30+ Methods to Obtain New Tax Resolution Clients

Acquiring new tax resolution clients is unlike traditional tax practices of getting new tax preparation clients. With the sporadic nature of clients' tax problems, nobody really has a go-to person for resolving tax problems. It requires different strategies to bring in new clients consistently.

This guide will review some of the top strategies to attract new tax resolution clients consistently. We’ll explore various marketing methods, community engagement, and more to help you grow and succeed in the tax resolution industry.

This guide is written in collaboration with the owners of TaxCure, who combined have more than 30 years of experience in the tax resolution industry, with a primary focus on marketing. We have spent millions on marketing, tested many marketing methods, and worked with the largest companies in the industry. This guide will cover some of the main techniques to consistently bring in tax resolution revenue for your practice. If you want further customized assistance, please contact us. We have various plans tailored to different size practices. Our goal at TaxCure is to create transparency in this marketplace dominated by scam review sites when we know taxpayers want someone local if given the opportunity. 

Website Optimization for Tax Resolution

Your website is a powerful marketing platform that you have complete control over. A powerful website allows you to control what potential clients see when researching or hearing about your services. Your website is your digital storefront that can make or break the deal for a client. Your website can become your most powerful asset to drive new clients, and wise investing in it is essential. Below are some subcategories on how to invest in your website to drive more tax resolution clients.

Search Engine Optimization Specific to Taxpayers that Need Help

Obtaining rankings for terms that taxpayers search into search engines when they have a tax problem or are looking for help can significantly boost traffic and qualified leads for your business. It is essential to understand your potential clients and understanding common search queries to focus on what will drive the best return on investment for your business. (For example, if you arrived at this page through a search engine, you got to this page because TaxCure researched the queries that tax professionals use when searching for ways to obtain new tax resolution clients. We made this article specific to your needs, and we aim to provide valuable content for you to grow your business.) With this article, we hope you sign up as a free profile to be listed on TaxCure to grow your business. 

One way TaxCure grows business for Tax Pros is by consistently publishing content about various problems and services our members help with. There is a science to this, and it is one piece of the puzzle to drive more prospects your way. If you are looking for help with this aspect of your business, you can always contact us to see if we are a good fit for your SEO services.

About Us & Bios for Website

Often this is overlooked. The value of providing valuable insight about yourself and your business helps form a connection with the taxpayer that has arrived at your website. Obtaining new tax resolution clients is a balance between marketing, sales, and quality services. Sales is a major aspect that many companies struggle with. Having a good about page to help people connect with you or your business can help close the deal before they even contact you.

Client Testimonials of Prior Tax Resolution Clients

A page dedicated to testimonials of prior tax resolution clients can be very powerful in closing the deal. It is crucial to showcase real testimonials. Consider using video testimonials as consumers trust them to see real people talking about their experience. 

Pay-Per-Click (PPC) Advertising for Struggling Taxpayers

Your website is the first thing people see when you do pay-per-click advertising. This is a game of constant optimizations and a clear call to action. Having a professional site to give the taxpayer confidence to reach out to you and specifically giving them confidence you can assist with the service or problem they searched for is imperative. 

Doing PPC isn’t something you can do overnight and get it running successfully. The PPC market is extremely competitive, with some of the highest costs of keywords to bid on. For example, if you wanted to advertise on the term “Tax Relief Attorney,” you would likely spend $25+ per click. It is important to know what you are doing here before jumping in and knowing which keywords will likely generate the clients you want. You also need to ensure your website is optimized for conversions and has the appropriate KPIs to limit wasted spending.

When optimized, this method can be one of the fastest and most reliable ways to bring in business consistently, but it will cost you a lot of money. You can read more here on what you should pay to bring in a new tax resolution client to put some things into perspective.

Places for Tax Resolution PPC Advertising

• Google Ads: The largest PPC network with the highest potential, the most competitive, and some of the highest prices for keyword bidding. If you don’t have experience with this, it is suggested to hire an expert to assist, especially in the field of tax resolution. Even companies specializing in all-tax marketing tend to fall short when it comes to marketing tax resolution services, and it is a very niche industry. Working with a company with experience is essential to lower your wasted spend. 
• Microsoft Advertising: Very similar to Google Ads, but with a far lower reach and also a bit looser on being able to target specific keywords. This can be effective and should be considered, especially with their potential to increase market share, as they have the first-mover advantage of using AI in their search platform. 
• Facebook Advertising: Different from your typical keyword bidding platform, you can target audiences. It can be difficult to target taxpayers that have issues with FaceBook, but there are clever ways to do it.

Did you know, TaxCure recently started offering PPC advertising services? We have been doing PPC marketing in tax resolution for over 15 years. We have heard the nightmare stories from so many of the members of what they pay per lead and the performance of their marketing companies and realized we need to help out. We have 15 years' worth of data on keywords that convert, negatives to add to campaigns and more. If you would like to learn more about our offering to grow your business through PPC marketing, please contact us, and we can schedule a call to go over how our process works. 

Email Marketing

While there can be many aspects of email marketing, we will cover some of the top ways you can use email marketing to increase your tax resolution clients.

Email Marketing to Your Client Database

If you have an existing practice doing tax prep or other tax services, you should have a list of your current clients and their emails. This is a great way to let your services be known to existing clients. Maybe they don’t know that you offer these services and may come into a tax problem. Emailing your current clients that already trust you is a great source of securing existing clients for more services. Even if you only do tax resolution, following up on an annual basis can help ensure you stay in their mind if they come across another tax issue. Many tax resolution clients tend to come into future tax issues as well.

Email Opt-ins on Your Website

Leverage your website to have potential clients sign up for a newsletter or other email communications. You can offer incentives like a free e-book on resolving tax problems, tax savings tips, etc, to motivate them to share their email address with you. You can then email them in the future to stay in their mind about your services. Many taxpayers are struggling financially, like to try things themselves sometimes, and aren’t ready to move forward with services. If you give them an offer that doesn’t require them to spend money and you can help them in some way without much effort, you can have their contact information for a future time when they may want to reach out to you.

Getting email opt-ins requires traffic first, so don’t build out this campaign before you have found an effective way to drive some traffic to your brand first. 

Drip Campaigns

These email campaigns help nurture a potential prospect who may have contacted you on your website or inquired about your services but have yet to become a client. An effective email campaign that will consistently send them emails about your services and highlight your company can greatly assist them in making the final decision to move forward with your services.

Networking Event Emails

Networking events can be a powerful way to drive client referrals. If you have a non-competitive business but you share a target audience. Staying in front of these people is essential to drive potential referrals to your business. Have a newsletter that provides value to these clients and keeps them aware of your services, and you are open to referrals. Be sure to collect business cards at networking events, save their emails to your marketing platform, and create a specific campaign targeted just to them.

Claim Relevant Online Listings – Review Sites

People often overlook the value of many online listing services. Business listings are very important for brand reinforcement. Finding ones that reinforce your brand and promote your services are the best, but most are just mainly suitable for brand reinforcement. 

Why is Brand Reinforcement Important?

Various studies have been done on how many touch points it takes before a customer makes a hiring decision. You can have the most optimized website, but people know that you control this information and can say whatever you want. Therefore, many people seek external references before making a hiring decision. They then do a brand search on your company name or a search on your name, and it is vital to have solid listings that support the work you do outside of your website to increase your close rate significantly.

I’m going to list a few below that can be suitable for tax professionals that offer tax resolution services. You must be active on them and only claim the ones that will rank for your brand and aren’t loosely regulated to prevent fraudulent reviews you can’t do anything about. 

TaxCure

You already have this! TaxCure is a great place to both reinforce your brand as well as generate new prospects for your business. We have your personal, professional profile and business profiles. If you haven't made a business profile yet, be sure to take advantage of this feature because it is another listing for you business that will show in search results that showcase great qualities about your business. One other great thing about your profiles is that Google and other search engines will show your review stars right from the search results without having to visit the page on TaxCure. This helps show that other people have found your services valuable (as long as you have good reviews… But most of our pro remembers do and we do validate each review to ensure it was a real person, they hired you for services, and those services they did were tax resolution related). 

Google Business Profile

This profile is one of the most critical profiles you can claim and optimize. Google Business Profile helps with brand reinforcement when someone types in your company name, showing in the results a lot of information about your services. This listing also is essential for catching those local searches where searchers have the intent to make a hiring decision. This is a separate listing from your website and can drive a good amount of traffic to your brand if optimized correctly.

National Association of Enrolled Agents (NAEA)

The NAEA has professional profiles for enrolled agents that will help you claim a place in the top 10 listings for you as a professional. They also offer other services as well. They do have an annual fee for their membership, but the standard profile is a great promotion to show great credentials at the top of the search results.

AVVO

For attorneys, this is a powerful directory that can provide clients as well as a high-ranking profile for your name and brand. They don’t drive a significant amount of traffic for tax-related topics to drive client referrals, but the listing helps strengthen your brand.

LinkedIn

Having a presence on LinkedIn through a personal profile and creating a company page can help boost your brand visibility. Generally, these profiles rank in the top 10 search results and are essential for brand reinforcement. 

Yelp

Yelp is one of those sites that aren’t great for generating tax resolution clients. It can be suitable for brand reinforcement. If you have a profile already, make sure you maintain it and get some good reviews because it generally is favored high in the results for your brand. This is a go-to place for people to post negative reviews, and it is tough to combat them. This is not a high suggestion of ours, but an easy place to grab a place in the top 10 results for your brand. This can be valuable to those professionals that offer other tax services, like tax preparation, to generate some referrals. 

Super Lawyers

Super Lawyers is a site for lawyers with a profile page that can rank decent for their brand. They have a free listing option, and not all lawyers can get listed. It can be a good place to reinforce your brand and claim a listing if you are an attorney.

Justia

Justia is for attorneys general, blanketing many aspects of the law. For tax resolution, they can showcase your experience. They don’t receive significant traffic from people with tax issues. However, their platform allows your profile to rank high in search for your brand. 

FindLaw

FindLaw is another directory just for attorneys. They cover various aspects of law and allow you to create a profile for yourself and your company. This can be great for brand reinforcement as long as you put some effort into it. They don’t receive much traffic related directly to tax, so don’t expect direct referrals from here. If you have a solid profile it should rank top 10 in the search results for your brand.

Better Business Bureau (BBB)

This long-standing brand is well-recognized and a trusty entity. Having a listing here and in good standing will help reinforce your credibility. A BBB profile for your business generally ranks highly in the search results, and if you maintain it well, it is a good profile. The BBB has built somewhat of a strong reputation to give extra trust to clients knowing they have an intermediary to get involved if there are any issues. The BBB does assist in helping resolve client complaints, but the main benefit of their service that is not stated is you get a nice listing that ranks high in the search results for your brand and lets customers know they have some BBB “protection.” This does have an annual or monthly fee to be a part of, but generally, if this listing can sway one person a year to use your services, it will l likely be worth the cost.

FaceBook Business Page

FaceBook can play a crucial part in enhancing brand reinforcement. With a Facebook business page, your brand is more visibility to your audience. It shows great in search for your brand in search engines and helps foster trust and engagement. Having a Facebook business profile can help to show you are actively engaged with your clients, but it can also hurt you if you don’t show frequent updates and give the impression you aren’t that involved. Generally, this profile ranks high in the results for your brand and is an important marketing angle to maintain. 

