Dallas, Texas–(Newsfile Corp. – April 17, 2023) – Bracewell LLP introduced these days that Bucky Brannen has joined the firm’s tax practice as a lover in the Dallas workplace. Brannen most not long ago was at Baker Botts LLP, the place he advised shoppers on state and nearby tax challenges.
“We are thrilled to welcome Bucky to the business,” claimed Bracewell Managing Associate Gregory M. Bopp. “His broad expertise on point out and regional tax challenges delivers additional depth to our current market-foremost tax exercise.”
Brannen advises purchasers on ways to minimize condition and area taxes in every single stage of enterprise. He assists negotiate pre-financial investment economic incentives, structure operations to decrease tax, control audits and dispute assessments and assets tax valuations, and aid advancement via tax-productive restructurings, acquisitions and inclinations. Brannen’s apply is genuinely countrywide. He has working experience with all forms of condition and local taxes nationwide, together with taxes on profits, house, earnings, gross receipts, severance and motor fuels. In addition, he on a regular basis advises on multi-state functions.
“Bucky’s varied working experience strengthens our potential to fulfill the increasing needs of our clients for condition and neighborhood tax information,” reported Elizabeth L. McGinley, chair of Bracewell’s tax section. “Bucky will also operate closely with undertaking growth lawyers in assisting shoppers with proactive point out and community tax scheduling, which includes the negotiation of state tax incentives.”
Bracewell’s tax group has served as counsel on billions of bucks of transactions, which include community and non-public business mergers and acquisitions, tendencies, personal equity investments, joint ventures and money markets choices. The firm’s tax observe is nationally recognized for its knowledge involving tax matters associated to the electrical power business, which include chances below the Inflation Reduction Act of 2022. Bracewell’s tax team also spearheaded the enhancement of one of the major multi-disciplinary lawful groups in the United States concentrated on carbon seize, utilization and storage (CCUS) initiatives.
“Bracewell’s solid federal and condition and community tax procedures, as effectively as its longstanding customer relationships, are an ideal platform to start the subsequent stage of my follow. I search forward to doing work with my new colleagues,” claimed Brannen.
Brannen graduated magna cum laude with a B.A. from Austin Faculty and received his J.D., magna cum laude, Purchase of the Coif from Southern Methodist University Dedman College of Legislation. He also gained a Master of Law in Taxation from New York College College of Regulation.
About Bracewell LLP
Bracewell is a major legislation and governing administration relations company mostly serving the energy, infrastructure, finance and technologies industries through the planet. Our industry target success in complete state-of-the-artwork expertise of the professional, lawful and governmental challenges faced by our clients and enables us to give modern answers to aid transactions and solve disputes.
IRVINE, Calif., April 14, 2023 /PRNewswire/ — Former Minnesota Real Estate Developer Sentenced To 78 Months in Prison And $1.5 Million Special Assessment for Tax Evasion, Mail and Wire Fraud
Why you should use an Attorney to represent you in an audit
The evidence presented at trial proved that from 2009 until January 2012, the real estate developer willfully evaded the payment of employment and excise taxes owed by him and the three businesses he controlled. One of the ways he avoided paying taxes was by transferring over $1.1 million into a bank account in the name of a shell company with no legitimate business purpose but used by him to pay personal expenses. The developer evaded payment of more than $700,000 in taxes.
He had also filed a fraudulent financial statement, making numerous misrepresentations to the IRS to avoid paying the taxes he owed. For example, he failed to disclose multiple personal vehicles that he owned, and he denied the existence of the shell company’s bank account, which he was using to receive monthly compensation of $50,000 from two of his companies. The developer also falsely claimed to be living in Bayport, Minnesota, when, in truth, he had already moved into a $1.4 million house he was purchasing in Knoxville, Tennessee.
Read on to know how you can save yourself from becoming a similar cautionary tale.
Who is a Real Estate Professional?
To be a real estate professional, an individual must spend the majority of his or her time in real property businesses:
Development or redevelopment
Construction or reconstruction
Acquisition or conversion
Rental
Management or operation
Leasing
Brokerage
Furthermore, to qualify as a real estate professional, the taxpayer must spend:
more than 50 percent of his/her time in real estate activities; AND,
more than 750 hours in real estate activities.
From our experience, we know that your examiner will give serious attention to the fact whether you are able to satisfy him that you materially participate in one or more of the specific real estate trades or businesses listed above. The examiner will try to determine who is the real estate professional, husband or wife. The auditor will request and closely examine your documentation regarding time. You are required under the law to provide proof of services performed and the hours attributable to those services.
We advise you to seek legal guidance from a dually California licensed Tax Attorney and CPA immediately if you or your business entity (S Corp, C Corp, LLC, Partnership, etc.) have received an audit notice from the IRS or a California Taxing Authority, such as Franchise Tax Board (FTB), the California Department of Tax and Fee Administration (CDTFA) and the Employment Development Department (EDD) concerning a tax audit. Depending on what the federal or California auditor finds, an examination of your business and personal tax filings could lead to devastating outcomes, including an unexpected tax assessment, costly accumulated interest, and/or substantial civil penalties—none of which even begins to approach the danger involved in an IRS or California criminal tax investigation. If the government believes that there is strong enough evidence to prosecute you for tax evasion or related offenses successfully, you will be at risk of jail time, in addition to much higher financial fines and criminal restitution.
Material Participation
A taxpayer materially participates in an activity if he or she works on a regular, continuous, and substantial basis in operations. If a taxpayer does not materially participate, losses are passive, which means they generally are not deductible in the absence of passive income. Material participation is time sensitive.
Under an audit, you shall be required to identify the amount of your participation in a trade or business activity for each year. The type and quantity of time documented shall determine whether an activity should be treated by you as passive or non-passive. Please note that you can have a significant financial interest in a business and yet not materially participate. Real estate investing is generally passive under the tax code but can rise to the level of trade or business depending on the individual facts and circumstances of your case.
