Accounting News and Notes

How to Process an Offer in Compromise with the IRS: Determining the Offer Amount

So you have tax problems, which seem will never go away. You work diligently to get all of your returns properly prepared and now you receive an IRS notice that promises liens on assets, levies to bank accounts and garnishments to your wages. Each notice shows up with the balances due creeping higher, always a bit more than the last. You owe for years of back taxes, penalties and interest and the amount due now seems insurmountable. Perhaps you have even been on an installment plan but the amounts you are paying monthly are less than what is being assessed for additional penalties and interest. Facing what feels like an insurmountable debt,  may well give you the sensation that your are entering the twilight zone. You do have options with one of those being the possible submission of an Offer in Compromise. There is light at the end of the tunnel, but it requires determination, resolve and the experience of a CPA who is well versed in these matters.

Though there are many forms to complete including Form 656, which is where the actual offer amount is documented, Form 433A for wage earning taxpayers and Form 433B for businesses owners. Forms 433A for individual taxpayers and Form 433B are the predominant source of information for both taxpayers as well as the Internal Revenue Service to determine a settlement amount. In general terms, the settlement amount is calculated by taking the total of a taxpayers net worth and their excess cash flows (discounted into today’s dollars) over the next five years.

Determining Net Worth

A taxpayers net worth is determined first by adding up all of the assets that a taxpayer owns. This would include their home, furnishings and fixtures, vehicles, cash balances, cash surrender value of any insurance policies, real estate investments, stocks, bonds, and essentially every other asset that a taxpayer owns. If married and submitting a joint Offer in Compromise then the assets reported would also include any assets of both spouses. From the total of the assets, one would subtract the outstanding debt for which a  taxpayer has including home mortgages, car loans, credit card debt, equity lines, and generally all of the outstanding loans one has. All of debts (if submitting a personal offer on Form 433A and if submitting a corporate offer on Form 433B), are generally listed on the forms alongside the asset to which the debt relates along with detailing the monthly payment being made and any available credit, which is at present unused.

Determining Excess Cash Flows

Perhaps the most elusive portion of determining the offer amount is the calculation of what excess cash flows are available to the IRS and can be applied against any outstanding monies due. In layman’s terms, this determination is based upon the result of listing a taxpayers monthly income and qualified expenses. The income sources would generally list all taxable income that a taxpayer has been receiving and may be reasonably expected to receive in the future. Also a detailed listing, by category, is prepared showing all a taxpayers monthly expenditures by category. For individual taxpayers ,the IRS has statutory tables which are used to prepare the monthly amount listed. These tables are based upon the monthly income of a taxpayer as well as their family size. The expenditures detailed are frequently the most widely discussed and debated of all the items listed anywhere on the offer forms as often what a taxpayer feels is a necessary and required expense is not viewed in the same light as the same by the IRS. After any monthly excess is determined then this total is multiplied by sixty months (five years) and then discounted back into today’s dollars. This calculation is then added to the net worth amount, as determined above, to list the initial offer amount.

Offer Submissions

Both the IRS and GA are encouraged by tax law, but not required, to cease all collection efforts while an offer is being considered, as long as they feel the offer is being tendered in good faith. Just as the IRS desires to work with taxpayers who have a valid offer for them to consider, so should taxpayers only submit offers if they truly qualify. In this way, both parties are best able to work in good faith to resolve and satisfactorily determine a fair settlement amount.

Getting a good Atlanta CPA to help with your tax issues is your best first step to obtaining sound business and tax advice helping to ensure the likelihood of your business and family home finances.

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.HisCPA.com

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We advise clients on: IRS representation, Offer in Compromise, Incorporation in GA, Corporate and Personal Income Taxes, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

Atlanta CPA Serving Corporate Income Taxes to the Metro Area

www.HisCPA.com

If you are a business owner run, do not walk, to the nearest CPA office. Owning of a business is something that you do not want to do alone or without the services of an experienced Certified Public Accountant. Being a new business will bring many critical issues, all of which may well thwart your efforts at having the advice of a CPA who specializes in business issues.