TaxBuzz Profile

If you like it or not, you probably already have a profile here if you are a tax professional since they use web scraping technology. They rank well for brands, and that is what they have built their business on. They drive much of their traffic from people searching for certain tax professionals and possibly doing a bait-and-switch tactic, especially if you haven’t claimed your profile. If you haven’t claimed your profile, we suggest you claim it and update you with relevant information. Especially if this profile already ranks for your brand in the top 10 results for your brand name.

Buying Tax Resolution Leads

Sounds easy, right? Just pay to receive prospects with tax issues and seeking help. Well, it isn’t quite as it seems, and this can be an expensive way to acquire new clients, but many businesses base their whole business solely on this type of marketing. We have a very detailed article on how buying leads works & how to avoid getting ripped off. 

Tax Lien Mailers

This approach involves acquiring lists of individuals who recently had tax liens filed against them and sending them an informative and professionally designed mailer. There are some companies out there that offer this service from obtaining the lien lists to sending the notice. There are many businesses who have relied solely on this practice to build their business. While it can be an effective strategy, there can be times where it isn't effective when the IRS isn't being aggressive and implementing new tax liens. This can also be an expensive form of marketing with the cost of acquiring the lists (there are free ways to do this), printing copy, coming up with the creative for the letter, and setting up effective split testing to see which gets the best response and then the cost of mailing the letters.

Companies that have this dialed in can have an effective and repeatable model of generating new clients. Many people jump in and think they will achieve great results right away, but generally fall short of the return needed to continue. With consistency and testing while having the appropriate KPIs in place, this can become an effective method.

With the mailers, be sure not to come off like you are a tax agency. This was an old-school method used by many marketing companies and shady tax resolution companies back in the day. While this did probably produce good results for them, in this day an age with technology, this will only make a bad name for you and your company, which will hurt your long-term success. Be sure to explain how your services can assist in resolving their tax debt and the benefits they can receive by taking timely action. Be sure to promote trust and include client testimonials and information about your firm to establish credibility. Be sure to have a clear call to action, maybe a phone number that you specifically track so you can attribute that call to the mailer, or a website that you can track that it came from the mailer (maybe acquire a similar domain to yours or a very short name domain that redirects to your site that passes a UTM parameter that you can effectively track traffic from that source).

Social Media Presence

Why Is Presence on Social Media Important?

With over half of the world on social media. This is a tool that no business can ignore. We’ve already mentioned the importance of this in various aspects of marketing above. Here are some tips on leveraging it to help grow your tax resolution services. 

1. Establish Presence and an Indexable Profile: These profiles show high for your brand in search. These profiles should be complete, up-to-date, and reflect your brand’s messaging. 
2. Share valuable content: Share things that meet your target audience. Even if they don’t find you directly through social media, this is your platform to showcase things when someone searches for your brand. Things like tax law updates, tax tips, client testimonials and more. Just think, if someone was to hire my business or are an existing client, what type of information would they like to see to solidify their commitment to my business?
3. Engage: Be sure to be responsive. Being responsive will lead to new clients and will also show you are a business that cares and will respond to your client's needs.

Social Media Platforms to Consider

• LinkedIn: This is a good platform that showcases your expertise. This is great for creating a company profile and a professional profile. This ranks well in search engines and reinforces your brand to potential prospects. This isn’t that powerful in terms of generating new prospects, but it is an important profile to have. This can be important for professional networking and having a place to connect with other professionals that you may receive referrals from. 
• Facebook: This has a broad user base. Many taxpayers will look up companies' information here, and it has become an essential platform for all businesses to get on.
• Twitter: A good platform for sharing updates, engaging in discussions, and connecting with customers or similar businesses with similar target audiences. Generally, this profile ranks high in search for your brand and can be valuable for brand reinforcement.
• Instagram: While this may not seem like an intuitive choice for tax resolution, Instagram can be effective for sharing visual content, such as infographics that simplify complex tat issues and images about your company to help build more trust. 
• Youtube: Creating video content allows you to show in the second largest search engine in the world. This is also a powerful profile where potential prospects can see you and make a connection with you, which can significantly increase the close rate when they reach out to you. Youtube can be an effective way to generate valuable content that can directly drive prospects and grow your business. This is a good place to showcase your skills and answer common questions from tax problems that you frequently help resolve, and this can help generate potential prospects that meet the types of skills that you have. 

Partnerships and Referrals

• Professional Networking: Collaborating with complementary service providers such as financial planners, real estate agents, attorneys, accountants, etc. These professional connections can lead to referrals for the services you offer. Networking events, industry conferences, and online forums can be a really great way to build some of these connections. 
• Client Referrals: Happy clients often recommend services to friends. Tax resolution is a touchy subject, and staying in touch with prior clients is important to stay in their minds for possible future services or to remind them of the services you helped them with so that maybe they will refer others to you.

Final Works on Acquiring New Tax Resolution Clients

Attracting new clients requires strategic planning, a good understanding of your target market, and a commitment to providing top-notch services. There are a variety of strategies, and it is best to use multiple techniques to diversify your mix in the ways you receive new clients.

It is important to find strategies that work for you that can be consistent and repeatable. The more consistent you can become with implementing various acquisition strategies and consistently putting effort in, your client base will consistently grow over time. 

At TaxCure, we are here to help guide you on different methodologies to consistently grow your practice. Check back for updates on more tips and tricks and detailed articles to ensure you keep growing your tax practice

North Carolina Tax Garnishments

If you don't pay your taxes in Noth Carolina, the NC Department of Revenue (DOR) can garnish your wages, bank accounts, and payments from third parties. Garnishments can be professionally embarrassing, and they can also cause financial distress. Here's an overview of how they work and what to expect.

Bank Garnishment

The NC DOR can garnish 100% of the funds in your bank account up to the amount of your tax debt. Generally, the bank freezes the funds for a certain number of days to give you a chance to respond, but typically, the garnishment starts before you even receive the notice from the DOR. 

The bank must garnish all of the available funds when it receives the garnishment order. If you have outstanding checks or automatic payments, they will bounce or make your account negative unless you make a deposit. If you don't take action by the deadline, the bank will send the frozen funds to the DOR — timing varies, contact your bank for more details. 

Wage Garnishment

A wage garnishment is when the state sends a notice to your employer to withhold the delinquent tax from your paycheck. For tax debts, the state will instruct your employer to withhold 10% of your gross wages. However, your employer can garnish up to 25% of your wages for other types of debt. If your wages are already being garnished, the tax garnishment will usually be on top of the other garnishment. 

Your employer will send the withheld amount to the DOR, and they will continue to do so until your liability is paid in full. The garnishment also applies to commissions, bonuses, and any other payments you receive from your employer. 

Garnishments on Other Income Sources

The NC DOR can also garnish other types of income, such as rents, royalties, and contract payments. As indicated above, the state can only take 10% of wages reported on a W2, but there are no limits for these payments. The DOR can take 100% of these payments. 

Vendor Garnishment

The state can also garnish 100% of payments paid to state vendors. Vendors are individuals or businesses who provide services to the state, and before issuing payments, the state runs your tax ID through a computer system. If you have an outstanding tax bill, the state must send the payment (up to the amount of your tax due plus interest and penalties) to the DOR. 

One-time Vs. Continuous Garnishments

There are two types of garnishment: one-time and continuous. For instance, when the state garnishes the funds in your bank account, it is a one-time garnishment. The state must issue an additional garnishment if it wants to take more money from your account. 

A wage garnishment, in contrast, is a continuous garnishment. It continues until the tax debt is paid in full. 

How to Release a Wage Garnishment

The DOR will release the wage garnishment once you have paid your taxes in full. Your employer must continue garnishing your wages until they get a notice from the state. If you believe that you have paid in full, you can call the DOR at (877) 252-3252 to request a garnishment release letter. 

In some cases, the state may consider removing or reducing a wage garnishment if you prove that you're suffering financial hardship. You may also be able to convince the state to release a garnishment if you set up a payment plan, but this is not a guarantee. 

How to Avoid an NC Tax Garnishment

To avoid a tax garnishment, you need to make arrangements to take care of your tax liability before the state moves forward with enforced collections. In North Carolina, you may be able to make monthly payments, set up an offer in compromise, or take advantage of other programs. 

Depending on the situation, you may be able to appeal the tax due or apply for innocent spouse relief. The right solution varies based on your situation. But in all cases, the sooner you deal with your tax debt, the easier it will be.

Get Help With NC Tax Garnishments

Struggling with an NC tax garnishment? Worried that the state is going to start garnishing your payments or bank accounts? Then, reach out to a tax professional today. 

Using TaxCure, you can search for local CPAs, enrolled agents, and tax attorneys based in North Carolina. You can narrow down your search to find a local pro with the exact experience you need, and you can review multiple profiles until you find the best fit for your situation.

Overview of the Power of the Taxcure Pro Membership

Discover the benefits of TaxCure Pro Membership, designed to help tax resolution professionals effortlessly grow their practice and boost their revenue. Take advantage of our unique features and resources to unlock your business's full potential.

First, do you see the professionals listed in the right column if you are viewing on a desktop? (bottom of the page if viewing on a mobile device) Well, these professionals are the tax pros that show to taxpayers in your area based on the tax problems or solutions they can help with (The selection used for this page is for a general topic on Unpaid IRS Taxes. The results vary based on the page being viewed. Yes, we have a complex algorithm to help paid pros get seen for only the topics they help with!). You can only be seen on content pages if you are a paid member. These pages get 10s of thousands of visits a month and we are always expanding on content based on the problems and solutions that our TaxCure Pro members offer.

Benefit #1: Increased Visibility with Unique Algorithm

TaxCure Pro Membership promotes your profile to taxpayers who are most likely to hire you based on our unique algorithm and search criteria. Experience a significant advantage in attracting new clients with an impressive 1045% more inquiries compared to free members.

Benefit #2: Top Placement in Search Results

Appear at the top of search results and enjoy increased visibility, as 80% of taxpayers choose to reach out to professionals listed at the top. As a Pro Member, you'll be displayed above organic results, often appearing twice if you qualify for a top spot. Just search yourself for your area. Here is a sample search for a taxpayer looking for help for professionals that help with an IRS garnishment, unpaid taxes, & tax penalties. Take note of the top two professionals that display, that is where you would be when upgraded to the pro membership, and you would have two listings on the page (one that says Ad, other that is organic). 

Benefit #3: Exclusive Visibility on Content Pages

Gain additional exposure to potential clients with exclusive visibility on content pages related to various tax problems and solutions. With over 50,000 visitors viewing these pages in the past month, only paid Pro Members are listed, giving you an edge in attracting new leads. For example, if you view one of our content pages on unfiled tax returns, which drives clients that have multiple years of unfiled returns to the site, you can see the listings of the paid members on the right-hand column when viewing on a desktop or at the bottom of the page on mobile. 

We are constantly investing in our content to help drive prospects to our pro members. Suppose you help with a specific state tax agency as well. In that case, we are consistently putting out new content on state issues and solutions that target problems and solutions a taxpayer needs help with based on the agency experience our pro members have. You can navigate to our state guide section here, and when you become a pro member, we will work to optimize our site to serve you more targeted prospects. 