Material participation is a year-by-year determination. Consequently, it is conceivable you could be passive in one year and non-passive (in other words, materially participating) in the subsequent year. An examiner will try to determine if reported losses are classified properly on your given return. Losses from businesses, whether conducted as a Schedule C, Schedule Form, partnership, or S Corporation, are passive if the taxpayer does not materially participate.
Material participation does not apply to the following activities:
Rentals are generally passive, whether or not the taxpayer materially participates. However, rental real estate interests of real estate professionals are subject to the material participation tests.
Working interests in oil and gas activities are excepted from the passive loss limitations. If liability is not limited, the taxpayer has a “working interest.”
Income from a partnership or S Corporation that trades in stocks, bonds, or securities for the accounts of the partners or shareholders is non-passive. Income or losses, even from a limited partnership interest, may be deducted as non-passive.
You should know that The IRS and California taxing authorities, such as the Franchise Tax Board (FTB), the California Department of Tax and Fee Administration (CDTFA), and the Employment Development Department (EDD), have been aggressive in auditing real estate professionals. To survive the audit and prove that the statutory requirements have been met, it is critical that taxpayers establish credibility by maintaining detailed, accurate records. Let us discuss some of the common issues faced by taxpayers involved in the real estate industry.
Passive Active Loss
Prior to 1986, a taxpayer could generally deduct losses in full from rental activities and trades or businesses regardless of his or her level of participation. This gave rise to significant numbers of tax shelters that allowed taxpayers to deduct non-economic losses against wages and investment income. The Tax Reform Act of 1986 added IRC § 469, which limits the taxpayer’s ability to deduct losses from businesses in which he or she does not materially participate and from rental activities.
Federal tax law disallows any deduction for a taxpayer’s net loss from passive activities for the year. Passive activities include, by definition, any rental activity, including any rental activity conducted through the means of a separate entity, such as a partnership or limited liability company. An exception to this disallowance rule prevails if the taxpayer is deemed a “real estate professional.” Passing muster as a real estate professional requires the taxpayer to meet certain statutory tests (see above). Difficulties can arise in meeting these tests, especially if taxpayers are nonchalant about keeping good records.
Section 469(a) of the Internal Revenue Code provides that no tax deduction is allowed for the taxpayer’s net passive loss for the year. The passive loss rule applies to all taxpayers other than taxable corporations, so called C corporations. Losses from one passive activity are allowed only to the extent that there are other passive activities that generate a net profit. Passive activities can include more than rental operations. For example, allocations of income and loss from limited partnerships, no matter what the business purpose of the partnership, are generally considered passive in nature.
Any excess passive loss not deductible in the current year is suspended and can be carried forward indefinitely into future years and can be deducted if there are net profits from passive activities. Alternatively, if a passive activity is sold, the taxpayer can deduct all suspended losses at that time. There is no expiration of the suspended losses as long as the taxpayer still owns the property in question. Rental activities are passive activities by definition.
The passive loss rules are extraordinarily complex and obtuse. Let’s use some examples to depict the basics of the passive loss rules as they apply to rental activities.
Julia is a full-time attorney who leases a single-family residence to tenants. This is her only passive activity. Her adjusted gross income (AGI) for the current year, Year 1, is $200,000 before considering any rental loss. For Year 1, the rental had a loss of $(15,000). Julia is not allowed to deduct any of this loss for the current year. Rather, the loss is suspended and carried forward into future tax years, starting with Year 2, when it can offset future profits generated by the rental residence or profits generated by any other passive activity.
Continuing with Example 1, assume that during the following year, Year 2, the rental residence shows a net loss of $(5,000) through July 1, at which time Julia sells the residence. Julia can now deduct all $20,000 of the losses from the rental, as she has disposed of her entire interest in this passive activity. She is allowed to deduct all these losses in Year 2 even if the rental residence had been sold at a loss.
The foregoing examples included a mention of adjusted gross income (AGI) for the taxpayers. AGI is basically the taxpayer’s gross taxable income for the year, less business deductions, rental losses, and contributions to retirement accounts. Readers may know this as the so-called “bottom line” on page 1 of Form 1040. From AGI, various other deductions, such as home mortgage interest, property taxes, and charitable contributions, are deducted in deriving taxable income.
How are Real Estate Professionals Audited?
You must understand that your examiner will scrutinize your situation thoroughly. Expect to be asked: What are your real property trades or businesses? Where do you materially participate? Are you or is your spouse the real estate professional?
You will be requested to provide documentation of your timekeeping; the auditor is likely to closely examine your log. The examiner will scrutinize all activities you are involved in—even if they are not related to real estate and even if you are not getting paid.
You will be interviewed. You will be asked questions about your personal life, business, civic activities, philanthropy, family obligations, and hobbies. Be mindful that the examiner is building a case around all of your time spent in all activities to determine the remaining time available for real estate. The examiner is going to assess your credibility.
Knowing what to say and, more importantly, what not to say is the key to the entire process. Therefore, it is absolutely crucial that you are thoroughly prepared for an audit. While representing you, we strive not to be surprised by anything raised by the IRS or a California taxing authority conducting the audit or disclosed by you during the course of the audit. That is where our years of experience comes in. Once we determine that you might be facing potential criminal tax liabilities, your primary goal becomes the prevention of initiation of a criminal tax investigation, and we do whatever we can to achieve that.
Our Approach to Dealing with Audits
During an eggshell audit, the IRS or a California taxing authority is looking for the possibility that you, as a subject of a civil audit, will make a mistake and provide information leading to the initiation of a criminal tax investigation. As your attorney representing you in an eggshell audit, our goal is extremely clear: the resolution of the audit without a referral by the civil examiner to the IRS’s criminal investigation division (CID). However, as simple as that goal is, reaching it is cumbersome and perilous. That is where we come in!
Using our decades of experience, we have distilled our approach to four key aspects while we represent you as you undergo an eggshell audit:
Understanding deeply how civil audits arise and the steps that need to be taken as your counsel to prepare you for the audit;
Recognizing when you are facing an eggshell audit and recognizing whether you might have committed criminal tax fraud;
Key techniques to employ when representing a real estate entity going through an eggshell audit and the signals to look for when evaluating whether a civil investigation has turned criminal; and
Steps to take after a criminal investigation has started to lessen the possibility of referral for prosecution.
