Articles Posted in Tax Debt

Our tax attorneys noted the recent closure of American Tax Relief in Beverly Hills for fraud and misleading advertising that claimed the company could settle delinquent federal and state taxes for pennies on the dollar.

We reported recently on our Tax Problem Attorney Blog when Roni Deutch ran afoul of the California Attorney General for advertising that was allegedly misleading. Those facing charges for tax evasion need solid legal advice and should not be misled. A tax lawyer can save a client thousands of dollars by protecting their rights in disputes with the IRS. However, finding a reputable tax dispute law firm is a critical first step in the process.

The Los Angeles Times reports that the Federal Trade Commission accuses American Tax Relief of bilking 20,000 customers out of $100 million with false claims about the company’s ability to reduce their tax debt.

The FTC said the company used TV, radio and Internet advertising to claim it could settle tax debt with the IRS for less than what was owed. It also claimed it could remove tax liens, stop wage garnishments and successfully challenge bank and tax levies as well as property seizures and “unbearable monthly payments.”

The husband and wife couple had been operating the company for over a decade and charged upfront fees of up to $25,000. The company’s assets were frozen by a Chicago judge who issued a restraining order. And a receiver has been appointed to manage the company.

Despite earning more than $60 million form the business, the couple allegedly failed to pay their own taxes.

Investigators said the company provided an “essentially useless service” while pushing people further into debt instead of helping them address their tax problems with the IRS. The company charged thousands to client credit cards and stopped answering customer calls after receiving payment, according to investigators, who hope to recover restitution for the victims.

There has been no reports of whether either owner even had a law degree.
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When the IRS files its federal tax lien it attaches to all of the taxpayer’s assets, including his home, bank accounts, cars and personal belongs. The federal tax lien ensures that if real property is sold any proceeds will go to the IRS to pay its tax lien. The IRS can also foreclose on its federal tax lien, and sell any property that the taxpayer owns.

There is a myth that the IRS won’t seize and sell a taxpayer’s home. Like most myths there is a grain of truth to it. In order to sell a taxpayer’s primary residence the IRS must obtain an order from a federal district court pursuant to Internal Revenue Code Section Section 6334(a)(13). However, if negotiations break down, or the statute of limitations on collection is about to expire, the IRS can and will seek a court order, and most courts will grant such orders. This is one reason why it is critical, especially in large dollar cases, that taxpayers obtain advice from a tax attorney with experience dealing with these types of tax problems.

A recent case from South Dakota illustrates that tax problems do not get better with age. United States v. Boscaljon (SD SD 2010). The Boscaljons owed about $200,000 dating back to 1993 and 1994. The IRS went to court to sell their residence. At the time of trial the taxpayers were both 74 years old, and living apparently primarily on social security, plus Mrs. Boscalon’s earnings from her $8.75 per hour, 20 hour per week job. Mr. Boscaljon had been diagnosed with cancer, had just completed chemotherapy, and had suffered a heart attack. Despite these facts the IRS brought suit to seize and sell the Boscaljons’ home. So much for a kinder, gentler IRS.

Earlier this year Robert Allen Stanford became infamous when he was accused by the Securities and Exchange Commission (SEC) of engaging in a gigantic fraud. It turns out that Robert Allen Stanford also has massive tax problems. According to a Motion to Intervene filed by the Internal Revenue Service (IRS) in the SEC matter, Stanford and his wife Susan Stanford owe the IRS over $226, 000,000 for the 1999 through 2003 tax years. In addition they may owe additional taxes for other years. The IRS has already filed tax liens against the Stanfords for 2002 and 2003, however, the Stanfords’ filed a petition in the United States Tax Court (Tax Court) to dispute the amount of the tax owed. The Stanfords’ petition to the Tax Court for 2002 and 2003 was an appeal from a collection due process (CDP) hearing. The federal tax liens, are fully effective, however, upon filing by the IRS, and if the Stanfords had a prior opportunity to dispute the amount of the tax due then they would not be entitled to another chance due so in the CDP hearing. The entire tax lien and tax levy process was slowed when the District Court in the SEC case issued a general order barring creditors from proceeding with claims against the Stanfords. The IRS motion seeks to allow it to move forward with tax litigation and collection against the Stanfords.

If you have tax liens, or tax levies please call the tax controversy lawyers at Brager Tax Law Group, A P.C.

The United States Tax Court has upheld a ruling by the Internal Revenue Service (IRS) turning down Koko Taylor’s offer in compromise, and allowing the IRS to proceed with a tax levy against all of her property and income. It also upheld the tax lien filed against her. Koko Taylor is a well known blues singer sometimes called the “Queen of the Blues.” The Tax Court opinion by Judge Paige Marvel details Koko’s rise from a poor orphan to a successful professional recording artist with a performing career spanning some 50 years.

Koko Taylor fell behind on her obligations to the IRS, and incurred tax debt of about $300,000 as of September 2006. To make a very long story short Koko’s tax lawyers filed for a collection due process (CDP) hearing with the IRS, and submitted three different offers in compromise including an effective tax administration offer in compromise. In the last offer in compromise, Koko’s tax attorneys proposed that she pay $125,000 and 50% of her annual net income should it exceed $125,00 per year.

The IRS rejected her offer in compromise, and the Tax Court agreed with the rejection of the offer in compromise. Let’s keep in mind that Koko Taylor was 80 years old, and her only substantial asset was her home valued at around $240,000—after taking into account its so-called “quick sale value.” She also was an insulin dependent diabetic, and had two heart attacks as well as high blood pressure. The IRS called these conditions “not uncommon for someone her age.” The IRS further determined that Taylor could pay her taxes in full without economic hardship even though that meant she would have to sell her home, continue to perform into her 80s, and live on a budget of $3,300 per month. Part of Koko’s tax problems were no doubt exacerbated by her continuing failure to stay current on her estimated tax payments which allowed the IRS and the Tax Court to rule against her on technical grounds. Nevertheless, the case represents a graphic demonstration that the so-called kinder and gentler IRS is not currently in evidence, and illustrates the difficulties of obtaining an offer in compromise. It is these difficulties which require a tax expert to navigate these treacherous waters.