Benefit #4: Click-to-Call Button for Easy Contact

Provide potential clients with a convenient click-to-call button on your profile. Cater to those who prefer calling over messaging, making it easier for them to get in touch with you and increasing your chances of securing new clients. Click-to-call leads makeup over 50% of all inquiries on TaxCure and not having a call button means you are potentially missing out on potential clients. 

Benefit #5: Instant Notifications for Prospect Information

Stay on top of new leads with instant notifications of prospect information via email and text messages. Respond quickly without needing to log in to the TaxCure platform, maintaining a competitive edge in the fast-paced tax resolution industry. Once you upgrade, a simple change in your settings will send text messages directly to your phone when someone reaches out. Responding quickly increases close rates significantly.

Benefit #6: Access to Webinars and Premium Content

Expand your knowledge and stay updated on industry trends with exclusive access to webinars and premium content. Enhance your practice and gain a competitive edge with valuable insights and best practices designed to help tax professionals grow their businesses.

Benefit #7: Profile Analytics and Social Media Integration

Track your success with profile analytics, providing data on views, messages, website clicks, and click-to-calls. Boost your online presence with public social media links, allowing potential clients to easily learn more about you and your practice.

Benefit #8: Removal of Similar Profiles from Your Profile Page

Ensure that potential clients focus on your unique offerings by removing similar profiles from your profile page. This way, when a taxpayer views your profile, they won't be distracted by other suggested professionals.

Benefit #9: Custom Byline for Enhanced Branding

Stand out from the competition with a custom byline that you can edit and use as an ad for yourself in the search results. This personalized touch can make your profile even more appealing to potential clients. You can check out this search for what your local competition includes in their bylines. Just look for the profiles with the orange click-to-call button as they are paying members and likely have updated their byline.

Experience Growth With Little to No Maintenance

TaxCure Pro Membership offers a low-maintenance solution for tax resolution professionals looking to grow their practice and increase their revenue by $10,000 to $30,000 a year. With exclusive features and resources designed to optimize your visibility, attract new clients, and showcase your unique brand, TaxCure Pro Membership is the perfect platform for your business's success. Sign up today and experience the difference for yourself!

Oregon Back Taxes: Consequences and Resolution Options

The Oregon Department of Revenue (DOR) collects and administers personal and business income tax in the state. If you don't file or pay your state taxes, the DOR can take collection actions against you. However, the DOR also has several programs to help taxpayers get out of tax debt. 

To help you out, this guide provides an overview to Oregeon's tax resolution programs. Then, it outlines what can happen if you don't pay taxes in Oregon. To get help now, reach out to a tax pro from Oregon today.

Tax Relief Programs in Oregon

If you can't afford to pay your Oregon state taxes, don't despair. The DOR offers several different options to help taxpayers get caught up on their back taxes. There are also relief programs for people experiencing financial hardship or dealing with taxes incurred by their spouse without their knowledge. Here are the main options. 

Payment Plan on Oregon Back Taxes

The Oregon Department of Revenue offers payment plans to people who can't afford to pay their tax liabilities in full. You can set up a payment plan with Revenue Online, or contact the Department of Revenue directly to request payments. If your account has been assigned to a private collection agency, you need to contact them to request a payment plan. 

Generally, if you can pay off the balance within 36 months, the Department will approve your payment plan request. If you need more time, you will need to complete Form OR-SFC (Statement of Financial Condition). The OR DOR website doesn't outline conditions for the payment plans, but in most states, you need to stay compliant with filing and paying taxes to get a payment plan approved. 

Oregon Settlement Offer

If you can't afford to pay your tax bill, the state may be willing to settle it for less than you owe. This is similar to the IRS's offer in compromise program. However, unlike the IRS, the OR DOR will only let you have one settlement offer in your lifetime — the DOR is very strict about this. Because you only have one chance to take advantage of this program, talk with a tax professional to make sure that this is the right choice for your situation. Generally, you will only qualify if you don't have disposable income to make payments or assets to liquidate.

You must be an individual to apply for a settlement on your tax debt. Unlike the IRS, the Oregon DOR doesn't let businesses settle taxes. To apply, use Form OR-SOA (Oregon Settlement Offer Application). This form requests detailed information about your income, assets, bills, and debts. According to the Oregon Department of Revenue, the application process takes about three hours, but it can take longer. You will also need to send in supporting documentation, and you can only qualify if you're compliant with tax filing and payment regulations. You must also meet the following requirements:

• You must offer something — you cannot make a $0 settlement offer.
• You must make a non-refundable good faith payment of 5% of the amount offered. 
• Your appeal rights for the tax debt must have expired.
• You cannot be involved in an active bankruptcy case or in litigation. 
• When you apply, you agree that the DOR can contact third parties to verify the information presented in the settlement offer.

If accepted, you must pay the offer in full within 30 days or set up a 12-month payment plan. Additionally, you must stay compliant with filing and paying your state taxes for three years following the date that the offer is paid in full, and if the DOR has issued a lien for your tax debt, it will only be removed after you have stayed compliant for three years.  

Unfortunately, if the DOR denies your settlement offer, you cannot appeal. There are no appeal rights to this decision. That's why it's critical to work with a professional to ensure that you take the best approach with your application.  

Innocent Spouse Relief

When you file a joint tax return with your spouse, you are jointly responsible for the tax liability. However, in rare cases, you can get relief from your spouse's portion of the tax liability through the Oregon innocent spouse relief program. To qualify, you must meet the following criteria:

• You and your spouse filed a joint return. 
• Your spouse understated tax on the return. 
• When you signed the return, you didn't know that your spouse had underreported the tax. 
• It would be unreasonable for the state to hold you responsible for your spouse's tax liability. 

An understatement of tax occurs when someone underreports their income or claims deductions or credits that they aren't entitled to. For instance, if your spouse was running a side business without your knowledge and they didn't report any of the income, you might qualify for this type of relief. 

Temporarily Uncollectible Status

You can apply for temporarily uncollectible status if you're experiencing a temporary hardship such as a job loss or short-term disability. If you qualify, the state will stop collection actions against you. However, the DOR can still seize your tax refund to cover your tax debt, and it may issue a lien against you. 

When the state marks your account as temporarily uncollectible, it expects you not to incur any additional tax debt. If you file a new state return that shows you owe tax, you will be removed from this program if you don't pay the bill in full by the due date. If that happens, the DOR will expect you to pay the full amount that you owe, and if you don't, they will pursue collection actions against you.  

Suspension of Collection Activity Due to Hardship

The above program just offers temporary relief, but the if the following are true, you can get the DOR to suspend collection actions until your situation changes:

• Household income under 200% of the poverty line.
• Less than $5,000 in assets.
• Only income is exempt from garnishment. 

To put this into perspective, a family of three is below 200% of the federal poverty line if they earn $46,060 or less. As of 2022, Oregon doesn't include your home and one vehicle in your asset count. 

If you qualify for this hardship program, the state may still issue a lien against you, and interest will continue to accrue on your debt. Additionally, the DOR can seize state and IRS tax refunds to cover your tax bill, and if you incur any new tax debt, collection actions will resume on your account. 

Penalty Abatement

If you incurred penalties on your account, you may be eligible for a penalty waiver. Write a letter to the DOR explaining why you paid or filed late, and if the state thinks you have a reasonable cause, it may waive the penalties. In most cases, the state will not waive interest from your account. 

What Happens If You Don't Pay Oregon Taxes?

If you don't pay your state taxes, the Oregon DOR can enforce collection actions against you. The state can garnish your wages, seize your assets, and more. Here is an overview of what happens when you don't pay taxes in Oregon.

Tax Liens for Oregon Tax Debts

The OR DOR can file a tax lien against you if you have unpaid taxes. First, the state issues a Distraint Warrant. Then, if you still don't pay, the state issues a tax lien.

The lien attaches to all of your current and future assets. The state can also issue a Uniform Commercial Code (UCC) lien which attaches to your business assets. Once the state issues a UCC lien, it has the right to seize your business property to recoup your unpaid tax bill. You can generally avoid a lien by setting up a payment plan. 

Garnishment

If you don't pay your taxes, the state can garnish your wages, bank accounts, or third-party payers. Take a look at the details:

• Wage garnishment — The state can send a notice to your employer requesting them to withhold up to 25% of your take-home pay.
• Bank garnishment — The state sends a notice to the bank to seize all of the funds in your account, up to the amount of your tax debt plus interest, penalties, and fees. 
• Third-party garnishment — The state sends a garnishment notice to a third party that holds your assets. This may include stocks, securities, and rental income. It can also include payments you receive from processing credit cards at your business and accounts receivables for your business. 

If you disagree with a wage garnishment, you have 120 days to submit a Challenge to Garnishment. You have 30 days for all other garnishments. Then, the DOR will review the situation. If the DOR upholds the garnishment, you have 90 days to request a Garnishment Challenge Denial Hearing Request. 

Oregon Department of Revenue Contact Information

• Individual Tax Inquiries: 503-378-4988
• Business Tax Inquiries: 503-378-4988
• General Information: 503-378-4988
• Collections Department: 503-378-4988
• Website: Oregon Department of Revenue

Tax Levy

The state also has the right to seize your assets for unpaid taxes. The DOR can seize RVs, motorcycles, and other personal property, but it will not take your primary residence. If you own a business, the state can seize your safe deposit box and money from your cash registers.

Tax Penalties Charged

The state assesses the following penalties when taxpayers don't pay or file:

• 5% failure-to-file penalty for missing the filing due date. 
• 5% failure-to-pay penalty for not paying the tax on time. 
• Additional 20% failure-to-file penalty if you haven't filed within three months of the due date.
• Additional 25% failure-to-file penalty if you don't file within 30 days of receiving a Notice of Assessment for failure to file. 
• 100% failure-to-file penalty when returns aren't filed for three consecutive years.
• $100 penalty for not filing annual reports such as Form WR or the transit tax annual report by the due date.
• 5% underpayment penalty if you underpay quarterly commercial activity estimated quarterly taxes.
• 5% non-qualified withdrawal penalty for unqualified withdrawals from first-time homebuyer savings accounts. 

The penalties apply the first day you are late. For instance, if you file a return a day late, you incur a failure-to-file penalty of 5% of the balance.

Professional License Suspension

The DOR can suspend your professional license if you don't pay your taxes. This can make it impossible to run your business. To avoid these types of collection actions, you need to be proactive about contacting the DOR and making arrangements on your tax debt. 

Common OR DOR Collection Notices

Have you received a notice from the DOR in Oregon? Wondering what it means? Here is an overview of the department's most common notices:

• Notice of Assessment — You have late unpaid taxes. The full amount is due.
• Notice and Demand for Payment — This is a reminder that you have an unpaid tax bill. 
• Notice of Distraint Warrant — The state is issuing a tax warrant against you. You will not be arrested. The warrant notes the state's legal claim to the tax debt, and if you still don't pay, the state will issue a tax lien. 
• Notice of State Tax Lien — The state has issued a tax lien in the county where you live. This is a legal claim to your assets, and it acts like a judgment against you. 
• Notice of Intent to Offset Federal Income Tax Refund — The OR DOR participates in the federal offset program, and if you earn a federal tax refund, the IRS will send it to the state to cover your tax debt. 
• Notice of Intent to Offset Federal Payments — The state is planning to claim other federal payments through the offset program. This doesn't apply to Social Security payments, but it may apply to payments you receive as a federal contractor. 
• Statement of Account — This just shows an overview of your tax debts and the amounts that you owe. 