The IRS is very thorough in its approach and has a deep understanding of all vulnerable areas related to the tax filings of those in the real estate industry. The IRS audits real estate entities so frequently that it has even developed a Passive Activity Loss Audit Technique Guide to assist its IRS Revenue Agents during audits by providing insight into the issues, accounting practices, and methods unique to the real estate industry. In general, the guide identifies issues unique to the real estate industry of which the Revenue Agents should be aware. It directs Revenue Agents to look for certain vital sources of information and outlines steps and techniques to be taken in conducting effective and focused audits/investigations of real estate entities. However, using our extensive experience, we use the same tools to the advantage of our clients. In other words, we know what weapons and strategies the other side might deploy, making us ready to defend every blow that might come our way.
If you know you cheated on your tax returns, the biggest mistake you can make is to consult the original preparer. The reason is that they are likely to become the primary witness against you if the government decides to initiate criminal tax proceedings. They would have absolutely no incentive to protect you and are likely to reveal everything, including the information that you thought was confidential. A CPA, EA, or CTEC certified preparer generates most of his income from tax accounting and preparation; thus, they are strongly motivated to protect their reputation with the taxing authorities at the expense of your reputation. As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs our firm provides a unique platform to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, consider hiring the Tax Law Offices of David W. Klasing. Hiring our firm can make all the difference between paying the proper amount of income taxes due, as opposed to doing jail time, paying a hefty penalty, and paying for the cost of a long and agonizing prosecution.
Here is a link to our YouTube channel: click here!
More Commonly Asked Tax Audit Questions
California Sales Tax Questions and Answers
Questions and Answers for Criminal Tax Representation
Questions about delinquent payroll taxes and trust fund recovery penalty
Public Contact: Dave Klasing Esq. M.S.-Tax CPA, [email protected]
Right after individual bankruptcy, two impeachments, countless civil lawsuits, and a company fraud conviction, will Donald Trump lastly get tripped up on tax fraud like a present day-day Al Capone?
In explaining why Trump was charged with 34 felony counts of falsifying business enterprise data, fairly than misdemeanor counts, Manhattan District Attorney Alvin Bragg reported the falsification in each and every scenario was manufactured “with intent to defraud and intent to dedicate an additional criminal offense.” The indictment does not specify those people other crimes, but the accompanying statement of specifics indicates they contain violations of New York point out tax law as effectively as federal and state election rules.
Bragg apparently is pursuing tax prices versus Trump centered on a fragile, interlocking triad of felony statutes. To be prosperous, he’ll have to verify just about every element of each alleged crime, such as Trump’s particular involvement and intent at each synapse of a intricate scheme, wherever the fundamental alleged tax fraud is by itself matter to at least some debate.
An April 5 evaluation asserts that the “unexpected” tax accusation “bolstered what several legal specialists have explained as an in any other case dangerous and novel situation.” It is premature to say irrespective of whether that is legitimate until eventually prosecutors supply additional specifics. The assertion of details mentions taxes two times.
“2. From August 2015 to December 2017, the Defendant orchestrated a scheme with other individuals to affect the 2016 presidential election by pinpointing and obtaining destructive data about him to suppress its publication and gain the Defendant’s electoral potential clients. In buy to execute the illegal plan, the members violated election legislation and built and triggered wrong entries in the enterprise information of numerous entities in New York. The individuals also took techniques that mischaracterized, for tax purposes, the real mother nature of the payments made in furtherance of the plan.”
“25. The TO CFO then doubled [the amount of reimbursement requested]so that Lawyer A could characterize the payment as earnings on his tax returns, as an alternative of a reimbursement, and Lawyer A would be remaining with $180,000 just after shelling out around 50{c024931d10daf6b71b41321fa9ba9cd89123fb34a4039ac9f079a256e3c1e6e8} in earnings taxes.”
Law firm A is Michael Cohen, Trump’s own attorney at the time, and TO CFO refers to Allen Weisselberg, the longtime chief monetary officer whose testimony led to the Trump Organization’s December 2022 conviction for prison tax fraud and falsifying company data.
Paragraph 2 of the statement implicates at minimum three possible violations of New York regulation, but only just one is specially tax relevant. First, falsifying organization data with intent to commit one more criminal offense is a Class E felony. 2nd, presenting a phony instrument to a community place of work with intent to defraud the condition is also a Course E felony. Finally, due to the fact “for tax purposes” commonly implies “having the goal of decreasing a tax legal responsibility,” the crystal clear suggestion is that Bragg is alleging that someone took an illegal state cash flow tax deduction for the hush payments, a probable “tax fraud act” that can rise to a really serious felony under New York’s tax regulation.
Paragraph 25 doesn’t add a great deal of authorized consequence other than reminding us that 1 party’s profits is typically an additional party’s deduction.
Have been the reimbursements to Trump’s lawyer deductible? We first have to have to know who actually took the deduction, mainly because firms, but not folks, normally can deduct hush payments and relevant legal charges underneath Portion 162 as everyday and vital trade or company charges.
Confusingly, the statement of points declares that Trump compensated the reimbursements personally although the Trump Firm recorded them as lawful expenditures on its accounting system. This reference to expensing, blended with the lack of any general public assertion that Trump took a deduction on his private returns, indicates that the district legal professional will contend that Trump Organization involved the reimbursements in a bigger un-itemized deduction for authorized expenses.
Bragg appears to be alleging that Trump schemed with the Trump Group to falsify its organization information and file bogus instruments with New York’s tax authorities so that he may possibly safe, indirectly, an or else impermissible own tax deduction.
Trump could argue in response that he was entitled to choose the deduction. While it is tough for most individual taxpayers to argue that they’re engaged in a trade or enterprise, he presents an abnormal situation: Considerably of his earnings reportedly relates to licensing his title.
