Do you need to file an FBAR for a Dematerialized (demat) Account?

Because there is not quite a US domestic analogue, there is  confusion over whether or not a ‘demat account’ needs to be reported on a report of foreign bank account (FBAR) form. 

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IRS promises more review of Partial Payment Installment Agreement Requirements

Internal Audit reveals IRS not following procedure on follow up; agency vows to improve

There is no doubt the an IRS partial payment installment agreement (PPIA) can be  an awesome IRS tax debt settlement tool. For the taxpayer, they can pay to the IRS what they can afford each month after reasonable living expenses. Meanwhile, the each month, the IRS tax debt gets close to extinction, thanks to the statute of limitations on IRS tax debt.

If you are in the an IRS partial payment installment agreement, expect the IRS to want to take a peek inside your financial affairs.
Photo credit: stock.xcng

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Offshore Bank Expert Attorney Anthony Parent Creates New Video about the June 2013 FBAR Update

The Helpful Video, which is Posted on YouTube, Explains What the Latest FBAR Update Means for Taxpayers

Anthony Parent, the founder of IRS Medic at Parent and Parent, a firm of tax attorneys who are devoted to helping their clients with tax-related issues, has just created a new video titled “June 2013 FBAR Update.” The in-depth video, which the FBAR attorney has posted on YouTube, explains in great detail what the latest FBAR update means for taxpayers.

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What are your IRS debt settlement program options for when you can’t afford to pay?

In an earlier post, I gave an overview over how IRS debt settlement works. And in this article, I will go over the IRS debt settlement programs available to you when you agree to what you owe, but still can’t afford to pay the debt in full to the IRS.

Can’t afford to pay the IRS?

Can’t afford to pay the IRS? Well, you are in good company. Something like 1,000,000 taxpayers are in the same situation as you, unable to pay their IRS tax debts in full. Because this represents such a huge amount of taxpayers, the IRS and Congress have developed these IRS debt settlement programs when you agree to what you owe the IRS, but can’t afford to pay them in full.

Installment Agreement (Full pay)

This type of installment agreement will pay back the IRS in full within the remaining collection period (Click here to learn what the IRS collection period is). There is a streamlined Installment Agreement which doesn’t require financial information. And for larger installment agreements, the IRS will require full financial information, so that they can collect as much from you as possible

What to watch out for: Nearly anyone can get into an Installment Agreement. But the question is, will this actually settle your tax debt? Is it an amount you can actually afford? If you pay the IRS your installment agreement, what is the chance of you running up a new debt? The last thing you want to do is agree to the IRS’ numbers even though you have doubts that you will be able to make every payment. Don’t agree to anything just to make the IRS go away.  Because all that will happen is you will increase your tax debt and have to deal with a more aggressive IRS who doesn’t like the fact that you defaulted your Installment Agreement (when you run up a new tax debt, it automatically defaults any agreement you have in place with the IRS, even if you are still paying your installment agreement in full).

Partial Payment Installment Agreement (PPIA)

A partial payment installment agreement is an installment agreement that won’t pay back your entire tax debt over the remaining collection period. These are a bit tougher to negotiate. And the IRS may only give you a limited amount of time to pay the reduced amount.

What to watch out for: The IRS can revisit your financials to see if an increase in your partial payment installment agreement is warranted. So you do not have final resolution until the collection period has expired or you paid the debt in full. Any tax lien filed against you, you can not get withdrawn like you can when you full pay your tax debt.

Currently non-collectible/hardship status

In “CNC” status  you pay the IRS nothing each month! All you need to do is make sure you aren’t running up new tax debts. And like the partial payment installment agreement, once the collection period expires, the tax debt goes away.

What to watch for: As your IRS tax debt gets closer to being wiped out by the passage of time, the IRS knows this as well. So like with the Partial payment installment agreement, the IRS may become much more aggressive near the end. If you qualify for a partial payment installment agreement or non-collectible status, changes are you should really investigate whether or no an Offer in Compromise would be the right IRS tax debt program for you as it settles your tax debts quicker.