The Appeals Process in Oregon

You have the right to appeal determinations from the Oregon DOR. For instance, if the DOR audits your return and says that you owe money, you can appeal. You can also appeal decisions about collection actions such as wage garnishments. When the state notifies you about determinations, the notice will outline your appeal rights. 

Typically, you must appeal within 30 days of receiving a determination. If you miss the 30-window for appeals or if you disagree with the response to your appeal, you can appeal to the Magistrate Division of the Oregon Tax Court. You have 90 days from the day of the notice to do so. You can appeal most determinations aside from penalty determinations. 

If you miss the 90-day deadline, you can appeal to the Magistrate within two years of paying the tax, penalties, and interest. If you disagree with the Magistrate's decision, you can appeal to the regular division of the Oregon Tax Court. 

Voluntary Disclosure Program

The OR DOR offers a voluntary disclosure program for businesses that are behind on their filing obligations. This program allows you to get back into compliance, and it minimizes the penalties you incur on your account. To qualify, you must not have been contacted by the OR DOR or the Multistate Tax Commission (MTC), and you must make a written request to the DOR. 

Individuals can also make a voluntary disclosure to the state if they want to get caught up on state income tax returns. When you apply, you must explain why you didn't file your OR returns. You must also explain any specific requests or proposals that you're making and include a statement indicating if you've been contacted by the DOR or MTC. 

Does Bankruptcy Eliminate Oregon Tax Debt?

Generally, you shouldn't turn to bankruptcy if you're just dealing with tax debt, but if you have a lot of other debts that you can't afford to pay, it can be an option to explore. When you file for bankruptcy, the courts will issue a stay, and the DOR will stop collection actions against you. For instance, if your wages are being garnished for taxes, the garnishment will stop. 

Unfortunately, not all tax debts are eligible to be discharged in bankruptcy. Talk with your bankruptcy attorney or reach out to a tax pro to see if your tax debts qualify to be discharged. After you finish your bankruptcy case, you can set up a payment plan for any taxes that you still owe. 

Oregon Statute of Limitations on Tax Debt Collection

In Oregon, there is no statute of limitations on tax debts that are collectible by warrant. However, once filed, liens expire after 10 years, but they can be renewed without losing any priority. 

Get Help With Oregon Back Taxes

If you're struggling with personal or business tax debts in Oregon, you should reach out to a local tax professional. A CPA, enrolled agent, or tax attorney based in Oregon can help you deal with the Oregon DOR and the IRS. Use TaxCure to search for a tax pro today, and then, narrow down the results based on your tax program or the relief program that you want.

Washington State Taxes: Resolution Options and Consequences

The Washington Department of Revenue (WA DOR) administers and collects a range of taxes. You will incur penalties and interest if you get behind on your taxes. The state can also enforce collection actions against you, including revoking your business license. This guide looks at your options and explores the consequences of unpaid state taxes. 

Taxes in Washington State

In Washington State, businesses may need to pay business and occupational tax, public utility tax, and a handful of other industry-specific taxes. Individuals must pay sales tax, but that's collected and remitted by businesses. In cases where individuals or businesses don't pay sales tax on a taxable purchase, they may owe use tax to the state. Both individuals and businesses may need to pay capital gains tax as well. 

Tax Debt Relief Options in Washington State

The WA DOR takes business taxes very seriously. However, the state is often willing to work with business owners who get behind on their taxes. In particular, you may be able to set up a payment plan, and in very rare cases, the state may settle your taxes for less than you owe. Keep reading for a look at the options. 

Important Contact Information:

• Washington State Department of Revenue (WA DOR)
  • Individual and Business Inquiries: 360-705-6705
  • Collections Inquiries: 360-664-1388
  • Website: https://dor.wa.gov/

Payment Plan on Washington Back Taxes

The WA DOR may be willing to accept a payment plan on your back taxes. To apply, you need to contact your local DOR office, or you can have a tax pro take care of the process for you. There are local offices in Bellingham, Bothell, Kent, Porta Angles, Richland, Seattle, Spokane, Tacoma, Tumwater, Vancouver, Wenatchee, and Yakima. 

Typically, you can only get into a payment plan if the WA DOR has already issued a tax warrant against you. When you apply, you must submit a financial statement with details about your income, expenses, assets, and debts. The DOR uses this information to determine if you qualify and to set the number of your payments. 

You can only set up a payment plan in Washington if you agree to have the payments electronically debited from your bank account. Additionally, you must stay current on your tax filing and payment obligations. If you don't, the WA DOR can rescind the payment agreement. 

Offer in Compromise: Rule 100 Settlements

A settlement is when the DOR agrees to accept less than the full balance on your tax debt, and the department "settles" or eliminates the remaining amount. In Washington State, this is called a Rule 100 Settlement. 

Unfortunately, you cannot get a Rule 100 Settlement if you cannot afford to pay. Your business, however, may be able to get a Rule 100 Settlement if any of the following apply:

• You received written instructions from the DOR that conflict with state statutes. 
• Strictly applying the law would have harsh consequences.
• If the issue went to court, the outcome would be uncertain. 
• The issue is not recurring. 

You cannot get a Rule 100 tax settlement if the department is litigating the same issue or if you're dealing with an issue where relief doesn't apply, such as the cost of litigation. Additionally, you cannot use this tax settlement option if you think a tax law is unconstitutional. 

Penalty Waivers

Sometimes, the DOR may be willing to waive penalties on your account. You must reach out to the department and explain why you think you deserve a penalty waiver. Generally, you should apply in writing, but you may be able to make a verbal request at the department's discretion. 

You must request the penalty waiver within 30 days after the notice of the amount due or by the extended due date if applicable. There are two main situations where you may be able to get penalty abatement in Washington State.

Waivers for Reasonable Cause

The DOR will only waive penalties if you incurred the penalties for situations out of your control. Waiving penalties typically applies to circumstances such as the following:

• You mailed the payment on time but to the wrong agency.
• You received incorrect written advice from a DOR agent that lead to your late payment. Incorrect information from a tax professional does not qualify you for a waiver.
• You or an immediate family member died, or your accountant or their immediate family member died.
• A fire or other casualty destroyed your place of business or your business records.
• You paid or filed late due to fraud, theft, or embezzlement from your employees. 
• You requested a tax return or other form, and the department did not provide it in a reasonable amount of time. If you had received the form on time, you would have been able to file and pay on time. 

You cannot get a penalty waiver due to financial hardship or because you didn't understand the tax laws. You also can't get a waiver if you relied on written advice that the WA DOR provided to another taxpayer. 

Waivers of Penalties on Late Payments of Returns

Even if you don't have reasonable cause, you may be able to get a penalty waiver if you normally pay on time. To qualify, you must be dealing with taxes reported on a combined excise tax return, oil spill response taxes, enhanced food fish taxes, leasehold excise taxes, timber and forest land taxes, or tax on telephone access line use. 

You also must have paid and filed on time for the last 24 months. If you haven't been in business for 24 months, you must have been on time for the entire time you have been in business. 

Interest Waivers

In most cases, the department will not waive interest that accrues on your Washington State tax debt. However, you may be able to get interest waived if the failure to pay was based on direct, incorrect written advice from the department. You can also get a waiver if the majority owner of the business is on active duty in the military in armed conflict outside of the United States or its territorial boundaries, and the business's gross income in the last year was $1 million or less. 

Hardship 

Sometimes, the WA DOR will offer you relief if your tax liability or the state's collection actions are causing financial hardship. This can apply to business taxes, property taxes, and estate taxes. The DOR publishes a very limited amount of information on hardship programs and procedures. To get help, you need to reach out to the DOR directly or contact a tax professional who has experience dealing with the WA DOR. 

Taxpayer Rights Advocate in Washington

If you cannot resolve your concerns with the WA DOR, you may be able to get help from a taxpayer rights advocate. An advocate can answer your questions and help you understand your rights and obligations as a taxpayer in Washington state. They cannot, however, change the law or get you relief from taxes that you owe. 

Washington State Voluntary Disclosure Program

The Washington State DOR runs a voluntary disclosure program to help businesses that have not been paying taxes. To apply, you need to submit an application online. Here are the qualification criteria:

• Your business has never registered with the DOR or reported taxes to the DOR.
• Your business has never been contacted by the DOR. This includes phone calls, written correspondence, requests to complete a Washington Business Activities Questionaire, or audit/examination notices.
• Your business is not involved in tax evasion.

If you meet these requirements, the DOR will only look back four years plus the current year. The department will also waive some or all of your penalties. In contrast, if you don't come forward voluntarily and the DOR finds you, the look-back period is seven years plus the current year, and the penalties can be up to 39% of your unpaid tax liability. 

The DOR should automatically approve you if you meet the criteria. At that point, the DOR will send you a Voluntary Disclosure Agreement. You must sign and return this within 30 days, or your application will be denied. If the DOR denies you, you may be subject to all interest and penalties, and you will face a look-back period of seven years plus the current year.

After being accepted, you must register your business by completing a Business License Application. You will also need to pay the registration fee and stay current with future tax filing and payment obligations. Additionally, you will need to submit details about your gross income, a Washington Business Activities Questionnaire, a Confidential Tax/Email Authorization form, and any other information as requested. Finally, you must pay the tax and interest by the due date.

Consequences of Unpaid Taxes in Washington State

The state will send you a tax bill if you don't pay your taxes. If you don't pay by the date on the notice, the Washington Department of Revenue can enforce collection actions against you. Here is an overview of what can happen if you don't pay taxes in Washington.

Penalties for Filing and Paying WA Taxes Late 

Here are the penalties assessed by the WA DOR:

• If you underreport tax by 20% or more — 5% of the underreported tax. Increases to 15% or 25% if the tax does not get paid by a certain deadline. 
• Penalties for filing paying late — 9% of the tax liability. Increases to 19% if not paid by the last day of the month following the due date and increases to 29% if not paid by the last day of the second month following the due date.
• Warrant — 10% penalty if a warrant is filed.
• Disregard of specific instructions — 10% penalty.
• Intentional effort to hide underpaid tax — 50% of the tax.
• Failure to register — If the DOR discovers that you are not registered, the penalty is 5% of the unpaid tax.
• Misuse or resale certificates or reseller permits — 50% of the unpaid sales tax. 
• Failure to remit sales tax to a seller — 10% of the unpaid sales tax.
• Disregarded transaction — 35% of the tax due.

In addition to penalties, you will also accrue interest on your unpaid tax debt. The longer you ignore a tax debt, the more it will grow. To protect yourself, you should deal with your tax debt as soon as possible. 

Washington State Tax Warrants

The Washington Department of Revenue can issue a tax warrant if you have unpaid taxes. If you don't pay the warrant within ten days, the department will file it with the County Superior Court. The tax warrant also gives the department the right to levy (seize) your assets. 