Question whether the Trump model is a trade or business enterprise, in which circumstance a payment to keep away from brand name-tarnishing publicity could arguably be a legitimate business enterprise expense. Even though the authorities could answer that he was definitely acting to defend his candidacy relatively than his personal manufacturer, parsing the distinction could get awkward.
By on their own, the presumed tax-connected charges seem like a tall order, provided that federal prosecutors declined to go after a comparable scenario, concerns pertaining to Cohen’s reliability as a witness, and the fact that Weisselberg has not publicly implicated the former president—at least not yet.
This article does not automatically replicate the viewpoint of Bloomberg Market Team, Inc., the publisher of Bloomberg Regulation and Bloomberg Tax, or its entrepreneurs.
Creator Information and facts
Andrew Sidamon-Eristoff, J.D., LL.M., is the proprietor of ASE Tax Coverage & Administration. He was New Jersey’s point out treasurer beneath Gov. Chris Christie, New York’s state tax commissioner below Gov. George Pataki, and New York City’s finance commissioner less than Mayor Rudolph Giuliani.
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Each individual form of enterprise has distinctive tax outcomes and other significant effects this sort of as no matter if the owners are personally liable for business enterprise money owed.
Fort Value, TX – The selections that are built when an personal or team starts off a enterprise can have major extensive phrase implications on the company’s funds and liabilities. Mainly because these decisions can continue to be with the corporation for so very long, it is critical that these foundational choices are made with qualified assistance and an comprehension of how taxes and other important matters will be appropriate to the long term of the company. Legal professionals are constantly a good supply of info for any individual who has live shows about their organization taxes and associated legal matters. Below is a transient overview of some of the factors that tax attorneys can help with in the early stages of a business.
Enterprises can be formed in diverse means
Fort Worth tax attorneys will advise a person commencing a business enterprise that they can opt for several sorts of structures that may perhaps have pros or drawbacks depending on the predicament. There are partnerships, minimal liability organizations, S companies, sole proprietorships, and non-earnings organizations. Every single kind of business has different tax consequences and other vital consequences this sort of as irrespective of whether the house owners are individually liable for business money owed.
Filing taxes for the very first time
When a organization is preparing to file their taxes for the initial time, Texas tax legal professionals are important at this time as nicely. The company ought to have adequate dollars set aside to be capable to address their tax liability, and they should also remain compliant with whatever tax policies and rules are connected to their marketplace. If the IRS responds with the will need for additional information and facts, when they want to audit the small business, or they have concerns about deductions and produce offs, the attorneys can give assistance about how to respond and settle the problem speedily and competently.
Providing or merging a organization
Workforce meetings in open strategy workspace picture by Proxyclick Customer Management Procedure, by using Unsplash.com.
There are some times when a organization will go through major modifications these kinds of as a merger or staying marketed off to a distinctive personal or company. Tax attorneys are also crucial at this time, as there are modifications in taxes that come about when a small business goes via this course of action. The new owners will want to be educated pertaining to how they really should file and any issues that need to have to be managed right after the merger or takeover.
Overlap with trusts and charities
Estate arranging attorneys can be consulted when a enterprise would like to set up a trust for donations to charities or other varieties of philanthropy. There can be a variety of added benefits to environment up charitable brings about by way of utilizing trusts or comparable lawful devices as opposed to just providing revenue absent on an ad hoc foundation as required.
Additional suggestions is out there from local corporations
USAttorneys.com is a service that can assistance individuals get in contact with legal professionals in their area. Any one who requires a referral to a nearby legal professional can phone 800-672-3103 for help.
A group of area lawmakers are proposing state laws intended to give the Metropolis of Pittsburgh the power to far better take care of property taxes in neighborhoods the place longtime inhabitants are at threat of currently being priced out.
The area has seasoned immediate economic growth and improved enhancement in latest many years, much of it concentrated in neighborhoods including Lawrenceville, Bloomfield and Garfield. For some who have owned households in those people areas for many years, the increasing home values have come with higher house taxes they just can’t generally afford.
The proposed laws would amend a point out regulation to allow for second class towns like Pittsburgh to produce a extended-time owner occupant tax exemption application (also recognised as LOOP). The software would freeze home taxes for house owners who meet up with particular criteria, which includes possessing and living in their properties for a designated period of time of time — normally wherever from 5 to 15 decades. Philadelphia has a similar plan in location.
At a push convention in Bloomfield on Wednesday, Democratic point out Sen. Jay Costa mentioned the laws is just portion of a much larger discussion close to economical housing in the Pittsburgh area. He pointed out a lot of people at possibility of currently being pushed out by large house taxes are the extremely men and women that made neighborhoods like Bloomfield appealing in the very first area.
“The bottom line is, we are seeking to choose techniques to make certain that people are capable to keep in their houses, notably in the communities in the neighborhoods that they have resided in for so very long,” Costa claimed.
Costa attempted to move the laws two times in advance of, but claimed it obtained pushed aside in favor of other housing programs, like the Whole Properties Maintenance Act.
Present-day condition law permits next class counties to create their have programs that would defer or exempt tax boosts. Allegheny County has tried using to build such a application right before. In 1990, officials enacted an ordinance restricting annual property tax will increase for longtime residents to 5{c024931d10daf6b71b41321fa9ba9cd89123fb34a4039ac9f079a256e3c1e6e8}, but a county judge finally struck it down. He dominated that new property proprietors cannot be taxed at a increased price than their longtime neighbors.
Costa claimed he hopes to prevent a legal problem this time all around by mastering from the county’s earlier mistakes. The laws he launched would enable the metropolis to build its have longtime operator occupant program that hopefully avoids some of the pitfalls of the county legislation.
If the laws is passed at the point out degree, Pittsburgh Town Council would continue to have to have to go laws producing a LOOP in the town. Council would create the eligibility parameters for participation in the system.
“The a lot more applications that we have in our toolbox, the additional we can maintain our neighborhoods stabilized,” claimed Pittsburgh Mayor Ed Gainey. “We do not want to push out. We want to provide in. And in buy to do that, we know we have to be inexpensive. And part of staying reasonably priced is owning the right instruments to be capable to do it.”
