Frequently Asked Questions (FAQ's)
Below are questions that my clients with IRS tax problems and/or California tax problems frequently ask me, along with my responses. My responses are general in nature and for informational purposes only. They may not apply to your particular tax situation, as each client's tax problem is unique and depends on its own facts and circumstances. If you have a tax problem, please contact me, San Diego Tax Attorney Richard Carpenter. Put my 25 years of tax law experience to work for you.
1. Q: Why did my tax return get selected for audit?
A: In general, tax returns are selected for audit for several reasons.
- The IRS uses a "Discriminant Function System" to grade tax returns and compare them to each other. The higher a taxpayer's "DFS" score, the greater their chance of being selected for audit. Most taxpayers get selected for audit because of their high "DFS" score
- Self-employed taxpayers also have a substantially higher chance of audit than whose that receive a W-2 at work.
- Taxpayers who claim losses on their tax returns get audited more frequently than others.
- Some taxpayers get selected for audit solely because of who prepared their tax return. The IRS has determined that some tax prepares don't follow the rules correctly and they select their clients very frequently for audit. Thus, your tax return could be selected for audit without any fault of you - simply because the IRS doesn't like your tax preparer.
- A small percentage of taxpayers are also randomly selected for audit - but this doesn't happen too often.
If you are selected for audit by the IRS, please contact me - San Diego Tax Attorney Richard Carpenter - before the audit begins. I will be able to review your income tax return and explain to you why you were selected for audit and what steps should be taken to properly prepare for the audit. I have been representing taxpayers at IRS tax audits for the past 25 years.
2. Q: My tax return just got selected for audit, shouldn't I just call my tax preparer to represent me at the IRS audit?
A: No, it is always best to have an experienced tax attorney represent you before the IRS, for these reasons:
- Many tax preparers and/or CPAs have little or no experience representing taxpayers at IRS audits.
- Before the audit begins, an experienced tax attorney can provide you with an independent review of your tax return and spot trouble audit areas that your tax preparer clearly missed already
- Some taxpayers get selected for audit solely because of who prepared their tax return. The IRS has determined that some tax prepares don't follow the rules correctly and they select their clients very frequently for audit. In those instances you certainly don't want that tax preparer to represent you at the audit under any circumstances.
- Using a tax attorney qualifies you for the attorney/client privilege - so anything you discuss with your tax attorney remains confidential. In contrast, if your tax case ends up in court, tax advisors and preparers who are not attorneys can be required to tell the court what you said to them about your taxes.
If you are selected for audit by the IRS, please contact me - San Diego Tax Attorney Richard Carpenter - to represent you at your tax audit. I have been representing taxpayers at IRS tax audits for the past 25 years.
3. Q: I haven't filed my income tax returns for several years - am I in big trouble?
A: It depends. If you have not filed your income tax returns for several years, you are not alone. While this is a serious matter, and some high income taxpayers actually go to jail each year for non-filing their tax return, for most taxpayers, it is not an insurmountable hurdle.
The first point you need to understand is if your income exceeds the minimum filing level set by the IRS, you are required to file an accurate income tax return each year. So if you have fallen behind with your income tax return filing, you should take immediate steps to correct this problem - especially if you have been ignoring letters from the IRS and/or CA Franchise Tax Board asking for your delinquent tax returns. If you are delinquent with your tax return filings, please contact me, tax attorney Richard Carpenter, to take the necessary steps to prepare and file all delinquent income tax returns. I have accountants on my staff that I have specially trained to prepare and file multiple years of delinquent tax returns quickly and effectively.
