthly payment from a checking or savings account) that offers a monthly amount to pay the entire liability within the earlier of 84 months, or the remaining life of the collection statute of limitations (generally 10 years from the date the tax was assessed).

To determine whether you qualify for any of these programs, or if there might be a more beneficial resolution for your outstanding tax liability, contact one of the attorneys at Anderson & Jahde.

This entry was posted on Friday, October 14th, 2016 at 10:37 am and is filed under Articles.

The Dangers of Online Estate Planning

Tuesday, September 20th, 2016

Today, the world-wide-library puts information at our fingertips in a moment.  Access to an unlimited amount of information is quite alluring.  When it comes to Estate planning, several web services claim that consumers can complete a will or a trust online in minutes.  Are these claims correct and what happens when problems arise?

Online Estate planning seems like an enticing bargain at the outset.  But it may be pennywise and pound foolish.  They offer legal documents at a cheap price, or even free, without knowing or understanding your family’s unique issues and concerns.

A one-size-fits-all planning approach may appear to save a buck, but keep in mind you are not told what happens when online legal documents cause problems. Worse, if you do not truly understand the decisions going into this legal instrument, you may later be unable to avoid major pitfalls and errors.  Estate planning should work correctly when needed most—if or when incapacity strikes and at death.

If you use an online service, make sure that you understand not only that a legal document is being created, but how and why it will work as intended

What Should Concern Me?

  • State laws, tax laws, and federal laws all apply to an estate plan.
    Will an online estate plan help to legally avoid, minimize, or form a plan that takes into consideration any tax laws?
  • Children get divorced, have creditor problems and make bad decisions.
    Will an online estate plan maximize asset protection to protect an inheritance from divorcing spouses or creditors?
  • Children in blended families can accidentally get disinherited.
    Will an online estate plan disinherit children from a first marriage?
  • Beneficiaries have problems.
    Will an online estate plan help or hurt a child with an addiction problem?
  • Special needs beneficiaries can lose government benefits if money is inherited outright.  Will an online estate plan protect government benefits? 
  • You can keep your estate out of probate court if you wish. 

Will an online estate plan avoid probate? 

These are just a few examples of the risks in estate planning that an online service may not address.  Online planning can lead to a legal disaster.  With an estate planning lawyer, these and other issues can be addressed correctly in an estate plan designed specifically for you and your family.  At Anderson & Jahde, PC we can help you love your family with a great plan.

This entry was posted on Tuesday, September 20th, 2016 at 10:15 am and is filed under Articles.

Beware of IRS Impersonators

Monday, August 22nd, 2016

Beware of IRS Impersonators

A lot of honest taxpayers are being robbed by tricky IRS impersonation scams. These people are not real IRS employees, just thieves.

If you are contacted by someone claiming to be an IRS employee, here are a few things to keep in mind:

If you receive an automated message or a live call, stating that “IRS is filing a lawsuit against you,” and you need to send money right away to prevent it, you can be certain it is a scam.

The IRS typically does not make its initial contact with taxpayers by telephone, and the IRS does not initiate contact with a taxpayer by text, email, or through social media.

If you do not owe the IRS money, or if you are not aware of any issues with the IRS, be highly suspicious of any contacts, either live callers or recorded messages, threatening some type of IRS action against you.

Never respond to an automated “IRS” call.

What should you do if you are contacted?

Ask: “What is your name and badge number please?” Likely, the scammers will hang up. But if they don’t, and you are given a name and badge number, you have two options. One, if you know you owe the IRS money, or you have reason to believe you have an issue with the IRS, then you can call the IRS at 1-800-829-1040, and find out if it was attempting to contact you. Two, if you have no reason to believe the IRS would be contacting you, then you should hang up and file a complaint with the Treasury Inspector General for Tax Administration here.

What shouldn’t you do?

Never give your credit card number, bank account number, send them a check, send a gift card, or wire funds.

The IRS will not ask you to make a payment over the phone, unless it has already sent several written notices to you. If you legitimately owe the IRS money, you can mail a check (you should first confirm the correct address with the IRS by calling the 800 number above), or by paying online through the IRS website: https://www.irs.gov/payments.

The caller may say you have to purchase a “stored value card,” or gift card, then they take the number from you to “check” to see if there is really money stored on the card; if there is money, they steal it at that moment.

Be safe, be smart, and before you have any conversation with anyone who claims to be from the IRS, simply ask the one question that likely will send them packing: “What is your name and badge number?” A true IRS employee must give you this minimal amount of information.

This entry was posted on Monday, August 22nd, 2016 at 2:46 pm and is filed under Articles.