When you decide to fight the IRS or a state tax agency, the cost of fighting must be considered.  It is sometimes cheaper to lose than it is to win.  It is a business decision to challenge the agency.

Two Internal Revenue Code provisions allow for the recovery of fees and costs.  IRC Code sec 212(3) provides an itemized deduction for out-of-pocket fees and costs.  IRC Code sec 7430 provides for a reimbursement of out-of-pocket fees/costs.

IRC Code sec 212(3) reads as follows: “In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenes paid or incurred during the taxable year -

(3) in connection with the determination, collection or refund of any tax.”

This deduction is very broad.  The deduction applies to -

1.  Audit, collection and refund cases

2.  Federal, state or local taxes

3.  Income, estate, gift, property or “any other tax”

4.  Fees for tax counsel or expenses of the case, and

5.  Preparation of tax returns.

Revenue Regulation 1.212-1(d) specifies the expenses must be “ordinary and necessary.”  If you are in a 28 per cent federal and 9/3 per cent state tax bracket, the tax agencies are effectively paying almost 40 per cent of the fees you pay Tax Crisis Institute to defend you.

The deduction is treated as a miscellaneous itemized deduction and claimed on schedule A.  The expense must exceed two per cent of AGI and the deduction is claimed in the yar the expense was incurred.

Regards,

Dana M. Ronald, Tax Crisis Institute

There was a time the IRS and State taxing agencies could not be sued for overzealous or unlawful collection pre or post bankruptcy;  this was the doctrine of sovereign immunity. On October 22nd, President Clinton signed the Bankruptcy Reform Act of 1994.   This law contained amendments that unequivocally waived sovereign immunity for governmental units at all levels under the Bankruptcy Code.

When the IRS or a State tax agency continues to collect while the Taxpayer is under an automatic stay or continues to collect after a discharge by the Bankruptcy Court, the Taxpayer may sue for damages including attorney’s fees and costs;  in some cases a tax collector may be jailed for contempt of court.

If the tax debt is not discharged in a chapter seven case, we can sue the tax agency and the individual tax collector and all who signed off on the levy per automatic stay 11 U.S.C Sect 362.  If the Taxpayer has been discharged, we ask for the Court for contempt for violating the “post discharge injunction.”

We first send notices to the Special Procedures Unit who is the internal IRS group who handles bankruptcy issues.  The person and his or her Identification number are located who has been assigned the case.  A letter is sent certified mail explaining these taxes are dischargeable and provide appropriate statutory authority or case law, if necessary.  In addition, we put them on notice that we will take enforcement action in the Bankruptcy Court against the IRS or the tax agency, if they levy, file a lien or do anything in violation of the automatic stay or “post discharge injunction.”  We will ask them to confirm that we are correct and that the taxes or dischargeable; or in the alternative what authority they feel supports the position the taxes are not dischargeable.

If the Special Procedures stonewalls us, we do not fool around.  A Motion For An Order to Show Cause Re: Contempt is immediately filed with the Court.  Depending upon the outcome of the Show Cause hearing, jail may be an option for renegade tax collector.

Regards,

Dana M. Ronald, Tax Crisis Institute

Have You Been Involved in the Roni Deutch Fiasco?

Are you a victim of the “Tax Lady,” Roni Deutch? Tax Crisis Institute is here to help you.

Tax Crisis Institute is an experienced tax representation firm that can help you resolve any unfinished tax problems you may have been dealing with while working with the Roni Deutch Tax Corporation. If you need help resolving a lawsuit please seek appropriate legal counsel.

According to a story released by WalletPop.com, Roni Deutch was charged with more than 100 contempt of court charges. It was reported that she refuses to refund over $435,000 in unfulfilled fees, and she has recently shredded over 1.5 million pages of important documents. Her assets have been frozen and the Roni Deutch Tax Corporation is in complete disarray. If you were a client of Roni Deutch, you need to get help now!

If you have been involved with this issue, don’t hesitate to contact us now. We can help you resolve your existing tax issues and get you back to your life quickly.

Call us at 1-866-751-9829 or complete the form to the right.

The Bankruptcy Code prescribes five rules that apply to discharging income and non-trust fund taxes in bankruptcy.  They are:

1.  The Three year rule on timely filed tax returns – Section 507(A)(B)(A)(i)

2.  The Two year rule on late filed tax returns – Section 507(A)(B)(A)(1) (C)

3.  The 240 day assessment rule – Section 507(A)(B)(A)(ii)

4.  No Fraudulent return rule – Section 523(A)(1)(C) and

5.  No Tax Evasion Rule – Section 523(a)(1)(B).

If a taxpayer has filed all of his or her returns and is not subject to the consumer debt rules of BAPCPA, the taxpayer will get a discharge.

What does a taxpayer do when he or she does not know the last time he or she filed?  Or if he or she does know, the records necessary to prepare the returns may be so sketchy, uncorrelated or incomplete that it is impossible to do the returns.

The IRS is usually satisfied with the last six year’s returns.  The state may go back 25 years on substitute for returns.  In most cases, if we prepare the last six year’s returns for the IRS and the IRS plus the returns the state or IRS SFRs, we can safely discharge a taxpayer’s tax debt and obtain a fresh start.

There is a dilemma, however.  When a taxpayer signs a bankruptcy petition, it is signed under the penalty of perjury.  What a bankruptcy judge or trustee are particularly after, when the jurad is signed, are upreported or transferred assets.  This could be a criminal matter.  However, when a taxpayer signs under the penalty of perjury, it does not apply to just assets.  It applies to all schedules on the bankruptcy petition.

In a word, if a taxpayer has ot filed tax returns for many years, the case could be made he or she has not disclosed all of his or her debts.  The taxpayer is vulnerable to a challenge by a tax agency under the No Tax evasion Rule.

Enter Dana’s rule number Six for non-filers looking to obtain a discharge of his or her tax debts:  Obtain a written installment agreement from the IRS and/or State tax agency prior to filing the bankruptcy petition.  The IRS and California, and most states are the same, will not enter into an installment agreement unless all returns they require are filed.

With the written installment agreement as evidence, if is unequivocal tht even the harshest IRS or state legal counsel could challenge the bankruptcy discharge.  It is bullet proof.  You will get your discharge!

Kind regards,

Dana M. Ronald 3/11/11

The states are broke and running historically unprecedented budget deficits. They are looking under every rock to collect. There is no one they care less about harming than someone who has vacated their state.

Under the Uniform Enforcement of Foreign Judgments Act, a state tax agency cannot collect by lien nor levy in an another state without a court judgment in it’s own state.

How they collect when they do not have a judgment is through unsettled jurisdiction issue. If a taxpayer has a local and not a national nor international financial institution or employer who is levied, the state cannot levy without a court judgment in another state.

The question is how we stop the unlawful levy. If it is a California bank levy, the levy is payable in ten and not 21 days like the IRS. The state does not care that the levy is unlawful.

The pressure has to be put on the third party. If it is a financial institution, submit a written demand certified mail, not to pay the unlawful levy and complain all the way up to the top of the chain of command. My position is if the bank pays the money over, they are liable for the money.

If the levy is on a local employer, a taxpayer has a problem. The legal claim would be just as strong against the employer as against the financial institution. However, if the taxpayer asserts his or her rights. there may be job security problems in a poor job market.

You will likely see these desperate states turn their accounts over for collection to law firms. The law firm will get a judgment in the home state and then pursue collection in the taxpayer’s new state of residency.

Dana M. Ronald
Tax Crisis Institute
February 19,2011