Offer in Compromise

With an Offer in Compromise,  you pay the IRS an amount lower than what you owe. Why would the IRS accept less? Because hopefully, you demonstrated that your ability to pay — after taking into account all necessary personal and business expenses — is as low as possible.

What to look out for: Do not low-ball the IRS, you won’t be taken seriously. Do not give the IRS 20% down  payment (there is a better way to do this). And here is a big one: You must be a good taxpayer for then next 5 years after an Offer in Compromise is accepted or all of your tax debts will come back. 

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy can completely discharge old personal tax debts. 100%

What to watch out for: Timing is big. Be sure to calculate the correct time to file bankruptcy. My friend, Attorney Larry Hienkel of Tampa, FL has developed the bankruptcy tax discharge determinator to help bankruptcy attorneys calculate the right time to file bankruptcy.  Chapter 13 is available, but I have yet to see a repayment plan that was more favorable than something we could have negotiated with the IRS. The other thing is tax liens. If there is one area of law more confusing is what happens to a tax lien when Chapter 7 is filed? I have seen cases where they have been released and where they haven’t. It mainly depends on if we are successful in convincing the IRS insolvency unit that there is no equity the liens secure (but not always). You can not get rid of Trust Fund taxes with bankruptcy (although you can lower them with an Offer in Compromise).

For when you dispute the amount you owe

The are other IRS debt settlement programs available for when actually  dispute the amount you owe the IRS, these include penalty abatement, audit reconsideration, amended returns, innocent/injured spouse relief, Claim for Refunds and will be covered in a future article. So just to make it clear, these are your options when you can’t afford to repay the IRS.

Conclusion: “Why can’t I just do this on my own?”

One question we deal with all the time when we speak with someone who wants to know if they can save money and represent themselves in front of the IRS (or gamble on a a low-cost resolution company) is: “Why can’t I just do it on my own?”

Well, you can do it on your own. You can even represent yourself in a trial. But the question is, should you face the IRS unprotected?

To help you answer that question, I’d like to share some facts about the IRS with you.

Did you know that many IRS employees are members of an employee union? And that when an IRS employee is given low marks or faces discipline, union representatives are called in to protect the IRS employee facing punishment by the IRS. (Some feel the union actually doesn’t even represent them well enough, and don’t belong. h/t Martha De la chaussee)  This is all true, I assure you.

So here’s my question for you: If IRS employees need protection from the IRS, shouldn’t you get protection from the IRS?

What is IRS Debt Settlement Negotiation?

Thanks to the internet and late-night TV, confusing messages on the IRS.gov website, and heck — why not blame lawyer television dramas as well — there is huge confusion about what IRS debt settlement negotiations actually are. In this article we won’t give you false promises, but rather, tell you about a little-known secret called “RCP” that determines the deal you can negotiate with the IRS. But first, I want to tell you what IRS debt settlement negotiation isn’t.

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5 things you must know about FBAR penalty negotiations

 As you probably know, the IRS has a new focus on FBAR penalty enforcement. Because of the strange history of the form and the Bank Secrecy Act, many people can’t quite figure out what what all of this means. In order to help you understand the most essential facts, here is list of 5 things you must absolutely know about FBAR Penalty negotiations.

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IRS Crackdown on Quiet/Soft Disclosures, promising audits and big penalties

Tens of thousands of taxpayers, and tax professionals decided to ignore warnings by the IRS and created a reporting scheme often called soft or quiet disclosure, something done by amending his past tax returns and filing delinquent tax FBARs without participating in the Offshore Voluntary Disclosure Program (OVDP). These crafty taxpayers looked at the FBAR-equivalent penalties (5-27.5%o f highest account value)  and thought they were too high and ignored IRS warnings. They hoped when they put all their foreign account information on an IRS form, they could cross their fingers and the IRS might leave them alone.

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June 2013 IRS FBAR News & Updates

With all the FBAR news coming out, I thought it would be a good idea to do a quick video to go over some of the bigger FBAR?OVDP news developments.