A tax lien is a legal claim to your real and personal assets. To explain, imagine that the WA DOR has filed a lien against you, and you sell a piece of property you own. By law, the proceeds from the sale (up to the balance on your tax account) will go to the DOR. If another entity such as a mortgage company, also has a lien against the property, they will also get the proceeds of the sale. Generally, priority is established by the order in which the liens were filed. 

Having a lien against your property makes it nearly impossible to take a loan out against the property. A lender won't let you use your property for collateral if it knows that the DOR already has a lien against that property. However, in cases where you want to take out a loan to pay your state tax debt, the DOR may be willing to subordinate its tax lien. This just means that the DOR agrees to let the other lender take priority, with the caveat that you use the loan to pay off your state back taxes. 

Property Levies for Unpaid Washington State Taxes

Once the WA DOR files a warrant against you, it has the right to levy your assets. In this situation, the word levy means to seize your assets. The DOR can garnish your paycheck, seize the funds in your bank account, and/or seize and auction off your real or personal assets. If this happens, you may be held responsible for collection costs, tax, interest, and penalties.

Business License Revocation

If you don't pay your tax bill within 30 days of a warrant being issued, the DOR will schedule a hearing to revoke your business license. If your license is revoked, you will not be able to do business legally in Washington State. This is one of the worst things that can happen if you don't pay your state taxes. When you lose your ability to earn income, it becomes even harder to pay your WA tax debt. To protect yourself, reach out for help from a WA tax pro before this happens.

Statute of Limitations on WA Tax Assessments

Normally, the WA Department of Revenue has four years after the end of the calendar year in which the tax was incurred to assess a tax. This is the Washington statute of limitations for tax assessment. There is no time limit on tax assessments if you don't register to pay taxes as required, you committed fraud, or you collected sales tax but never paid it to the DOR.

Get Help With Washington State Taxes

If you're behind on filing or paying taxes in Washington, get help today. The TaxCure search feature can help you find high-quality local tax professionals who have experience helping clients deal with the Washington DOR and the IRS. Use TaxCure to find a local WA tax pro today. 

How to Avoid and Resolve Trust Fund Recovery Penalties: Guide for Employees and Third Parties

The IRS Can Assess Trust Fund Recovery Penalties Against Employees, Accountants, and Other Third-Parties. If the IRS contacts you about a trust fund recovery penalty, you need to respond carefully.

The IRS is extremely serious about payroll taxes — if a business fails to pay these taxes, the agency may assess trust fund penalties equal to the amount of the tax as well as other penalties and interest. 

The trust fund recovery penalty is unique because it isn't just assessed against the business or its owners. The IRS can assess this civil penalty against any responsible person, including employees and even third parties that have been contracted to take care of payroll. If you're liable for unpaid payroll taxes, you can also face criminal penalties.

Key takeaways

• If a business doesn't pay payroll taxes, the IRS may assess a Trust Fund Recovery Penalty.
• The TFRP is equal to 100% of the taxes withheld from employees' paychecks but not remitted to the IRS.
• The IRS assesses TFRPs against individuals, including employees of the company. 
• If the IRS thinks you're responsible, they'll send a request to schedule a Form 4180 interview. 
• If the interview indicates that you're responsible, the agency will send Letter 1153. 
• Then, you have 60 days to appeal. Or, if you agree with the penalty, you can contact the IRS to pay it or make payment arrangements. 

If the IRS is investigating your involvement in unpaid payroll taxes, do not take this issue lightly. Get help from an experienced tax attorney or another tax professional licensed to represent you in front of the IRS. 

Why Is the IRS So Aggressive About Trust Fund Recovery Penalties?

The IRS is serious about this penalty because it's related to taxes that were withheld from an employee's paycheck but never handed over to the IRS. Essentially, the IRS sees unpaid employee payroll taxes as theft. Employers have withheld the funds from their employees' pay, and if they pocket the funds or use them for other purposes instead of sending them to the IRS, they are ostensibly stealing from both the employee and the government. If you, as an employee, get caught in the crossfire of an employer's unpaid payroll taxes, you can face serious financial and legal consequences. 

Payroll taxes include Social Security contributions, Medicare premiums, and federal income tax paid by employees through their paychecks. By law, employers must withhold these taxes from their employees' paychecks and send these amounts to the IRS, as well as matching amounts for the employer's contribution to Social Security and Medicare. The trust fund recovery penalty is only based on the withheld taxes; it is not based on the employer's matching portion of the taxes. 

 

Who Is Liable for Trust Fund Recovery Penalties?

The IRS may hold anyone liable who was responsible for paying the taxes and who willfully failed to do so. That may include business owners, corporate officers, partnership members, trustees, directors, shareholders, but it can also include employees and even third parties such as accountants, payroll service providers, personal representatives, lenders, creditors, bookkeepers, employees of payroll companies, and attorneys.  

To be held liable for a trust fund recovery, you must have willfully failed to pay the tax. But what does this mean? How does the IRS assess that you were responsible and that you willfully ignored your obligation? Keep reading for an overview of the process. 

Determining Liability for Trust Fund Recovery Penalties

Wondering if you might face personal liability for the Trust Fund Recovery Penalty? Then, use this tool to check out your risk. Note that this is not the only way that you may face personal liability for business taxes.

To assess responsibility for trust fund taxes, the IRS revenue officer doesn't just look at the person's job title. They take several factors other factors into account, and they assess whether or not the person does the following:

• Manages day-to-day company affairs.
• Signs checks for the business. 
• Refuses to sign checks and thus prevents the payment of the tax.
• Makes financial decisions. 
• Controls payroll disbursements. 
• Makes withholding deposits. 
• Prepares payroll tax returns. 
• Decides which bills get paid first.
• Hires or fires employees. 

Trust fund recovery liability has gone through multiple court cases, and while the courts pay close attention to the person's role in the company, they tend to pay particular attention to the issue of prioritization. If you decided that the company should pay other bills instead of payroll taxes, you may be considered liable. 

To assess liability, the revenue officer will request financial documents such as canceled checks or business records that may indicate who is responsible. If the business doesn't provide the information voluntarily, the IRS can issue a legal summons. 

What Is Willful Failure to Pay Payroll Tax?

To be held liable for payroll taxes and trust fund recovery penalties, you must have acted willfully. This doesn't mean that you must have demonstrated malicious intent to defraud the government. Willfulness just means that you made a voluntary and conscious decision not to pay the trust fund taxes. 

For example, if you decided to pay the electric bill instead of covering withholding, you may be held responsible. 

What Should You Do If the IRS Thinks You're Liable for a Trust Fund Recovery Penalty

If the IRS contacts you and says that you might be held liable for this tax, do not take the issue lightly. Again, these penalties are severe, and they can cost a lot of money. 

Ideally, you should retain legal counsel as soon as possible. If multiple people might be considered liable, they should each get their own lawyer. Otherwise, conflicts of interest may arise. 

What to Expect If the IRS Thinks You're Liable for Trust Fund Recovery Penalties

If the IRS thinks you might be liable for a trust fund recovery penalty, the agency will request an interview with you. The purpose of the interview is to get you to admit liability or reveal information that will establish your liability. 

You can go to the interview on your own, but to protect yourself, you should strongly consider bringing legal representation. If you don't voluntarily respond to the interview request, the IRS can summon you. At that point, failure to appear can lead to contempt of court. 

What Happens at a Trust Fund Recovery Interview?

Also called a Form 4180 interview, the trust fund recovery interview consists of a variety of questions designed to assess your role in the company and your potential liability for the trust fund recovery penalty. 

You will not receive this form in advance. Instead, the revenue agent will bring the form to the interview and fill it out based on your answers. The length and breadth of the interview can vary based on the situation. 

For example, the first page of Form 4180 helps the revenue officer decide if they should go forward or abandon the inquiry. The interviewer may also ask questions from different parts of the form depending on if you are an employee of the company or an employee of a third-party payroll service. 

In general, the questions are designed to determine your level of responsibility and decision-making in the company. Do you have the authority to decide how the company's money gets spent? Did you contribute to decisions that lead to the payroll tax not being paid? Did you know about the unpaid tax? Could you have done anything to change the issue? Here are some tips on how to avoid a trust fund recovery penalty interview. 

What to Expect After the 4180 Interview

If the IRS determines that you are liable for the Trust Fund Recovery Penalty, they will send Letter 1153 proposing a TFRP assessment against you. If you agree, you can sign Form 2751 saying that you consent to the penalty, and then, you can make payment arrangements to take care of the penalty. You may be able to set up an installment agreement or qualify for a settlement, but if the IRS believes you can pay in full, they may require that. If you don't pay, they can file a tax lien and potentially levy (seize) your personal assets. 

What Happens If the IRS Assesses a Trust Fund Recovery Penalty Against You?

If the IRS decides to assess a trust fund recovery penalty against you, the agency has 10 years to collect it. The IRS has the power to use a vast range of collection actions, including issuing federal tax liens, seizing your wages and other income, and levying your bank account or other personal and business assets. 

You cannot discharge a trust fund recovery through bankruptcy. If you have the assets to cover this penalty, the IRS will use any measures it can to reclaim the penalty. 

Bottom Line — What to Do If the IRS Thinks You're Liable for a Trust Fund Recovery Penalty

If the IRS contacts you about a trust fund recovery penalty, consult with a tax attorney or another tax professional experienced with this penalty. Talk with your tax professional before responding to the IRS's requests for information or interviews. Bring your tax professional to the interview and consider having them respond to the IRS's information requests. 

A tax professional can help you understand your liability, and they can minimize your risk exposure. If you are held liable for this penalty, they can help you negotiate arrangements with the IRS. 

Penalties for Unpaid Payroll Taxes

The trust fund recovery penalty is 100% of the unpaid payroll tax. For example, if the business failed to deposit $20,000 that it had withheld from employee paychecks for federal income tax, Social Security, and Medicare, the trust fund recovery penalty would be $20,000. If the unpaid withholding tax was $1 million, the trust fund recovery penalty would be $1 million. 

Additionally, there is a civil penalty (called the failure-to-deposit penalty) of 2 to 15% of the tax for making a late deposit. If you don't file the returns, the penalty for filing late is 5% of the tax per month, up to a total of 25%. Luckily, employees cannot be held responsible for all of these fees. Liability for late and unpaid taxes generally only applies to the business or its owner. 

Can You Go to Jail for Unpaid Payroll Taxes?

Generally, jail time only comes up in serious cases of tax fraud or evasion. But with payroll taxes, jail time can be a serious risk. There are many cases of business owners and other people going to jail for unpaid payroll taxes and trust fund recovery penalties. The standard jail sentence is up to five years. 

Jail time is not restricted to people directly involved with the company. For instance, a banker faced a possible jail sentence because he continued to give loans to a payroll company even though he know the company was not paying the payroll tax for its clients. 

Get Help With Trust Fund Recovery Penalty Cases

If you've been accused of being responsible for unpaid payroll taxes, you need to protect yourself. The trust fund recovery penalty is one of the IRS's harshest civil penalties, and you should not navigate this on your own. 

To get help, use TaxCure to search for a tax professional based in your local area and experienced with this penalty.

What Is a FIRPTA Withholding Certificate? 

When Should You Request a FIRPTA Withholding Certificate?