For the New Business Owner we have on our web-site tools which will greatly assist in getting your new business started.

Tax Effects Of Entity Choice
We can help you navigate through the myriad of tax law letting you make the best strategic and tax decisions in incorporating your business.   http://www.hiscpa.com/article6.html

New Corporation Forms and Registrations Checklist
Whether you are just incorporating or have been in business for years. This summary will enable you to quickly locate the forms and guidance you need to ensure your business maintains tax compliance. http://www.hiscpa.com/checklist.htm

Incorporating in Georgia
Starting your business off with the best tax elections for your business are amongst the most important business decisions you will ever reach. Discover how you can best set yourself up for business success as you consider this critical part of your business start-up.     http://www.hiscpa.com/incorporating-ga.html

Knowing which return to file is a good start to understand both your tax obligations and responsibilities. Below please find a recap of the different returns required to be filed by entity type:

Form 1120: C Corporations. A C Corporation Return is a four page return, not accounting attachments which requires a business to report its assets, liabilities, and equity as well as its results of operations (i.e., its profit and loss statement). Also on the form any applicable corporate income taxes are assessed, as well as the method of tax basis filing, whether cash or accrual.        http://www.hiscpa.com/business-tax-returns.html

Form 1120: S Corporations. An S Corporation Return is a four page return, not accounting attachments which requires a business to report its assets, liabilities, and equity as well as its results of operations (i.e., its profit and loss statement). Also as an attachment to the form a K-1 is attached indicating each partners respective share of the company’s operating results and tax preference items. The return also will indicate the  method of tax basis filing, whether cash or accrual. K-1’s, by tax law, have to be prepared based upon the ownership percentages of respective partners.      http://www.hiscpa.com/tax-basis.html

Form 1065: Partnership Returns. Partnership Returns are required to be filed for all Partnerships whether or not they are incorporated, LLP’s, as well as LLC’s who have opted to remain a partnership for tax purposes. A Partnership Return is a four page return, not accounting attachments which requires a business to report its assets, liabilities, and equity as well as its results of operations (i.e., its profit and loss statement). Also as an attachment to the form a K-1 is attached indicating each partners respective share of the company’s operating results and tax preference items. The return also will indicate the  method of tax basis filing, whether cash or accrual. K-1’s, by tax law, can be prepared based upon the ownership percentages of respective partners or any other allocation method by which the partners agree.    

Getting a good Atlanta CPA to help with your tax issues is your best first step to obtaining sound business and tax advice helping to ensure the likelihood of your business succeeding.

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.HisCPA.com

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We advise clients on: IRS representation, Offer in Compromise, Incorporation in GA, Corporate and Personal Income Taxes, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

Submitting an Offer in Compromise: Which Tax Forms to Use 

If you have a large tax bill owed to either the IRS or Georgia, there is a tax process called the Offer in Compromise which may be well suited to help you get beyond the mountain of tax debt and to negotiate a fair and just settlement with the IRS. The process requires you to be current on all of your tax filings and payments, thus the Internal Revenue Service or Georgia will first need to be able to verify that all of your respective corporate and personal income taxes, payroll taxes, and sales tax reports have been appropriately filed. If you are a corporate taxpayer or have been a proprietorship and have a payroll, the IRS will need to be able to ascertain and confirm that you are current on these payments and filings as well. If you are doing an Offer in Compromise to the state of Georgia then having your payroll reports, income taxes and payments current as well as any applicable sales tax reports will also be a pre-requisite to submitting an Offer.

Submission of an Offer in Compromise. Filing of the Offer Form (Form 656), the Collection Information Statement for Wage Earners and Self-Employed Individuals (Form 433-A), and the Collection Information Statement for Businesses (Form 433B) are the core paperwork to be initially submitted with the Offer  in Compromise. Attendant with this filing is wide host of required documentation which needs to be submitted with the Offer to validate the deductions claimed.