In this two-part video series, I :

(1) give a quick overview the FBAR form and its filing requirements
(2) describe the IRS crackdown on so-called soft or quiet disclosures
(3) report on news that the IRS has made no efforts to educate expatriate or recent immigrants, dual citizen, resident aliens, and VISA holders,
(4) mention FBAR education resources for tax payers, tax professionals and estate planning attorneys, and
(5) explain why many CPAs and attorneys have stopped dabbling in OVDI cases, and (6)  advise those who filed under the 2009 that they have a limited amount of time to claim a penalty reduction.

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BY: THOMAS S. GROTH, ESQ (find Thomas on twitter! @tsgESQ)

What is the percentage of Offers in Compromise accepted?

It’s a reasonable question.  There are several reasons that someone might be wondering what percentage of offers in compromise get accepted.  Maybe you submitted an OIC, it’s been a while since you’ve heard anything about it, and you’re wondering if you actually have a real shot at getting your offer in compromise accepted at the IRS.  Or maybe you’re weighing your options.  You don’t know if you should go for it, should you fill out Form 656, cross your fingers, and wait?  If you were going to go strictly by the numbers, I’d say this isn’t a good bet.  According to the 2011 IRS Databook,  about 57,000  OIC submissions were received in 2010, but only around 14,000 were accepted.  So the percentage of Offers in Compromise accepted in 2010 was just under 25%.  In 2011, the numbers got a little bit better.  The percentage of OICs accepted in 2011 rose to just above 33%. So you can submit an offer, wait for what seems like forever, hoping that it gets accepted, and 66% of the time you’ll be disappointed.  Well, not exactly, read on to understand why these numbers shouldn’t discourage you from seeking about path to freedom from IRS Debt.

Our acceptance rate for Offers in Compromise here at IRSMedic is close to 3x the IRS’s overall acceptance rate of offers in compromise in 2011.  Yes, you read that right.  Why is it so high?  Because we only submit OICs that we believe in.  We only submit offers when we know the IRS has to say yes. Sometimes the IRS will say no at first, but we make sure that we hold them accountable. We appeal unreasonable rejections of Offers in Compromise that should be accepted.

So why is the percentage of Offers in Compromise accepted by the IRS so low? Because the IRS isn’t CapitalOne.  You can’t just offer them a 40% lump sum payment and expect them to take it on the grounds that you are currently unemployed.  An Offer in Compromise isn’t your standard Debt Settlement. To understand why, we need to consider the purpose of the program.  The purpose of the OIC program is to give taxpayers a fresh start, but only after they come into compliance.  But I’ve seen so many cases where IRS personnel will send out the paperwork for an OIC (called a Form 656 and 433-A(OIC)) to a taxpayer simply because the person tells the IRS representative that he wants to “settle my tax debt.”  They don’t even bother to mention that he better have filed every single tax return over the past ten years before they’ll take a serious look.

Why does the IRS let taxpayers apply for OICs when they should be telling them it won’t work out?  Because the IRS has nothing to lose.  See, while the offer is being considered, the amount of time the IRS has to collect is suspended. For example, supposed the IRS had 3 years left to collect on a particular 7-year-old tax debt.  Now, the taxpayer submits an Offer in Compromise for that year.  The IRS “considers” the OIC for a year before rejecting it.  The IRS still has 3 years left.  If no Offer had been submitted, they would only have two years left to collect.

Don’t believe anyone who tells you that you are guaranteed to qualify for an Offer in Compromise.  There may be better programs out there.  Look for a tax professional that is going to tell you the truth about your situation, and who will work with you to find the best resolution to your tax debt.  Here’s the thing: the Offer inc Compromise isn’t the only way to get the IRS out of your life forever.

Fill out the form below to get our series of e-mails about the Seven Steps that you need to take to resolve your tax problems:

Here is a letter form Jackie Bugnion, director of American Citizens Abroad:

To the Editor:

In his article, “The IRS Is in Big Trouble,” Tax Notes (no link, paywall), May 20, 2013, p. 951 , Christopher Bergin stated that the scandal surrounding the treatment of Tea Party applicants for section 501(c)(4) status may be the canary in the coal mine. I would like to highlight one other scandal which was signaled by National Taxpayer Advocate Nina Olson, but was ignored by former IRS Commissioner Douglas Shulman — the “bait and switch” tactics of the IRS under the overseas voluntary disclosure program (OVDP).

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