A solo 401(k) plan in which the only participants in the plan are the business owners and spouses of course, the spouses are employees of the business...


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Main Functions:

1.  Examination to determine the correct amount of taxes owed

     *  Self assessment

     * Document matching

     * Return examination (Audit)

2.  Collections Function

     * Collects the amount assessed

     * Collections personnel are not interested in debating the accuracy of the assessed amount


     The taxpayer has the right to be represented by an authorized representative.  Authorized representative are:

       * Attorneys, Certified Public Accountants, and Enrolled Agents.

       * These are authorized to represent taxpayers before both the examination and collection functions

       *  The taxpayer authorizes representation through signing a Power of Attorney ( Form 2848 ).

      * The IRS is required to honor a filed Form 2848

Taxpayer's Duties:

     * Quickly answer any notice you receive from the IRS

        * Most taxpayers deal with the Automated Collection System (ACS)

        * ACS is located at the National Computer Center, Martins bury, W VA.

        * The ACS sends notices that are generated by computer

        * The ACS usually handles cases that involve $ 100,000 or less in dispute.

        * These cases are handled through telephone calls, bank levies, wage garnishments and recording of Federal Tax Liens on all property owned currently or to be owned in the future.

        * If your case meets certain critera, it will be sent from ACS to a field (local) Revenue officer.  That is a good thing in most cases since you will then be dealing with a person rather than

          computer generated notices.  When dealing with the ACS, telephone wait time is long and you seldom speak with the same IRS person.

        * Revenue officers (ROs) want to close the cases as soon as possible.  However, ROS try to settle a case in the best interest of the government and the taxpayer.

          Many times they are helpful in finding a better solution to your problem, thus, be cordial and quickly answer all notices and request for information.

        * Often the RO will request information that you have earlier sent to ACS.  Resend the requested information via certified or registered mail.

        *  Keep a log of all contact you have with collections. Date, name and employee number of the person you talked with, and a summary of your discussion.

        * Also, keep copies of all documents and information sent to the IRS.  It is highly likely that you will need to resend it at a later date.




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Qualifying for an HSA

     Basic requirements to qualify for a Health Savings Account

         1.  You must be covered under a high deductible health plan on the first day of the month

                 a)  Self-only plan  The plan must provide for a minimum deductible of $ 1,300 ( 2016 )

                 b) Family coverage (Two or more insured) minimum deductible of $ 2,600 (2016)

         2. The high deductible health policy is the only insurance coverage the insured has.  There are limited exceptions

         3. You are not enrolled on medicare

         4. You cannot be claimed as a dependent on someone else's tax return for the year.

The benefits of owning a health savings account (HSA)

    1. The amounts you contribute to an HSA are tax deductible

            a. Maximum 2016 deductible contribution

                (i) Self-only plan - $  6,450

                (ii) Family plan     $ 13,100

            b. The contribution is deductible whether you itemize personal expenses or not

    2. The contributions remain in your account until they are withdrawn. Unlike a flexible spending account, HSAs are not a "use it or lose it" trust account

    3. Your employer can establish a plan for its employees. The contribution limits are the same for the employer as for you. The limits apply in the cases where

        employer contributes less than the maximum and you contribute more.

           a) Employer contributions are excluded from income

           b) Your cafeteria plan contributions are considered as though made by the employer

    4. The income generated by your HSA is not subject to income tax

    5. Distributions from your HSA used to pay medical expenses are tax free. Of course, these expenses cannot be used as itemized medical deductions

    6. Your HSA is portable even if your employer established and funded the account

    7. Maximum annual deductible and out-of-pocket expenses you pay before the insurance policy must start paying (stop-loss limits).

         a) Self-only coverage          $   6,550

         b) Family coverage             $ 13,100

    8. Certain preventive care benefits and screening services can be p-aid from your HDHP before you meet the HDHP deductible. Examples are tobacco cessation programs

        and obesity weight-loss programs.

Distributions from an HSA

      You will generally pay medical expenses during the year without being reimbursed by your high deductible health plan until you reach the annual deductible

      for the plan. You may ask the trustee of your HSA to send you funds from the HSA to cover the annual deductible. Although you received a deduction for your contribution or the employer's

      contribution was excluded from income, your withdrawal from the HSA are not taxable income if used to pay qualified medical expenses

Distributions from your HSA used for purposes other than qualified medical are taxable income. In addition, there is a 20% penalty imposed on amounts withdrawn that are not used to pay qualified medical expenses

What are qualified medical expenses ?

     Medical expenses that are deductible as such if you itemize your deduction. These include doctor, dental, eye care, prescription drugs, insulin,  but, generally not health care insurance premuims

      paid while you are unemployed.

     The medical expenses must be incurred by you and your spouse, dependents you claim on your tax return, and any person you could have claimed as a dependent on your tax return except that

           1. The person filed a joint return

           2. The person had gross income of $ 4,000 or more, or

           3. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's tax return





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Why would you want specific property discharged from a Federal Tax Lien ?

     * You may have a buyer for the property.  The buyer is unwilling to purchase property subject to a Federal Tax Lien

     * A Certificate of Discharge under Internal Revenue Code § 6325(b) removes the Government's lien from the property named in the certificate.

What are the bases for application for discharge ?

     1. The value of property remaining attached by the lien is at least double the liability of the federal tax liens plus the other liabilities which are senior to the liens  (e.g., 1st mortgage notes).

     2. The United States receives at closing an amount at least equal to the amount owed.

     3. Interest of the United States in the property to be discharged has no value (i.e., the property is "under water".  After closing and other senior debts are paid, there is no funds left).

     4. Proceeds from property sale held in escrow subject to liens and claims of the United States.

     5. Deposit made or bond furnished in an amount equal to the value of the United States interest.

How do you apply for Discharge of Federal Tax Lien ?