4. Q: I need to filed some delinquent income tax returns, but I am missing some of my tax information. What can I do?
A: I can generally obtain from the IRS, a listing of your income information (W-2s, 1099s, W-2Gs, etc) going back to tax year 2001. However you'll need to make some time to go through your files to see if you have any valid tax deductions - or do your best to estimate them, to the best of your ability. You'll likely need to contact your bank and/or credit card companies to obtain copies of prior statements. If you are delinquent with your tax return filings, please contact me, tax attorney Richard Carpenter, to take the necessary steps to prepare and file all delinquent income tax returns. I have accountants on my staff that I have specially trained to prepare and file multiple years of delinquent tax returns quickly and effectively.
5. Q: I have fallen way behind in paying my business payroll taxes. How serious is this?
A: Falling behind in paying your business payroll taxes is a serious problem that requires your immediate attention. If you continue to ignore paying your payroll taxes, soon you will find the IRS and/or California EDD taking aggressive collection action against your small business - which may include: (i) levying on your business bank accounts to obtain their delinquent payroll tax money - causing you havoc when trying to pay your other bills, (ii) contacting your customers and demanding (via a levy) that they pay them directly instead of paying your business - leaving you with more cash flow problems, and (iii) filing a tax lien against your business.
The IRS and the California EDD can also take steps to personally hold you responsible for your company's nonpayment of payroll taxes (called the Trust Fund Recovery Penalty). Even though your business is a corporation, that will not shield you from the IRS and California EDD coming after your personal assets. Not only is your business at risk, but so are your own personal assets - including your home. If you are in this situation - unpaid payroll taxes and/or unfiled payroll tax returns, it is very important that you immediately contact me, San Diego tax attorney Richard Carpenter, for assistance. I have been helping small business owners for the past 25 years.
6. Q: The IRS has just filed a federal tax lien against me, what does this mean?
A: A federal tax lien is a public record that you and/or your business owes the IRS money and any one with internet access will be able to find this out. Generally, if the IRS estimates that you will take more than 12 months to fully pay off your tax liability to them, they will routinely filed a federal tax lien against you.
A federal tax lien will also hurt your ability to borrow money. In addition, if you are a small business that has fallen behind with paying your payroll taxes, your competitors can see that the IRS has filed a federal tax lien against you and they will know that your business is in serious financial trouble. If the IRS has filed a tax lien against you, it is very important that you immediately contact me, San Diego tax attorney Richard Carpenter, for assistance.
7. Q: The IRS just levied my bank account. Why did this happen?
A: You must owe the IRS money and probably have been ignoring their previous letters for payment. As you may have already heard, the Internal Revenue Code gives the IRS tremendous power to collect past due tax, interest and penalties from a late-paying taxpayer. Federal law allows the IRS to levy against a taxpayer's wages, bank accounts, retirement plans, social security, escrow accounts and accounts receivable. The IRS also has the power to seize your assets and sell them off to pay outstanding amounts due. Note, the Internal Revenue Code does requires the bank to hold the levied funds for 21 days before forwarding it on to the IRS - so if you act quickly, there is usually time to negotiate with the IRS for a levy release under appropriate circumstances. If you owe the IRS over $20,000 in back taxes, please contact me, tax attorney Richard Carpenter, for assistance.
8. Q: I owe the IRS a lot of money. I heard that the IRS only has a limited time in which to collect this delinquent tax from me. Is this true?
A: Yes, there is some good news if you owe the IRS money. The Internal Revenue Code does limit the time period in which the IRS can collect delinquent tax from you. This is referred to as the statute of limitations on collections. In general, the IRS has 10 years to collect the tax from the date of assessment. This 10 year period can, however, be extended for various reasons. Also, if you haven't filed a tax return, the collection statute generally doesn't start running. If you owe the IRS over $20,000 in back taxes, please contact me, tax attorney Richard Carpenter, for assistance.
9. Q: I just received a phone call from an IRS Criminal Division Special Agent who said he wants to interview me. Should I go to meet with him?