Form 656: Offer in Compromise. This form is the actual Offer itself. The Offer when submitted to the Internal Revenue Service needs to include a check for $150 along with a check for at least twenty percent of the amount you are  proposing to settle your total outstanding taxes. On the Form you will also indicate how the balance of the monies will be paid after an Offer in Compromise is accepted. Generally the best option is to pay the balance within thirty days of acceptance of the Offer, although by law the IRS can extend a payment schedule for up to two years.

Form 433A: The Collection Information Statement for Wage Earners and Self-Employed Individuals. This form is used by all taxpayers who are filing an Offer in Compromise for tax monies, which they personally owe. Accordingly for all those who receive a paycheck with payroll withholding or have a business proprietorship will utilize this form to file along with Form 656. This form will list all of a taxpayers (and if a joint offer, their spouse as well) assets, liabilities, credit lines, insurance values, retirement plan balances, monthly cash inflow and outgo in accordance with prescribed IRS criteria. Attendant to the forms instructions there is a wide host of documentation which also should be attached including monthly pay stubs, bank statements, billings/statements, and proof of expenditures.

Form 433B: Collection Information Statement for Businesses. If you are submitting an Offer in Compromise for your business for either payroll taxes withheld and not paid or for unpaid income taxes if a C Corporation, then you will use Form 433B for the submission. This schedule will also list all of the assets and liabilities of the business along with a profit and loss showing the year to date profit for the current year. Most of this information can be obtained from the company’s internal books and records (i.e., their balance sheet and profit and loss). Details of where the company banks, account numbers, loans, loan numbers, offsetting balances, monthly payments are examples of the additional information which will also need to be supplied. Copies of items such as the last three monthly bank statements, open accounts receivable and accounts payable detail will also need to be provided.

Generally an Offer in Compromise will take at least a year to process and it is not a task you will want to take on without the skill of a good Atlanta CPA to guide you along the way. 

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.HisCPA.com

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We advise clients on: IRS representation, Offer in Compromise, Incorporation in GA, Corporate and Personal Income Taxes, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond. 

Section 179 Depreciation…Being Sure you Maximize Your Depreciation Deduction

Depreciation and all of its attendant rules are difficult for both the professional and laymen alike. Sifting through this maze of the tax code is a tenuous task. Perhaps there is no more important section of the tax code to consider when preparing your annual income tax return than the deduction for Section 179 depreciation. Whether you are a S Corporation, LLC, LLP, C Corporation, Partnership or proprietorship this one of the best deductions around and if used and claimed properly can do much to mitigate your current year tax bill. Section 179 depreciation has been around for decades in varying forms and limits. The law is intended to allow business owners to deduct in full, up to prescribed limits, the amount of fixed assets such as furniture, fixtures, computers, and office equipment the year that is purchased. Generally speaking this deduction does not apply to the purchase of fixed assets such a land, buildings, or passenger vehicles. Not only will this deduction help you mitigate your own tax bill but it will also stimulates the economy by encouraging the purchase of capital equipment.

In 2007 the Section 179 limit is $125,000 for most business and individuals and $160,000 if you are in a Qualified Enterprise Zone or for Renewable Community Property. The limit for business was originally set to increase for 2008 to $128,000 (as the amount is indexed annually for inflation), however the maximum amount was increased to $250,000 as a provision of the 2008 Economic Stimulus Act. The maximum limitations apply both at the corporate and personal level meaning that a single business or an individual taxpayer are limited to the maximum amount for that year. Proper tax planning should occur each and every tax year to ensure that all deductions are maximized to the full extent possible while being appropriately cautious about impacts on future year taxes. Section 179 tax elections and amounts claimed are also limited to a ceiling of a business’s profits for the year (i.e. they cannot exceed that years business profits for the maximum IRS set limit for the year). Any unused credits call be rolled forward to future qualifying years. Working with your CPA is the best way to ensure that you always pay only your lowest legally possible tax.

