Archive for July, 2010

Who Would You Rather Owe… The IRS… Or a Credit Card Company?

Monday, July 19th, 2010

I don’t know your financial situation personally, but I would venture a guess that if you have problems paying the IRS…that you may have credit card debt problems as well.

So I certainly don’t mean to throw “fuel on the fire” of a debt problem by making the following suggestion, but I’ll throw it out there as an option and only you’ll know if it is a legitimate option for you.

Did you know that the IRS accepts Visa, Mastercard, & American Express?

With credit cards, according to the IRS website “you can pay current and past due Form 1040 balances along with current year Form 940 balances and current quarter plus the three prior quarters Form 941 balances.”

You may be thinking “isn’t paying the IRS with a credit card like robbing Peter to pay Paul?”

Not exactly.  First, you’re not “robbing Peter” in this scenario.  If you’ve been extended enough credit by your credit card company to pay off your IRS bill, it’s apparently because you have a good enough credit rating to justify the credit card company’s risk that you’ll pay the money back.

Now this is assuming that you tell the truth on your credit card application.  Remember…lying on a credit application is a criminal offense…don’t do it.

Now I’m not suggesting that you don’t pay your credit card bill.  But, if you’re unable to make your credit card payments, there are legal limits to what the credit card companies can do to get you to pay the money.  And “Paul” in this scenario (the IRS) has much more power than “Peter” (the credit card companies) does to get “his” money.

Think of it this way…a credit card company has nowhere near the power of the IRS to collect their money.  Not only can the IRS take your wages, but they can also take things like your real estate, Social Security, 401(k)’s, IRA’s, car, boat, house, accounts receivable, cash loan value of your life insurance, or commissions…to name just a few.

The IRS can also put a lien on your personal and investment properties, making it difficult to sell your house, destroy your credit rating and make it difficult to refinance or get a home equity loan.  Of course, the “big hammer” of the IRS is that they can actually send you to prison for not paying your taxes.

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Will I be Held Liable for my Spouse’s Misrepresentation?

Wednesday, July 14th, 2010

If a spouse (or ex-spouse) improperly reported joint taxes, will both parties be held liable for the tax, interest and penalties?

Thankfully, the IRS has a solution for this scenario.  It’s called the “Innocent Spouse Doctrine”.  The IRS website states that: “By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return.  Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse).  You must meet all of the following conditions to qualify for innocent spouse relief:

1.      You filed a joint return which has an understatement of tax due to erroneous items (defined below) of your spouse (or former spouse).

2.      You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax (See Actual Knowledge or Reason To Know, defined below).

3.      Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.

Erroneous items are either of the following: 1) Unreported income.  This is any gross income item received by your spouse (or former spouse) that is not reported.  2) Incorrect deduction, credit, or basis.  This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse).”

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IRS Files $300K in Liens on Idaho State Representative

Thursday, July 8th, 2010

On Monday, June 14th, the IRS filed $300,000 in tax liens against Rep. Phil Hart, an Idaho state representative.

Hart refused to pay taxes between the years of 1996 to 2003, saying he believes the income tax is unfair, and a misinterpretation of the constitution.

He has piled up $90,000 in unpaid taxes and penalties. The IRS has filed liens on property rights belonging to Hart, for unpaid balances totaling $257,947.

Hart said on Monday, “I think as long as I’m engaged in the process (I’ll be all right),” although he admitted the liens had him worried for his estate and his business, Alpine Engineering.

Hart has paid roughly $104,000 in state and federal taxes since 2006. Although he still believes it’s an “inefficient tax”.

His beliefs have led to working on House Bill 454, to eliminate taxes on wages, salary and investment income, and increasing the sales tax.

He said, “I would very much like to have a hearing in the next session.  I think in this economic environment we’re in, whether outside of the fact I have this litigation issue going on, I think we really need to be talking about our tax system.”

He sued the IRS in 1996 and stopped paying his taxes, contending that income tax was unconstitutional.  A federal judge ruled against him in 2000, and the U.S. Supreme Court refused to hear the case.

Hart serves on the states’ House Revenue and Taxation Committee. Some of his fellow Republicans are concerned that Hart’s beliefs may affect his ability to serve in this capacity.

“Ordinary citizens don’t have that same opportunity to influence policy that might affect them,” says Sen. Mike Jorgenson.

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