Point out Rep. Sara Innamorato sponsored 1 of the earlier legislative attempts in the condition Property. Innamorato is also a Lawrenceville resident and reported she has viewed the effects of increasing assets taxes firsthand. She pressured that implementing LOOP is a make a difference of equity.
“Establishing LOOP would enable Pittsburgh to defend house owners — from youthful, functioning-course households to seniors on preset incomes — across the town from unaffordable property taxes. People today who have been listed here for a lengthy time deserve to continue to be in neighborhoods that they have invested in,” she reported. “So bottom line, this is about defending the men and women and people who have been right here through the rough times when also welcoming new neighbors and new expense.”
Innamorato, a Democrat, is also operating for Allegheny County Government. She claimed a LOOP could also assist remedy some of the county’s ongoing residence tax assessment issues if elected the next county government, she would revisit the thought of an Allegheny County LOOP.
Costa mentioned he and Innamorato hope to go the legislation ahead in each chambers when they reconvene in April.
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Massive tax debt can be a huge and stressful burden, especially when you’re already struggling. Fortunately, there’s professional help available for those who are thousands of dollars in debt to the IRS.
Tax relief companies employ a number of tax professionals who can help you negotiate payment options with the IRS and state tax agencies: from payment plans to pausing collections during times of financial hardship (called “currently not collectible” status).
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Why we chose this company: Anthem Tax Services’ full money-back guarantee — which promises all your money back if your tax debt isn’t reduced or eliminated — is among the best guarantees in the industry.
Money-back guarantee with no time limit
Some customers have reported cases resolved in as little as one week
Dedicated tax relief services for truck drivers
Customers have reported poor communication on cases that go on longer than a week
HIGHLIGHTS
Minimum Debt Required
$8,000
Certifications and memberships
NATP, NAEA, California Tax Education Council (CTEC)
Cost
Starts at $350
BBB Rating
A+
Anthem Tax Services offers both IRS tax debt relief and corporate tax preparation services. The company helps you apply for all IRS tax debt relief programs, including offers in compromise (OIC), innocent spouse relief, and “currently not collectible” status.
Notably, it also offers assistance with filing for wage garnishment and tax levy release — services not commonly offered by competitors.
Anthem’s money-back guarantee is also one of the best in the tax debt relief industry, offering all of your money back if it fails to secure any sort of resolution from the IRS — whether it’s a reduction in payment amounts or debt forgiveness. It’s important to note that said guarantee doesn’t include the initial investigation fee, which usually starts at $350, depending on the details of your case.
Anthem takes on customers that have as little as $8,000 in tax debt (lower than the typical $10,000) and offers free consultations. As a general rule, the company charges a flat rate fee upfront — which can vary greatly per individual customer but generally starts around $3,000 — though the price may change if additional services are required along the way.
Why we chose this company: Optima’s proprietary app, which allows users to file a free tax extension and also helps them understand what to do when they receive an IRS notice, makes it the company with the best mobile app in the industry.
Proprietary app provides free assessment of collection notices
Free consultations
Clearly outlined tax resolution process provides realistic expectations on the outcome of your case
Minimum $10,000 tax debt required
15-day money-back guarantee shorter than competitors
Optima Tax Relief works with every type of IRS and state tax debt relief option, from payment plans to “currently not collectible” filings The company’s staff is composed of several types of tax professionals, including enrolled agents, tax attorneys and CPAs.
Notably, Optima has a proprietary app that lets you access free assessments of any IRS collection notice you receive and also helps you file for an extension on your tax filing deadline.
Optima also offers individual and business tax preparation services as well as free consultations. During free consultations, the company outlines its two-step approach: 1) setting up a protection plan involving filing paperwork to pause any immediate IRS action against you — typically takes up to 4 weeks — and 2) providing you with a case summary.
Optima’s investigation fee is generally around $295, and you need to have a minimum tax debt of $10,000.
Why we chose this company: Larson Tax Relief’s wide range of business tax services — including payroll and federal tax issues, conflicts with your revenue officer and worker classification issues — make them an excellent choice for business and corporate tax debt relief.
15-day money-back guarantee for new customers
Can help resolve complex business tax situations such as tax liens or accounts receivable levies
Free consultations offered
15-day guarantee may be too short for serious tax debt issues
No bilingual service
Minimum $20,000 tax debt required
HIGHLIGHTS
Minimum Debt Required
$20,000
Certifications and memberships
NAEA
Cost
Starts at $2,500
BBB rating
A+
Larson Tax Relief works with all sorts of tax debt relief services, from personal IRS tax debt relief to corporate tax assistance and even assistance with delaying or preventing bank levies.
In addition to the large number of positive reviews the company receives on customer review sites, Larson stands out for its business tax services. The company can handle just about everything about business tax preparation, including paperwork for payroll taxes and corporate income taxes. This can be especially useful for small business owners or those with smaller accounting departments that need the support.
Larson offers free consultations, but does require you to have a minimum of $20,000 in tax debt to take on your case.
According to Larson, it charges a minimum fee of $200 to file tax returns, between $250 and $500 for research and discovery and a minimum fee of $1750 for representation or power of attorney services.
Larson has a 15-day money-back guarantee that applies to all new customers — this is definitely on the shorter side since other companies offer 30 days. It might not be all that useful if your case takes weeks to resolve.
Why we chose this company: Community Tax offers free consultations and affordable investigation fees that range between $295-$500.
Bilingual services offered
Affordable initial fees
Tax planning services help reduce the likelihood of future tax issues
No upfront pricing information
Limited state tax debt relief options
HIGHLIGHTS
Minimum Debt Required
$10,000
Certifications and memberships
IRS Continuing Education Provider
Cost
Starts at $295
BBB Rating
A+
Community Tax relief focuses on IRS tax debt relief, although it also offers limited state tax assistance. Like other similar companies, Community Tax handles applications for everything from installment agreements to offers in compromise, but not innocent spouse relief.