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.HisCPA.com

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

Back Taxes, Liens, Levies, IRS Problems, IRS Representation, and Offer in Compromise

When the IRS Tax notice arrives always remember to first breathe deep and then to contact a good CPA you can trust. Tax notices are always based upon information solely that the IRS has. A good CPA, who also specialized in tax representation issues, can bring information to light that will frequently dramatically lessen the amount of tax owed and perhaps even the totality of the bill. For example, if your business received Form 1099’s indicating earned business income that is most often all that the IRS knows and if you have not yet filed your return. Accordingly in this instance, the IRS will not be aware of the many valid business expenses you might have against same for which a CPA can help you file the right returns and address.

Offers in Compromise. These are still great options for those who qualify but I suggest retaining only those with a proven track record and to pay for professional fees as they are delivered rather than up front. In this way you will by nature of the relationship with the CPA, have a much more interactive and communicative relationship as this tax issue is addressed.    http://www.hiscpa.com/working-with-the-irs.html

Tax Liens & Levies. Having a CPA who is well versed in these areas will do much to make sure both your rights as a taxpayer and U.S. citizen are protected as well as to see that collection efforts, where appropriate, are deferred to allow you and your CPA ample time to address sensitive and complicated tax issues.      http://www.hiscpa.com/offer-in-compromise.html

IRS Representation. Just as you would not go into a court battle without an attorney so should you not try to address critical business and personal tax issues without a CPA who can guide and assist during this process.     http://www.hiscpa.com/irs-audit.html

IRS Problems. IRS Problems do not have to be permanent and working with a CPA who knows the ins and outs of how both the IRS and tax law works will do much to mitigate your pain and financial outlay.    http://www.hiscpa.com/avoiding-audits.html

IRS Issues and those to states as well can be solved. Working hand in hand with a seasoned and wise CPA will do much to resolve these past issues so you can get on with the living of today.

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, and Decatur.

Incorporating in Georgia

So you have opted to get a new business going and have gone to the Secretary of State’s web-site and it all seems to be a fill in the blank so you think everyone can do it. All you have to do is to know your business name and address. Right? Well, not just no; definitely no.

Most all, who go it alone fail to consider some and many all of the below issues:

Authorized Shares. How many initial shares to initially authorize leaving no room for flexibility to add future shareholders later.

Registered Agent. Naming a individual who will be the point of reference for all legal filings.

By-Laws. The rules and regulations under which a business will make decisions and the functional capacity of its owners.

Election of Officers. This will be those who are duly authorized to sign contracts on behalf of the company.

Election of Directors. All S and C Corporations should have a duly authorized and elected Board of Directors, even if you are the only one on it.

Stock Issuance. All corporation should have and record the issuance of stock evidencing their ownership in the company.

Board of Directors Meetings. Meeting should occur on a substantive and periodic basis documenting substantive decisions reached and determined.

Shareholders Meetings. Meeting should occur on a substantive and periodic basis documenting substantive decisions reached and determined.

Just as you would not want to perform your own major surgery so will you not want to incorporate yourself.

At His CPA PC we work hard to help you keep your tax bill as low as legally possible be helping with Entity Selection, IRS Representation, Offer in Compromise, and Corporate and Personal Income Taxes.

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.Hiscpa.com

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

Solving IRS Tax Problems & Offer in Compromise in Atlanta                   www.HisCPA.com

At His CPA PC we work hard helping clients with Solving IRS Tax Problems and with their Offer in Compromise. We work the old fashioned way by working to make sure you pay your lowest legal tax. Discovering how the IRS process works will help you learn what you can do to help keep your head above water. Contact John Dillard CPA today at 770 814 9304.