A withholding certificate allows the buyer to withhold a reduced amount from a property disposition subject to the terms of FIRPTA. Normally, when someone purchases a property from a non-resident alien or a foreign entity, they must withhold 15% of the realized amount and send it to the IRS. 

If they have a withholding certificate, they withhold nothing or a lesser amount. Applying for a withholding certificate can be complicated. To help you out, this guide explains when to apply for a withholding certificate and how to fill out the application. 

When Does the IRS Issue FIRTPA Withholding Certificates?

The IRS issues FIRPTA withholding certificates in the following situations:

1. When the amount that should be withheld is more than the seller's maximum tax liability. 
2. When reducing the withholding does not impede the IRS's ability to collect the tax from the seller. 
3. When the seller is exempt from U.S. tax on the gain realized from the transfer.
4. When the transferor or transferee agrees to pay the tax and provides a security to cover the outstanding liability.

The application process varies based on why you're applying. You can find detailed instructions in the following sections. 

Who Should Request a FIRPTA Withholding Certificate?

The transferee (buyer), their agent, or the transferor (seller) can request a withholding certificate. If the seller applies for a withholding certificate, they must alert the buyer in writing on the day of or the day prior to the transfer.

How to Apply for a FIRPTA Withholding Certificate

When you apply for a FIRPTA withholding certificate, you need to choose from one of six categories to explain why you're applying, and the application process varies based on which category you select. Here are the six options:

1. Transfers exempt from income tax or entitled to non-recognition treatment. 
2. Withholding based on the seller's maximum tax liability.
3. Installment sale rules.
4. Agreement to cover the tax payment with a security.
5. Request for a blanket FIRPTA withholding certificate. 
6. Other basis or criteria. 

If you're applying for a FIRPTA withholding certificate for reasons one, two, or three, you should file Form 8288-B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests). 

How to Fill Out Form 8288-B

This form requires the following details:

• Name and contact details of the transferor and transferee.
• Whether the applicant is the transferor or transferee.
• The name of the withholding agent – that's generally the buyer.
• Address where you want the withholding certificate sent.
• A description of the property.
• The date of the transfer.
• How the property is being used.
• If a U.S. income tax return related to the property was filed in the last three years.
• The amount of any U.S. taxes paid during the last three years.
• Why the withholding certificate should be issued — Again, when using Form 8288-B, the options include 1) exemption from U.S. tax or non-recognition treatment. 2) maximum tax liability less than the withholding amount, or 3) installment sale rules.
• If the transferor has any outstanding withholding from a similar transaction. 

Then, you need to note if the application was related to section 1445(e) 1, 2, 3, 5, or 6. 

Section 1445(e) Rules for FIRPTA Withholding Certificates

U.S. Code 1445(e) notes special situations related to U.S. real property distributions by corporations, partnerships, trusts, and estates. If your transaction does not involve any of these entities, it is not subject to the Code 1445(e) rules. 

If one of these entities is involved, you need to note if any of the following apply and then follow the applicable rules. Form 8288-B has boxes you can tick to indicate if your transaction is subject to these rules. 

1. Domestic partnerships, trusts, and estates must withhold 20% or the highest tax in effect for the tax year based on the portion of the gain realized by a non-resident alien. For example, if 15% of a domestic partnership's realized gain is allocated to a non-resident alien, the partnership should multiply 15% by the total realized gain and then withhold 20% of that number. 
2. Foreign corporations should withhold a tax based on the highest rate in effect for the year when they realize a gain from a U.S. real property distribution.
3. When domestic corporations distribute property to non-resident aliens, they should withhold 15% of the amount realized by the foreign shareholder. This rule only applies if the domestic corporation holds or has held U.S. real property during an applicable period of time.
4. The transferee (buyer/recipient) should withhold 15% of the realized amount if they receive a disposition of a partnership interest or a beneficial interest in a trust or estate. 
5. If a regulated investment company or a real estate investment trust (REIT) makes a distribution based on a realized gain in U.S. real property to a non-resident alien or a foreign corporation, the investment company or REIT should withhold 20% or the highest tax rate for that year. 

These are pared-down descriptions of the legal code. To ensure you are following the applicable rules for your situation, you should consult with a tax pro experienced with FIRPTA. 

How to Apply for FIRPTA Without Form 8288-B

To apply based on reasons four, five, or, six, you do not file Form 8288-B. Instead, you need to provide a written application, and the information needs to be labeled with the following letters and numbers. 

1. Info about why you're applying
   1. Whether you're applying based on category four, five, or six.
   2. If applying based on category four, (i) note if the agreement covers A) the transferor (seller's) maximum tax liability or B) the amount that would have otherwise been withheld (ii) note if the agreement and security instrument conform to the standard formats.
2. Details about the transferee (buyer) and transferor (seller)
   1. Name, address, and tax identification number of the person applying for the withholding certificate.
   2. If the applicant is the transferor (seller) or transferee (buyer).
3. Details about the property.
   1. Type of interest — for example, interest in real property, interest in personal property associated with real property, or interest in a domestic U.S. real property holding corporation. 
   2. Contract price.
   3. Date of the transfer.
   4. If the interest is in real property, the location and a description.
   5. Class or type and amount if the interest is in a U.S. real property holding corporation.
   6. Details about the following over the last three preceding tax years 1) Whether or not U.S. tax returns were filed related to the U.S. real property interest. If so, where the returns were filed. If not, why the returns weren't filed. 2) Amount of any U.S. income taxes paid related to the U.S. real property interest.
4. Information about why the withholding certificate should be issued. 

Then, you must also include additional information based on the category under which you're applying. 

Category Four (Agreement to Cover the FIRPTA Tax With a Security)

Include an explanation of the transferor's maximum tax liability or the amount to be withheld, a signed copy of the proposed agreement, and a copy of the security instrument you want to use. You can use a bond with surety or guarantor, a bond with collateral, or a letter of credit. Corporate transformers can use a guarantee. The IRS may accept alternative securities at its discretion.

Category Five (Request for Blanket FIRPTA Withholding Certificate)

A blanket FIRPTA withholding certificate applies to all of the transferors' property dispositions over the next 12 months. The applicant must provide an irrevocable letter of credit or a guarantee and enter into a tax payment and security agreement with the IRS. 

Category Six (Other Reasons for Requesting a Withholding Certificate)

You can apply under category six if you're using a non-conforming security. In this case, follow the instructions for category four, and then, describe the security and explain how it protects the government's interest. If you're using category six for any other reason, you should explain why the withholding certificate is justified. 

Who Should Sign the Request for a FIRPTA Withholding Certificate?

Finally, you need to sign the application. Individuals can sign their own applications. If a corporation or partnership is requesting an application, a responsible officer or a general partner can sign. With trusts and estates, trustees, executors, or equivalent fiduciaries can sign. 

If an authorized agent signs the application, you also must submit Form 2848 (Power of Attorney and Declaration of Representative). 

If you include information provided by another party, you should also include a written and signed verification from them that the information is correct. 

Where to Mail Applications for FIRPTA Withholding Certificates

Send applications for FIRPTA withholding certificates to this address:

Ogden Service Center 
P.O. Box 409101 
Ogden, UT 84409

How to Make Changes to a FIRPTA Withholding Certificate Application

You can amend a withholding certificate application by sending a statement to the address where you submitted your application. The IRS doesn't require you to follow a specific format, but you should include the following details:

• Name, address, and tax ID of the person making the amendment.
• Whether the person is the transferor (seller) or transferee (buyer).
• Date of the original withholding certificate application. 
• Description of the real property.
• Reason for requesting an amendment.
• Description of changes in the facts presented in the original application. 
• Signature.

When you submit an amendment, the IRS gets an additional 30 days to respond to your original application. In cases of significant changes, the IRS has 60 extra days. If the withholding certificate has been approved but not mailed back to the applicant, the IRS has 90 days. 

Requesting a FIRPTA Withholding Certificate to Buy Time

If the IRS believes that you have applied for a withholding certificate to buy extra time to submit the withholding, the transferee (buyer) will incur interest and penalties. Penalties and interest will accrue from the 21st date after the date of transfer until the payment is made. 

How to Request a FIRPTA Withholding Certificate If You Live Overseas

If you live overseas, you can request a withholding certificate using Form 8288-B as explained above. However, you should request to have the certificate mailed to the escrow or closing company. Note their information in Box 5 of this form. 

Applying for a FIRPTA Withholding Certificate Without a Tax ID

If the transferor (sell) or the transferee (buyer) does not have a tax identification number, they can request one when they apply for the FIRPTA withholding certificate. To request a tax ID, file Form W-7 (Application for IRS Individual Taxpayer Identification Number) with Form 8288-B. 

Then, mail the entire package to 

ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

The IRS typically takes 10 days to process requests for tax identification numbers. 

What to Expect After You Request a Certificate

The IRS normally responds to withholding certificate requests within 90 days of receiving the information. As indicated above, the processing time increases if you request an amendment to the application. 

How Long Does It Take to Request a FIRPTA Withholding Certificate?

The IRS estimates that it will take taxpayers 2 hours and 7 minutes to learn about the form and the FIRPTA law. Then, it estimates an additional 2 hours and 4 minutes to handle the recordkeeping. According to the IRS, it should take 1 hour and 7 minutes to prepare the form and 20 minutes to send the form to the IRS. 

The total time needed to apply for a FIRPTA withholding certificate should be about 5 hours and 38 minutes. Note that these are estimates and can vary widely depending on the situation. 

Get Help Requesting a FIRPTA Withholding Certificate

Applying for a FIRPTA withholding certificate can be a confusing process. But if you don't have the certificate, you will have to deal with withholding. In the absence of a withholding certificate, the buyer will have to withhold 15% of the seller's realized gain. As a result, the seller won't be able to receive all of the proceeds from the sale, potentially putting them into a financial bind.

You don't have to navigate this process on your own. Using TaxCure, you can search for local tax professionals who are experienced with FIRPTA requirements. Don't let FIRPTA rules hurt the success of your transaction — find help with FIRPTA today.

Cryptocurrency: Tax Implications of Selling, Exchanging, Holding, and Using Virtual Currency

Gains from cryptocurrency are taxed just like gains from any other property. There are tax consequences for selling, exchanging, and holding cryptocurrency as an investment. There are also tax implications of using cryptocurrency to pay for purchases or accepting virtual currency in exchange for goods or services. Failure to report crypto transactions on your tax return can lead to a variety of consequences. The IRS can assess penalties on your account, and the agency can even seize your crypto or other assets to cover your unpaid tax liability. 

If you have not reported cryptocurrency-related transactions correctly on your tax returns, you should try to get into compliance before the IRS contacts you. It's always better to reach out to the IRS proactively — especially if you're worried about potential criminal exposure due to tax fraud or evasion. The IRS recently added cryptocurrency to its Voluntary Disclosure Program. 

To help you out, this guide explains the tax implications of cryptocurrency in a variety of different situations. Then, it looks at what to do if you're behind on your reporting obligations.

How to Calculate Gain or Loss on Cryptocurrency

To calculate your gain or loss on cryptocurrency, subtract the basis of the cryptocurrency from its fair market value on the day you dispose of it. 