Community Tax is one of the few companies on our list to offer bilingual assistance both online and through their representatives. In addition to tax debt relief services, Community Tax also offers tax filing, bookkeeping and business accounting services. Consultations are free and their A+ BBB rating is supported by numerous positive reviews and quick response time to customer complaints.
The company services customers with tax debt as low as $10,000 and their money-back guarantee varies from state to state, ranging between three and 10 days, and offering a full refund if your issues aren’t resolved. Initial investigation fees are some of the more affordable ranging between $295-$500.
Why we chose this company: Tax Defense Networks’ availability online and on the phone to both Spanish and English speakers makes it the best tax relief company for bilingual services.
Wide range of tax debt relief and preparation services
Robust tax education resources
Fully bilingual services
3-day money-back guarantee
HIGHLIGHTS
Minimum Debt Required
$5,000
Certifications and memberships
National Association of Enrolled Agents (NAEA), ASTPS, NATP, Association of International Certified Public Accountants (AICPA)
Cost
Starts at $250
BBB rating
A+
Tax Defense Network stands out for providing a fully bilingual (Spanish – English) customer service, both online and over the phone. representatives) The company also accepts tax debt as low as $5,000 in some cases, making it more accessible than many competitors.
Aside from the full range of IRS and state tax debt relief options that competitors also work with (payments plans, offers in compromise, innocent spouse relief, etc.) Tax Defense network also offers specialized business tax solutions such as close corporate filing services for when businesses need to shut down permanently. Its educational resources are also more robust than other companies’, including offer-in-compromise and tax withholding calculators.
Despite the company’s free consultations, its 3-day money-back guarantee is much shorter than competitors — most companies on this list, for instance, offer 15 days. Regardless, its extensive certifications and memberships in national tax professional organizations help to support the numerous positive reviews from its current and former customers.
Other Tax Relief Companies We Considered
Below are some companies that we thought were worth looking into, but ultimately didn’t make our top list. Though they may not be the best for every situation, they still offer services that some individuals may find useful, depending on their circumstances.
Precision Tax Relief
30-day money-back guarantee
No-interest payment plans for all clients
Free consultations
Precision Tax Relief primarily focuses on IRS tax debt relief, but can also handle state tax issues. It doesn’t offer audit representation for its clients.
Aside from tax debt relief, Precision offers assistance with securing wage garnishment and levy releases, which can provide a significant amount of financial relief, if granted by the IRS. Individual and business tax preparation services are also available to clients, to avoid tax debt issues in the first place.
Precision stands out for making it abundantly clear that any payment plans you agree to are always interest-free. Its 30-day money-back guarantee is also fairly generous, since many — but not all — tax debt issues can be resolved within the span of three to four weeks.
Fees and rates are not advertised upfront, but they are always provided during the free consultations. It should be noted that while Precision has no minimum debt requirements for its customers, the company states anyone with a tax debt of under $10,000 may not be getting the best value for their money from their services.
Minimum Debt Required: No minimum debt required
Certifications and Memberships: NAEA, ASTPS, AICPA
BBB ratings: A+
Victory Tax Lawyers
Flat-rate pricing
Free consultations
No money-back guarantee
Minimum $25,000 tax debt required
Victory Tax Lawyers are tax lawyers who focus on tax controversy issues, such as preventing or resolving tax-related criminal charges, rather than general debt relief. However, Victory Tax does handle common IRS tax debt relief options such as compromise and installment agreements, but not innocent spouse relief.
Victory Tax offers assistance to both individuals and businesses, including services such as tax preparation, tax levy and lien defense and audit representation. Notably, they also assist with Report of Foreign Bank and Financial Accounts (FBAR) filings, which must be filed if you have bank accounts in countries other than the U.S.
Furthermore, they only work with cases involving a minimum of $20,000 in tax debt, which is considerably higher than other companies on this list.
Minimum Debt Required: $25,000
Certifications and memberships: Association of American Tax Problem Solvers (ASTPS)
Tax Relief Guide
Understanding and navigating tax relief options can be an overwhelming task. The following guide on tax relief includes explanations of basic concepts you need to know, as well as information on the many tax relief programs that tax relief companies can help you apply for.
What is tax debt relief?
Tax debt relief refers to a number of measures and strategies that help individuals pay or reduce their tax liability.
Although the term originally referred to policies aimed at reducing the tax burden for both companies and individuals, it’s now often used to refer to payment plans, settlements (called offers-in-compromise) and wage garnishments.
While both state and federal tax collectors offer similar plans, local regulations can vary widely. It’s important to check your state’s comptroller’s office for the specific options available to you.
It’s also important to note that anyone can negotiate these options directly with the IRS. However, there are situations when hiring professionals is a worthwhile investment.
Tax relief companies — also known as tax resolution firms — use their knowledge of federal and state law to review your documents and financial situation, and identify the best alternative. The process typically involves filing paperwork and communicating with the IRS on your behalf.
Some companies employ tax attorneys who can, in some particularly complex cases, act as intermediaries in your negotiations with the government.
How do tax relief companies work?
Tax relief companies work with the IRS on taxpayers’ behalf to reduce the amount of back taxes owed. However, it’s worth noting that you can do pretty much everything that tax relief companies do by speaking directly with the IRS.
The key difference is that good tax relief companies employ professionals with years of experience, well-versed in tax law, who can more easily navigate complicated cases involving higher debt amounts.
For instance, if your tax debt issues are a matter of missing last year’s tax payments, you might be better off simply reaching out to the IRS yourself, as there’s little these companies can do that you can’t.
However, if your tax debt case involves multiple bank accounts, assets, years of unpaid taxes and other particulars that complicate your tax situation, a tax relief company can help by sorting through your paperwork and identifying the best options available. In very rare cases, they could even identify things that the IRS missed and negotiate a lower tax bill.
As a general rule, if your tax debt is under $10,000, you might be better off attempting to negotiate with the IRS yourself. First, most tax relief companies have a minimum debt requirement — usually $10,000 or more. Second, if your debt is under that amount, you might do better paying the IRS in installments instead of increasing your debt load by paying for tax relief services.