A: Under no circumstances should any taxpayer speak with an IRS Criminal Division Special Agent, without first consulting with an experienced tax attorney. All statements made by a taxpayer to an IRS Criminal Division Special Agent can be used against him or her in any subsequent court trial. By recognizing early on when there is a potential criminal tax problem, an experienced tax attorney has the best chance of arriving at a successful resolution. If you are facing a criminal tax matter, it is very important that you immediately contact me, San Diego tax attorney Richard Carpenter, for assistance. I have the knowledge and 25 years of experience to help with any criminal tax matter.
10. Q: Can't I simply represent myself when dealing with the IRS?
A: Yes, you can represent yourself when dealing with the IRS - but for most taxpayers that isn't a good idea. IRS agents are specially trained in tax law and they deal with tax problems everyday. On the other hand, you are not specially trained in tax law and you don't deal with IRS tax problems everyday. So, if you represent yourself, the IRS will have a clear advantage. To level the playing field, you truly need someone on your side who is knowledgeable in tax law and specially trained to be effective in negotiations with the IRS. Remember, the IRS Agent is representing the Government - not you. Most IRS Agents will take advantage of you if they sense that you don't understand the rules. If you have an IRS tax problem, please contact me, San Diego tax attorney Richard Carpenter, for assistance. I have the knowledge and 25 years of experience to help with any IRS tax problem.
11. Q: I have decided to hire someone to represent me in dealing with the IRS. Why shouldn't I hire one of those "tax resolution firms" that I see advertising on the internet or during late night TV?
A: Tax law is complex and it is very important that you hire only an experienced tax attorney to represent you and that you carefully review the background of the actual attorney who will be working on your case before you hire them. As your financial future is at stake, you need to know exactly who will be handling your tax problem and what their background is. Also, will that employee still be working for that company next month? Don't be fooled by those "tax-help" company websites. As you may have already noticed, many of those websites intentionally avoid listing the background of the tax person who will be working on your case because he / she is either a novice attorney, or worse yet only an enrolled agent or just an accountant.
Several of these "tax resolution firms" have many consumer complaints. For example, according to the Wall Street Journal, one such firm -- J. K. Harris, a South Carolina based company - was sued by the Attorney General from 18 different states after it was found that this company didn't get consumers the tax relief it promised. According to the North Carolina Attorney General Roy Cooper, "many consumers paid J.K. Harris for tax help and got nothing but headaches in return." The Massachusetts Attorney General Martha Coakley also stated that J.K. Harris "took advantage of people who paid for tax assistance and, in some instances, profited by taking their money and not giving them any help at all (see the Wall Street Journal tax report column on July 23, 2008 for additional details.)
Don't be fooled by some "tax resolution" firm. If you have an IRS tax problem, please contact me, San Diego tax attorney Richard Carpenter, for assistance.
12. Q: Why should I hire you?
A: There are several important reasons why you should hire San Diego tax attorney Richard Carpenter to help resolve your tax problem:
- First, I have 25 years of tax law experience.
- Second, my law practice is limited to IRS and California civil and criminal tax controversy defense -- so I am working to resolve client tax problems every day.
- Third, I have top credentials. I am Certified as a Tax Law Specialist by the State Bar of California. This is the highest designation available to a California tax attorney.
- For the past 16 years, I have also been a part-time tax law professor at the University of San Diego School of Law.
- I am the author of 14 published tax law articles, including some of the leading articles in the U.S. in resolving civil and criminal tax disputes.
- I have also been recognized as one of the Top San Diego County Attorneys in 2007 and 2009 by the San Diego Daily Transcript legal news paper and was also named a "Super Lawyer" in 2008 and 2009.
- I frequently am asked by other tax attorneys and CPA's to provide expert guidance to their clients who have become involved in tax disputes.
I have the knowledge and experience you need.
If you have an IRS tax problem, please contact me, San Diego tax attorney Richard Carpenter, at (619) 696-8607 to discuss your tax situation in complete confidence. If you are serious about resolving your tax problem, I can
help you. Put my 25 years of tax law experience to work for you.
Certified
Tax Law Specialist