The basis is the fair market value of the crypto the day you received it plus any fees, commissions, or other acquisition costs. For example, if you purchase crypto for $900 and pay a fee of $100, your basis is $1,000. If someone gives you crypto worth $1,000, your basis is also $1,000.

When you dispose of the crypto, subtract the basis from its fair market value on the day of disposition. For instance, say you have crypto with a basis of $1,000 and you cash it out for $1,500 USD, you have a gain of $500. If you have crypto with a $1,000 basis and you sell it for $800, you have a loss of $200. 

Short- Versus Long-Term Cryptocurrency Gains and Losses

Long-term capital gains apply when you have owned the cryptocurrency for over a year. If you owned the crypto for less than a year, you incur short-term gains. The holding period starts the day after you acquire the crypto and ends the day you dispose of it. 

For example, if you receive virtual currency on Jan 1, 2021, and sell it during 2021, you have a short-term gain or loss. If you dispose of it on or after Jan 2, 2022, you have a long-term gain or loss. 

Short and Long-Term Capital Gains Rates on Cryptocurrency

Short-term gains are taxed at the same rate as your income. As of 2022, the rate can be anywhere from 10 to 37%. For most people, the long-term capital gains rate is lower than the short-term rate. 

As of 2022, the long-term capital gains rate is 0% if you're single with taxable income between $0 and $41,675, 15% if you're single with income between $41,676 and $459,750, and 20% if your income is over that threshold. The income brackets double for married couples filing jointly. 

When Do Capital Gains Apply for Cryptocurrency?

Capital gains don't just apply when you purchase and hold crypto as an investment. They can apply any time you acquire crypto and it grows or shrinks in value. 

For instance, if someone gives you crypto as a gift, and by the time you spend it, it has appreciated in value, you have a capital gain. However, if it had decreased in value, you would have a loss that you could use to offset your taxable gains. 

Receiving Virtual Currency for Goods or Services

If you receive virtual currency for goods or services, you must report the crypto as income. Use the fair market value of the cryptocurrency on the day you receive it. For example, say that you do web design for someone and they pay you with crypto worth $3,000. You must note $3,000 as income on your tax return. 

Because this is business income, you also get to subtract expenses from your income. That rule applies whether you pay for the expenses using U.S. currency, cryptocurrency, or anything else. 

To continue with the above example, imagine that while working on this project, you spend $100 USD on supplies but you also use $300 worth of cryptocurrency to buy software. You have $400 of business expenses which you can deduct from your business income. 

However, if the crypto you spent changed in value while you owned it, you may have an additional tax consequence as explained below. 

Paying for Services With Virtual Currency

When you pay for services with cryptocurrency, your gain or loss is the difference between the fair market value of the services and the adjusted basis of the cryptocurrency. 

Here's an example to illustrate this concept. Imagine that Joan receives $500 worth of cryptocurrency on March 1, 2021. On June 2, 2022, she uses all of this crypto to pay an accountant to do her tax return. The fair market value of the accountant's services was $800.

Joan's basis is $500. The fair market value of the services is $800. Her capital gain is $300. Because she had the crypto for more than a year, she has a long-term capital gain, and she needs to report this gain on her tax return. 

But now, let's say that Joan was paying the accountant to do her business taxes. Now, she has two tax-related events. She must report the $300 in capital gains, but she can also report the $800 accounting bill as a business expense. 

Selling or Exchanging Property for Virtual Currency

If you sell property for crypto, you calculate your gain or loss by subtracting the basis of the property from the fair market value of the crypto. For instance, say you own a building with a basis of $100,000 and you sell it for $150,000 of cryptocurrency, you have a $50,000 gain. 

When doing these calculations, you should use the fair market value of the crypto. But in situations where you cannot find the fair market value of the virtual currency, you should use the fair market value of the property. 

Crypto, Forks, and Airdrops

A fork is a change to the rules governing the blockchain that created the cryptocurrency. The chain splits at the fork, creating a new set of blockchain with the same history of the original cryptocurrency but moving in a new direction. Here are the tax implications of crypto forks.

Soft Forks Versus Hard Forks

Soft forks add new security features or functions to the crypto but don't create any new currency. As a result, you don't receive any income and you don't have to report anything on your tax return. Hard forks, in contrast, feature drastic code changes that create a new version of cryptocurrency and may come with tax implications as outlined below.

Hard Fork, Airdrop, and New Currency

If you receive new cryptocurrency through an airdrop following a hard fork, you have taxable income. But if a hard fork occurs and you don't receive any new currency, you don't have taxable income. An airdrop is a distribution of cryptocurrency to a taxpayer's ledger address. 

You should report ordinary income equal to the fair market value of the crypto the day you received it. If you eventually sell the crypto or use it to buy goods or services, you will need to calculate a gain or loss as explained above. Use the fair market value of the crypto the day you received it as your basis. 

Here's an example. Say that you have crypto worth $1000. A hard fork occurs and you receive new crypto worth $200. You must report $200 as ordinary income. A couple of years later, you exchange the crypto received in the airdrop for $500 USD, you now must report a capital gain of $300. 

Taxation on Gifts of Cryptocurrency

Gifts are not taxed. But to avoid taxation, the crypto must be given to you as a bonafide gift. For example, if your grandma gives you $1,000 of virtual currency as a birthday present, that is a bonafide gift with no tax consequences. 

In contrast, if your boss gives you $1,000 of crypto after you complete a bunch of work and says it's a gift, the IRS isn't likely to see that as a gift. In this case, you have received income and you must report it as such. 

Although there are no taxes for receiving gifts, you may face taxes when you sell, exchange, or dispose of the cryptocurrency. At that point, you should use the fair market value of the currency on the day you received it as the basis. Here are a few examples of what happens when you use gifted cryptocurrency. 

Tax Implications of Spending Gifted Cryptocurrency

Say that grandma gives you $1,000 of cryptocurrency. A year and a half later, you use the crypto to purchase $1,500 of services. You now have a $500 long-term capital gain. That is the difference between the value of the crypto the day you received it and the value the day you disposed of it. 

Tax Implications of Exchanging Gifted Crypto for US Currency

The math is basically the same if you exchange the gifted crypto for US dollars. Imagine that a couple of years after receiving the $1,000 virtual currency gift that you exchanged it for $2,500 USD. Now, you have a gain of $1,500. 

But what happens if you turn the crypto into USD the very day that grandma gives it to you? If it hasn't changed in value, you don't have a taxable gain or loss, and by extension, you don't have to report anything on your tax return. 

Tax Implications of Regifting Cryptocurrency You Received as a Gift

But what if you decided to give away the crypto? Again, you don't have to pay taxes on bonafide gifts. Say that you give grandma's $1,000 gift of crypto to your favorite nephew when it is worth $1,500. 

You don't have a taxable event, and your nephew now has crypto with a basis of $1,500. Note, however, that as of 2022, if you give away more than $16,000 to a single person, you must file a gift tax return.

Tax Rules for Donating Cryptocurrency

When you donate cryptocurrency to a charity, you receive two distinct tax advantages:

1. You don't have to report any gains on the crypto.
2. You get to claim a charitable deduction on your tax return. 

To qualify for this tax treatment, you must donate the crypto to a qualifying charitable organization. You should file Form 8283 (Noncash Charitable Contributions) if your total deduction for charitable donations exceeds $500. Here are details on how to calculate the value of your deduction.

Charitable Deduction for Donating Crypto Held Over a Year

If you have held the crypto for more than a year, your deduction is the fair market value of the crypto on the day you donate it.

For example, say that you purchased crypto two years ago for $1,000. Now it's worth $2,000 and you donate it to a qualifying charity. Your charitable deduction is $2,000. 

Although the crypto increased in value, you don't have to report or pay tax on the capital gain. 

Charitable Deduction for Donating Crypto Held Over a Year 

If you have held the crypto for a year or less, your deduction is the lesser of the basis or the fair market value on the day of the donation. Take a look at these examples.

Imagine that you purchased crypto for $1,000 and six months later, it is worth $1,500. If you donate the crypto to a qualifying charity, your deduction is $1,000 (you use the basis because it's the lowest number). 

In this case, it would actually be more financially advantageous to sell the crypto for $1,500 and pay tax on the $500 gain. Then, you can donate $1,000 to charity, claim the $1,000 deduction, and pocket the rest. Or, you can give all of the proceeds of the sale to the charity and take the corresponding deduction.

If the crypto fell in value and you donated it after holding it less than a year, the situation would be a little different. Say that you purchased crypto for $1,000 and six months later it was only worth $500. If you donate this crypto to charity, you can only claim a $500 deduction. 

In this case, you might be better off selling the crypto at a loss and using the loss to offset other gains on your tax return. If you like, you can still donate the $500 to charity once you've converted the crypto to cash.

Reporting Cryptocurrency Received as Charitable Contributions

Charities should report virtual currency contributions on Form 990 (Return of Organization Exempt From Income Tax) or Form 990-EZ (Short Form Return of Organization Exempt from Income Tax). Simply note the fair market value of the contribution along with your other contributions on line nine or line one of your respective return. 

If your charity sells, exchanges, or disposes of the virtual currency within three years after receiving it, you also need to file Form 8282 (Donee Information Return). You don't have to file this form if the donor signed Form 8283 to indicate that the donation was worth less than $500. 

Where to Report Cryptocurrency on Your Tax Return

By now, you have a sense of when crypto creates reportable income or capital gains, but you may still be wondering where to report cryptocurrency gains or losses on your tax return. Here is where you should report cryptocurrency based on the details of the transaction. 

• Crypto received as income but not for your business — Schedule 1 (Form 1040) (Additional Income and Adjustments to Income)
• Crypto received as revenue in your business — Schedule C (Form 1040) (Profit or Loss From Business)
• Crypto received as revenue for your farm/ranch business — Schedule F (Form 1040) (Profit or Loss From Farming)
• Crypto received as revenue for your partnership — Form 1065 (US Return of Partnership Income) 
• Crypto received as revenue for your S-corp — Form 1120-S (U.S. Income Tax Return for an S-Corp)
• Crypto received as revenue for your C-corporation — Form 1120 (U.S. Corporation Income Tax Return) 
• Crypto purchased, held, and sold as an investment — Form 8949 (Sales and Other Dispositions of Capital Assets)
• Crypto received for any reason that created a gain or loss when you disposed of it — Form 8949 (Sales and Other Dispositions of Capital Assets)

These are the most common places to report cryptocurrency on your tax return. But depending on the details of the transaction, you may need to report crypto in another spot. Consult with a tax professional if you need guidance. 

Cryptocurrency Question on Individual Tax Return

On Form 1040 (U.S. Individual Income Tax Return) there is a question that asks if you have received, sold, sent, exchanged, or acquired cryptocurrency during the year. You should answer yes to this question if you received cryptocurrency that is considered income, or if you disposed of cryptocurrency that created a gain or loss. 

However, if you just purchased cryptocurrency but you haven't had any other transactions, you can answer no to this question. Note that if you transfer crypto between your own accounts, that is a non-taxable event. Even if the exchange or platform sent you a tax document detailing the event, it's still not taxable. 

Crypto Assets and FBAR Reporting

If you have an aggregate balance of over $10,000 in foreign bank accounts, you must file a Report of Foreign Bank and Financial Accounts (FBAR). Here is an overview of the FBAR requirements so you can see if this rule affects you. 