 How to Survive an IRS Audit: A Taxpayer’s Guide to Success

How Audits are Selected
Learning about how audits are selected is the first step to discovering how to overcome the emotional and financial distress that normally occurs as part of the audit process. Lifting this veil will help keep you on an even keel in learning how to deal with the IRS audit.       www.hiscpa.com/irs-selection

When the IRS Notice Arrives
Rather than beginning the process in fear, discover how you can better prepare yourself so that you are not surprised at the audit process and its ultimate results. By seeing through to the other side you can best ready yourself to close your audit with no adjustments and no additional monies due.     www.hiscpa.com/irs-audit

Working with the IRS: Keeping your Tax Bill Manageable and Under Control

Solving IRS Tax Issues
Don’t fight the IRS but work with them to resolve your tax problems. Discover a myriad of legal ways the IRS is eager and willing to work with you to resolve any unpaid debts, penalties, and interest.    www.hiscpa.com/working-with-the-irs

Paying Your Taxes - Withholding and Extensions
Paying your taxes made easy. This section will enable you to quickly grasp the general guidelines of tax law requiring that you pay taxes as you earn money. As well, extensions and their uses and limitations are disclosed and discovered.  www.hiscpa.com/paying-taxes

How to Avoid an IRS Audit
Discover simple steps that you can do to help prevent an IRS audit. Though the tax code is at times very difficult to understand and comply, these basic simple steps will help you avoid an IRS audit.   www.hiscpa.com/avoiding-audits

Solving IRS Tax Problems: Submitting an Offer in Compromise
When all else fails and if you qualify, the IRS and Georgia both have a program which will enable you to work to solve the severest tax problems.   www.hiscpa.com/offer-in-compromise

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.Hiscpa.com

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

 Metro Atlanta CPA                                    www.HisCPA.com   

Corporate Income Taxes                  www.hiscpa.com/tax-services.html

Personal Income Taxes                     www.hiscpa.com/tax-top-ten.html
Payroll Administration                         www.hiscpa.com/payroll-tax.html
Retirement Planning                     www.hiscpa.com/retirement-planning.html

Financial Reporting                        www.hiscpa.com/attestation-services.html

Strategic Business Checklist         www.hiscpa.com/business-checklist.html    

An Award Winning CPA                       www.hiscpa.com/pressrelease1.html
Our Ministry                                             www.john-dillard.com/

Contact John Dillard CPA of His CPA at 770 814 9304 and visit www.hiscpa.com/

At His CPA we march to the beat of a higher drummer where we put the “Golden Rule” to work each and every day by “Serving Him by Serving You…One Tax Return at a Time.”

We serve clients that are located in Atlanta GA, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.

If you have a new business the first thing you will want to do is to review to see which type of entity works best for your corporation. Both the LLC (Limited Liability Company) and the S Corporation continue to lead the way in being the most popular choice of entity selection in the state of Georgia. There are many options to chose from when choosing the best entity for your business including:

S Corporations. Generally results in the lowest amount of tax for most businesses. Best suited for U.S. citizens or resident aliens who have less than one-hundred shareholders who do not need to be another entity type for operational or liability reasons.

-LLC. Limited Liability Company. Generally these are well suited to real estate development companies, for entities where owners are not U.S. citizens or resident aliens, you have multiple classes of stock, or have over one-hundred shareholders.

-LLP. Limited Liability Partnership. Frequently utilized by multi-practice physicians and dentists who are looking to limit their professional liability from other owners and practitioners.

-Partnerships. These entities can have general or limited liability partners and are also well suited for business whose predominant focus is the investment of real estate dollars or ventures.

-C Corporations. Typically results in the highest of all the tax entity choices as a result of owners having to pay taxes twice (first at the corporate level for any profits and then later for any dollars paid out to stockholder owners).

To review these choices in greater detail please visit our web site at http://www.hiscpa.com/article2.html  There on the site you will also find a mathematical example which will further illustrate the nuances and differences in taxes by entity selection.

For those who are just beginning a new business a checklist is often  a great way to ensure that you have all of your bases covered. One is available for your use and review at http://www.hiscpa.com/checklist.htm  Whether you are a Atlanta business or one in Duluth, GA you will find these articles an invaluable source of information to utilize again and again.