     Form 14135, Application for Certificate of Discharge of Federal Tax Lien" The sections and parts of Form 14135 that require you to fill out depend on which of the five aforementioned options fits your situation to          receive discharge.

     The application may be made by the taxpayer, the property owner or the bank, credit union or other institution providing the financing necessary to buy the property.  If the applicant is not the taxpayer (e.g., property owner or bank), in section 2, fill out name , address, day time phone number and fax number of the applicant other than the taxpayer.  Also, attach a copy of the taxpayer's Notice of Federal Tax Lien.  If applicant and taxpayer are the same, check the box in section 2 that the information in section 1 applies to section 2 and write "same" in section 2.

If the basis for application is number 4 above, list the information related to the Escrow Agent.  Submit a copy of the proposed escrow agreement with Form 14135.

If your basdis for application is number 1 above, show proof by appraisal of the remaining property subject to encumbrace byt the federal tax lien is at least twice the amount of your tax liability.  The appraised values must be first reduced by the amount of the federal tax lien plus other debt that has priority over the federal tax lien.  Priority is given to liens filed before the federal tax lien (e.g., mortgages, mechanics liens, etc.).

If your basis for application option 2, the IRS will receive funds at closing equal to your tax debt or if at closing funds are less than the amount of tax debt, it will apply that amount to the debt.

A discharge may be issued under provision 3 above in cases when it is determined that the government's interest in the property has no value.  When priority debt exceeds the fair market value of the property, there are no funds available for the IRS, thus its interest in the property has no value.

Certain documents must be made available regardless of the option you choose that best fits your situation.  There are:

     * Copy of deed(s) - real estate

     * Copy of title - Personal property

     * Appraisal - Performed by a professional

     * One additional document that shows value (e.g., County property tax valuation).

     * Names, addresses, daytime telephone numbers of all parties involved (e.g., banks, applicant, if not taxpayer.


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COLLECTION APPEAL REQUEST - Request a Collection Due Process Hearing ( CDP )

When taxpayer receives any of the following notices, taxpayer has the right to a "hearing" before an Appeals officer.  The Appeals officer is independent from the Collection Division that issues the notice.

          * Notice of Federal Tax Lien and your Right to a Hearing under IRC 6320

          * Notice of Intent to Levy and Notice of Right to a Hearing

          * Notice of Jeopardy Levy and Right to Appeal

          * Notice of Levy on your State Tax Refund

          * Notice of Levy and Notice of your Right to a Hearing

Request for a Hearing is made on Form 12153, Request for a CDP or Equivalent Hearing.  The request for a CDP hearing generally, suspends collection action, and suspends the running of the collection statute of limitation.  The appeal must be filed or postmarked within 30 days of the date on the Notice in order for you to qualify for a CDP Hearing.  An adverse determination issued by Appeals may be appealed to the United States Tax Court.  The tax court petition must be timely filed.

An Equivalent Hearing, which is not appealable must be requested within one year of the date on the "Notice of intent to Levy and Notice of Right to a Hearing"  In the case of "Notice of Federal tax Lien and Your Right to a Hearing under IRC 6320" the time to file for an Equivalent Hearing is one year plus five business days.

Filing Form 12153 within the 30 day time frame for a C D P hearing suspends the statute of limitation for the IRS to collect taxes (i.e., 10 years from the date the taxes were assessed), and will prohibit levy action.  

Filing for an Equivalent Hearing neither suspends to statute of limitation nor prohibits the IRS from taking collection actions.

In most cases, the taxpayer will suggest one or more collection alternatives.  What alternatives are available ?

          * Installment Agreement

          * Offer in Compromise

          * Status 53 ( You are presently facing a hardship (e.g. unemployed, medical emergency, temporary disability. etc.), but you expect the situation to normalize in the future.  The IRS will suspend collection action                expecting a future improvement in your status.  Penalty and interest continue to accrue during the time of suspension

          * Lien subordination, lien discharge or lien withdrawal

          * Innocent Spouse Relief

          * Other you must give reason

As with most dealings with the IRS Collection Division, time is of the essence.  You must submit your request within the time frame dictated by the IRS.






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COLLECTION APPEAL REQUEST - The other taxpayer advocate regarding IRS collection issues

When a taxpayer or third party's property is subject to collection action, a Collection Appeal Request Form 9423 can be used to halt the action cold.

     Following are the collection actions the CAP will stop:

       *  Levy or seizure action has or is being taken,

       * A notice of Federal Tax Lien has been or will be filed,

       * A Notice of Federal Tax Lien has or will be filed against an alter-ego or nominee's property.

       * A lien certificate, subordination, withdrawal, discharge or non-attachment has been denied,

       * Rejection of proposed modification or Modified, or proposed termination or terminated installment agreements.

       * Dis-allowance of taxpayer's request to return levied property

       * Dis-allowance of property owner's claim for return of property seized


To appeal, time is of essence.  Following are the procedures and time frames to be followed in a Collection Appeal case involving lien, levy and seizure actions

     * Arrange a conference with collection officer's manager

     * If manager agrees with collection officer's decision within two business days, inform collections within two business days after the conference of your intent to file an appeal - Form 9423

     * Within three business days of conference, file or have postmarked your appeal - Form 9423

     * If the manager fails to contact you within two business days of your request, make a note of that fact on Form 9423 and file it or postmark it within four business days of your request

     * If after a seizure of property, you must appeal to the Collection Manager within 10 business days after Notice of Seizure is provided you or left at your home or business.


In actions involving installment agreements, you are not required to request a manager conference, but, it could help, and you have 30 calendar days from IRS Notice to file for an appeal


Appeals decision is final.  Filing Form 9423 normally stops collection actionC


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