Of course, no two people share the same circumstances and if you feel like you need tax help — regardless of the size of your debt — many tax relief firms offer a free consultation to get you started.
Common tax problems
Tax problems refers to a number of issues resulting from mistakes made during filing or simply not filing a tax return at all. Below are some explanations of the most common tax issues that tax relief companies can handle for you:
Back taxes
Back taxes are taxes owed due to unfiled tax forms or mistakes made during filing. These can accrue interest, which can cause your tax debt to balloon to unmanageable levels. The IRS publishes the interest rates for penalties quarterly, so it’s important to check the agency’s website for the most up-to-date information.
A good way to avoid incurring back taxes is by using tax preparation software. Be sure to check out our article on the best tax software, if you’re in need of a helping hand when filing your taxes.
Wage garnishments
When your tax bill is due, the IRS will send you a series of collection notices. If you ignore these notices for long enough, the IRS may decide to collect portions of your debt directly from your wages by garnishing part of them.
Your employer receives Publication 1494 to help determine the portion of your wages that is exempt from garnishment, based on your marital status and number of dependents.Garnishment usually continues until the debt is satisfied, but tax relief companies may be able to assist by securing alternative payment arrangements.
Tax liens
Similar to a wage garnishment, this is a public notice issued by the IRS to financial institutions and other relevant parties declaring their right to collect any proceeds from personal property sales before other creditors.
Tax levies
A more drastic variation of a tax lien, a tax levy means that the IRS is enforcing its legal right to seize your property in order to pay your debt.
Tax audits
If the IRS spots irregularities in your taxes, the agency may choose to audit you. While anyone can be audited, wealthier individuals — especially those who earn $10 million or more — are the most likely to be audited.
How much does tax relief cost?
Given the complicated nature of tax relief services, it’s safe to say that costs vary greatly from case to case. There are two common pricing models: a percentage of the debt owed and flat hourly rates. The most cost-effective choice will depend on the size of your tax debt and how complicated your case is.
Most companies that operate on a percentage basis have rates that range from 10{c024931d10daf6b71b41321fa9ba9cd89123fb34a4039ac9f079a256e3c1e6e8} to 15{c024931d10daf6b71b41321fa9ba9cd89123fb34a4039ac9f079a256e3c1e6e8} of your tax debt. If, for example, your debt is $10,000 (many companies’ required minimum debt) you can expect to pay a minimum of $1,000 to $1,500.
On the other hand, a company that charges a flat hourly rate might be more affordable if the amount you owe is high but your case is relatively straightforward. The average hourly rate for tax relief companies can range from $240 to $1000.
Some companies have individual prices for different services. For instance, they may charge a flat fee of $300 for a basic investigation, but upwards of $1,000 if you want to pursue a specific tax relief option such as an offer in compromise (OIC), which allows you to settle your tax debt for a lower amount than originally specified.
For these reasons, it cannot be overstated how important it is to ask for as much information as a company is willing/able to disclose before contracting its services. Ideally, you’ll want to get quotes in writing, including the possibility of any additional fees and all available payment options.
Tax debt relief options
The following tax debt relief options are available to anyone directly from the IRS. Some state agencies may offer similar programs for local taxes. Before reaching out to tax relief companies, it’s always a good idea to check the IRS website or speak with a representative over the phone to obtain further information about these options.
Remember that most of the tax resolution services that private companies offer involve reviewing your case details and identifying the best option for your situation based on the information they find; they don’t have access to any information that you could not obtain yourself, and they cannot guarantee any specific result.
If your tax situation is relatively straightforward — meaning you don’t have multiple sources of income, a complex stock portfolio, etc. — you’re usually better off speaking to the IRS directly. Here are some of the tax debt resolution options that the IRS offers:
Offers in compromise
Offers in compromise are a way to settle your tax debt for less than the full amount you owe. Under this arrangement, the IRS considers factors such as your ability to pay, income, expenses and assets to determine if you are eligible.
Per the IRS, offers in compromise are only considered if it has reason to believe that the lower amount is the most that can be collected “within a reasonable amount of time,” which makes this one of the least commonly offered tax settlement options.
Innocent spouse relief
This type of tax debt relief applies when your current or former spouse commits an error of omission when filing taxes. Innocent spouse relief exempts you from any tax penalties that might apply as a result of these filing errors. This option only applies if the IRS determines that you had no reasonable way of knowing about the omissions.
Installment agreement
If you don’t have the money to pay your tax debt in a single payment, the IRS may offer an installment agreement, or installment plan, where you pay your debt over time. There are two types of installment agreements: short-term (180 days or less) and long-term (monthly payments for as long as you need to pay your debt.)
While there isn’t a specific amount you must owe to apply for an installment agreement, online applications are accepted for amounts up to $50,000 (long-term) or $100,000 (short-term), making it one of the more common and accessible options for individuals who want to directly negotiate with the IRS.
Penalty abatement
Sometimes known as “first-time penalty abatement,” this tax relief option is commonly available for lesser tax penalties such as failing to make a payment on a single tax return or missing a filing deadline. The main requirement to be eligible for this type of relief is having no penalties for the previous three tax years, although you must have also filed or at least requested an extension on your current taxes.
Currently not collectible
Currently not collectible (CNC) status means that both you and the IRS agree that while taxes are owed, you are currently unable to pay them. As a general rule, you can apply for CNC status when paying your taxes represents an undue burden on your necessary living expenses. This refers to scenarios such as being unable to pay essential bills like utilities, rent/mortgage, or even not having enough money left over for basic groceries as a result of your tax debt payment.
If the IRS grants you CNC status, your finances are reviewed every year until it determines that you’re able to pay your debt. Additionally, any future tax refunds you receive may be used to pay down your debt while in CNC status.
Other Services Offered by Tax Relief Companies
Audit defense
Some licensed tax professionals offer guaranteed assistance in the event that your tax returns are audited. Think of it as you would car insurance. You pay the tax professional an additional amount up front, and they agree to help you resolve any tax audits that might come up in the future, usually up to three years.
As mentioned above, if your tax debt is comparatively small — generally less than $10,000 — you might want to consider negotiating directly with the IRS yourself. If filling out your tax returns is a relatively straightforward process, applying for any of the IRS’s tax debt relief programs could be considerably cheaper than paying for a tax debt relief company’s services.
Tax relief lawyers
On the other hand, if you feel your tax debt situation is more complicated, working directly with tax relief lawyers might be the way to go. Be aware that some tax debt relief companies employ tax debt relief lawyers, but not all. A tax lawyer is far more specialized than a CPA or an enrolled agent, which can be useful when your case might lead to criminal charges.
Tax debt relief programs
The IRS Fresh Start Program — currently known as the Fresh Start Initiative — is a set of guidelines that makes tax debt relief more accessible. Instead of offering a specific type of relief, the Fresh Start Initiative lowers existing requirements to qualify for different IRS relief programs.
Income calculations used to determine eligibility for offers-in-compromise, for instance, have been modified in several important ways. The IRS will now only look at:
One year of future income for offers paid in five or fewer months, which is down from four years, and
Two years of future income for offers paid in six to 24 months, which is down from five years.
However, all offers must be fully paid within 24 months of the date the offer is accepted.
Tax debt relief companies evaluate the details of your case and check Fresh Start guidelines, helping you find the relief options that you qualify for.
The IRS also offers a number of tax assistance programs designed to help individuals file their taxes on time, among other things:
Warning about tax relief scams
Tax debt can create a lot of stress, which can make any offer to get rid of it seem enticing. However, as the Federal Trade Commission (FTC) warns, not all tax relief companies have your best interests at heart.
Tax debt relief companies red flags
Since only the IRS can determine whether you qualify for relief programs, you should steer clear of any tax relief company promising to lower your debt or making claims that seem too good to be true.
Assurances that you qualify for one or more programs — without even taking a look at your case — or claims that they can settle your tax debt in a specific time frame should raise red flags right away.
Many fraudulent companies don’t even bother filing the necessary paperwork to apply for relief programs, instead, they lie to customers and pocket their money without having done any work. According to FTC reports, some companies even made unauthorized charges to customers’ credit cards long after the case had been closed.
Here are some red flags to look out for when evaluating tax relief companies:
Company representatives make guarantees or promises without looking at your case details
The company fails to ask specifics about your tax debt situation
Upfront payment is demanded in exchange for “guaranteed” results
The company contacts you first by cold calling or unsolicited mail and/or e-mail
The company uses delay tactics such as asking you for the same documents over and over again
Other IRS-related scams
In addition to tax relief scams, you should also be aware of other IRS-related scams, such as the IRS text message scam that the agency recently warned about in a press release. A reputable tax relief company could even provide you with guidance on how to avoid these scams.
Trustworthy tax relief companies will avoid making specific promises and be transparent about their costs and process up front, and often offer free consultations.
The concept of tax relief includes a number of government policies and initiatives designed to reduce the tax burden on individuals and businesses. Things such as tax deductions and programs such as the Child Tax Credit are among the many tax relief options available.
Tax relief companies, on the other hand, focus on finding alternatives for managing any existing tax debt you may have with the IRS or local tax collection agencies. While results are never guaranteed, these companies can certainly assist with complicated tax debt issues.
How much do tax relief companies charge?
As with many services of this nature, the amount varies per case. It depends on how much tax debt is owed, the type of services offered and the work that needs to be done. Some companies charge a percentage of the debt owed, while others charge flat hourly fees that can range from around $200 to over $1,000 per hour.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program is an initiative from the Internal Revenue Service (IRS) that helps taxpayers obtain relief from their tax debt. This program introduces easier qualification requirements for programs as extended payment plans, offers in compromise, and penalty relief to help taxpayers who are unable to pay their tax debt in full.
Who can I call for free tax questions?
If you’re looking for general information on a number of federal tax topics, the IRS has several telephone numbers you can call. 1-800-829-1040 allows you to speak with a live representative, while 1-800-829-4477 allows you to access pre-recorded messages on over 100 different tax topics.
What is an offer in compromise with the IRS?
An offer in compromise is a tax debt relief option offered by the IRS that allows you to settle your tax debt for less than the total amount owed. Due to the benefit of paying less than you owe, this is one of the least commonly offered tax relief options.
Latest News About Tax Relief
Tax season is fast approaching so make sure you’re ready to file on time. If you’re a gig worker concerned about reporting the income you receive through third-party services such as PayPal or Venmo, don’t worry, the IRS has delayed the major tax change for gig workers that was recently announced.
If you were planning on buying a new electric vehicle soon, you should know that the new EV tax credits could save you up to $7,500 on your next car purchase. Be sure to also read up on when the 2023 tax filing season begins and why you should file your taxes early this year.
After you’re done making sure your 2022 tax checklist is in order, check out the 2023 tax brackets so you have a better idea of how much more (or less) you’ll be paying in taxes next year.
How We Chose the Best Tax Relief Companies
If you’re looking for professional assistance with your tax debt issues, consulting a tax relief company is likely at the top of your mind. While it is entirely possible to negotiate common tax debt issues yourself directly with the IRS, consulting a professional can often provide greater peace of mind. We used the following criteria to choose the best tax relief companies:
Availability
When people think of tax debt relief, they mostly think about the IRS, which is a federal agency. However, tax debt can also impact people at the state level. We picked companies that could deal with both federal and state tax issues and that were available nationwide.
Cost
We chose companies that offer free consultations and flexible payment plans, making their services accessible to all who need them.
Credibility
To ensure that you only work with companies with a solid track record, we tax looked at their record with the Better Business Bureau and customer reviews on websites such as Trustpilot.
We also only picked companies with at least one certification, accreditation or membership in major tax professional organizations such as the National Association of Tax Professionals (NATP), the National Association of Enrolled Agents (NAEA), and many others.