At the time of writing, you are not required to include foreign accounts that only hold crypto assets on your FBAR. However, in early 2021, the Financial Crimes Enforcement Network (FinCEN) released a notice saying that it intends to request an update to the Bank Secrecy Act (BSA) which would require taxpayers to report these accounts. 

Be aware that the rules around cryptocurrency and FBAR are likely to change. Contact an accountant or other tax professional for guidance. 

What If You Forgot to Report Cryptocurrency Transactions on Your Tax Return?

As you can see, almost every crypto-related transaction has tax consequences. If you failed to report income or capital gains from crypto on your tax return, you underreported your income, and you may have a past-due tax liability. 

If the IRS finds out that you have income or gains from cryptocurrency, the agency can send you an assessment and a demand for payment. Plus, the IRS can add penalties and fees for underreporting your income. If you ignore the notices, the IRS can enforce collection actions such as penalties, federal tax liens, asset seizures, and even criminal charges in rare cases. In particular, the agency can seize your crypto as noted above. 

If you have unreported crypto losses, you may have missed out on valuable deductions and may have paid more income tax than you should have. In this situation, you may want to amend your returns to reclaim your overpaid tax liability. 

Get Help With Cryptocurrency and Taxes

If you have questions about how to report cryptocurrency on your tax return, if you haven't reported cryptocurrency correctly on your tax return, or if you have other issues related to crypto and taxes, you should reach out to a tax professional. 

Certified public accountants, enrolled agents, and tax attorneys can help you. Use TaxCure to find a local tax professional experienced with cryptocurrency issues today.

What Is FIRPTA?

Understanding FIRPTA Requirements and Exceptions

The Foreign Investment in Real Property Tax Act (FIRPTA) allows the IRS to tax non-resident aliens when they sell or dispose of U.S. real property. If you buy a home from a non-resident alien, you must withhold 15% of the proceeds and send it to the IRS. This deposit helps to ensure that the non-resident alien pays the tax. 

"Think of FIRPTA as an advance tax payment. If a foreign person sells their property at a profit, they earn U.S. sourced income, and they have to pay tax on that income. The FIRPTA deposit stays at the IRS until the seller submits a tax return. Then, if they owe less tax, they get a refund for the difference." 
— Marc Enzi, Enrolled Agent with Tax Solutions — Trusted Globally in Houston, Texas 

To help you understand FIRPTA requirements, this guide breaks down the essentials. 

Who Pays FIRPTA?

The seller owes the tax. They have earned capital gains on the sale of the property, and they are the ones who actually owe the tax. 

But the buyer must withhold the tax. If the buyer doesn't withhold the tax, they may incur penalties. Ultimately, if the buyer doesn't withhold the tax and the seller never pays it on their own, the buyer can become liable for the FIRPTA tax. 

How Does FIRPTA Apply to Buyers?

As the buyer, you must file Form 8288 (U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests) within 20 days of the sale. This is a short one-page form. You need to include your name and address, a description of the property, and the date of transfer. Then, you should note the amount subject to withholding and the total amount withheld. 

For example, if $300,000 was subject to 15% withholding, you would withhold $45,000 and you would send this amount to the IRS. 

You also need to attach copies A and B of Form 8288-A (Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests). This form also requires very basic information about you, the seller, and the property. 

How Does FIRPTA Apply to Sellers?

After the buyer submits the FIRPTA withholding and documents, the IRS will send copy B of Form 8288-A to the seller. The seller will use that document when filing their U.S. income return. 

Non-resident aliens should file Form 1040-NR (U.S. Nonresident Alien Income Tax Return). At that point, if the amount withheld was more than the tax due, the seller will receive a refund. 

Note that the rules are different when corporations distribute U.S. real property interests to shareholders. Foreign corporations should withhold 21% of their recognized gain. Domestic corporations should withhold tax on the fair market value of U.S. real property interests distributed to foreign shareholders if the distributions are due to redemption of stock or liquidation of the corporation. 

When Does FIRPTA Apply?

FIRPTA applies to all dispositions of U.S. real property interests by foreign persons. To help you understand when FIRPTA applies, let's break down these concepts.

What Is a FIRPTA Disposition?

A disposition includes sales, exchanges, gifts, transfers, exchanges, and any other transfers of ownership. 

What Is Real Property Under FIRPTA?

U.S. real property interests include the following:

• Real estate such as homes or commercial buildings. 
• Interests in real property such as mines, wells, or natural deposits in the United States.
• Personal property associated with the use of real property — for example, farming machinery purchased with a farm.
• Interests in domestic corporations unless the corporation never held U.S. real property while the seller owned their interest or during the last five years.
• Rights to purchase U.S. real property — for instance, if a non-resident alien has an option to buy real property and they sell it.

How Does FIRPTA Define a Foreign Person or Entity?

For the purposes of FIRPTA, a foreign person refers to a non-resident alien. A non-resident alien is a resident of a foreign country who is not a U.S. citizen. 

Resident aliens, also called green card holders, are not considered foreign persons under the terms of this act. The category of foreign person also includes foreign partnerships, foreign trusts, foreign estates, and foreign corporations that have not elected to be treated as domestic corporations under Section 897(i). 

How to Calculate FIRPTA Withholding

FIRPTA withholding is based on the amount realized by the sale. To calculate this number, you should add together the cash paid, the fair market value of other transferred property, and the amount of any liability assumed by the buyer. 

For example, say that you buy a property for $200,000 cash, and you take over the seller's $150,000 loan. You also receive additional property worth $50,000. When you add these numbers together, you have the amount realized on the sale — in this example, it's $400,000. 

Then, you multiply this number by the withholding rate of 15%. In this scenario, you would need to withhold $60,000. As of 2022, you must withhold 15% of the amount realized on the sale (10% for sales before February 17, 2016). 

FIRPTA on Property Owned Jointly by U.S. and Foreign Persons

If the property is jointly owned by U.S. citizens or residents and non-resident aliens, you need to allocate the non-resident alien's realized amount to calculate your withholding. In other words, the FIRPTA withholding is only based on the portion of the property owned by the non-resident alien. 

Say the realized amount was $400,000, and the foreign person had a 20% interest. Their realized amount is $80,000 (20% of $400,000). You should base the withholding on that amount. 

This rule even applies if the non-resident alien is married to a U.S. citizen. You still have to allocate the realized amount based on the non-resident alien's interest in the property. 

Exceptions to FIRPTA

There are several exceptions to FIRPTA. You may not have to withhold FIRPTA if any of the following apply:

• The sales price is less than $300,000, and you plan to use the property as a personal residence. Review the following section for more details.
• The seller realizes nothing on the sale. 
• The seller provides a certificate stating that they are not a foreign person. 
• The seller provides a withholding certificate indicating that a reduced amount should be withheld. 
• The seller submits in writing that they are not required to recognize a capital gain on the house (for example, if the seller is allowed to take advantage of the capital gains exemption for a personal residence). 
• The buyer or acquirer is the U.S. government, a state, a possession, a political subdivision, or the District of Columbia. 
• The disposition is subject to rules related to corporate or partnership interests or the lapse of an option. 

FIRPTA Rules for Personal Residences

To meet the residential requirement, the buyer must plan to reside in the property for at least 50% of the days the property was used by any person during the first two years after the transfer. For instance, if the buyer rents out the property for 200 days, they must live there for at least 100 days to meet this requirement. 

The buyer can also satisfy the residential requirement by having their family members live in the home. Qualifying family members include spouses, full and half-siblings, ancestors, and direct descendants. You don't have to consider days when the property was empty. 

Note that the residential requirement is based on intent. If the buyer's plans change unexpectedly, the IRS can be flexible as long as the buyer couldn't reasonably foresee the change in circumstances. 

Reduced FIRPTA Withholding

As of 2022, FIRTPA withholding can be reduced to 10% if you're buying a home as a personal residence, and the realized gain is over $300,000 but less than $1 million. 

Note that if the residential property is owned jointly by a non-resident alien and a U.S. resident, you must take the total amount of the realized gain into account when determining if you're exempt from FIRPTA or facing a reduced amount. 

For example, say that you purchase a property for $800,000, and only $250,000 is allocated to the non-resident alien. In this case, you can reduce the FIRPTA withholding, but you are not exempt. 

Even though the amount realized by the non-resident alien was less than the $300,000 threshold noted above, the total amount is greater than $300,000. As a result, you have a reduced withholding requirement, not an exemption. 

FIRPTA Requirements on Exchanges of Real Property for Stock

FIRPTA withholding rules do not apply if the seller exchanges property for stock in a U.S. corporation, as long the exchange meets the following criteria:

• Gain or loss does not have to be recognized because the exchange meets the requirements of IRC 351.
• The real property was exchanged for another real property interest which would be subject to taxation when disposed of. 
• The non-resident alien provides notice to the withholding agent that the disposition is not subject to gain or loss under the IRS's rules. 
• The withholding agent sends the notice and a cover letter to the IRS within 20 days after the disposition. 

However, FIRPTA withholding is required if the non-resident alien exchanges the property for stock in a foreign corporation and the foreign corporation treats the property as paid-in capital or a contribution to capital. Foreign corporations are not required to withhold for FIRPTA if they have elected to be treated as U.S.corporations under IRC 897(i).

When Was FIRPTA Passed?

FIRPTA became law in 1980. Although this law has existed for over 40 years, many taxpayers are not aware of it. The law has also become relevant for more taxpayers in recent years due to an increase in foreign ownership of real property. 

According to the National Association of Realtors, foreign investors purchased $57.7 billion in U.S. commercial real estate in 2021. That was a 49% increase over the previous year, and this number doesn't even take residential real estate into account. 

When more foreign investors own U.S. property, U.S. buyers become more likely to purchase property from non-resident aliens. As a result, more taxpayers have to deal with FIRPTA than they did in the past. 

Why You Need a FIRPTA Expert

FIRTPA specialist Marc Enzi explains, "FIRPTA can kill deals at the closing table when there are misunderstandings and people don't know how to handle it. Sellers don't understand that it's a tax deposit and not a tax. 

"If FIRPTA is not handled properly at closing, sellers may have trouble getting their refunds, and buyers may get a big penalty from the IRS. Having a FIRPTA expert on your team before closing helps to avoid any problems after closing." 

Get Help With FIRPTA

The FIRPTA rules can be complicated and confusing, especially when corporations or partnerships are involved. Whether you're currently buying a property from a non-resident alien, worried that you didn't withhold the correct FIRPTA tax, or dealing with a FIRTA liability, a tax professional can help you. 

At TaxCure, we make it easy to search for quality tax professionals in your area who are experienced with FIRPTA. To learn more, search for a tax pro today.

What Is a New York Tax Warrant? How to Avoid and Remove Tax Warrants

If you don't pay your NY state taxes, the New York State Department of Taxation and Finance can take all kinds of collection actions against you. One of the first collection actions is a tax warrant. Tax warrants open the door to other types of enforcement actions, and they can make it difficult to buy or sell property and take out loans. 

Is the NY DTF threatening to issue a tax warrant due to your tax debt? Is there already a tax warrant against you? This guide explains state tax warrants and how to get them removed. 

What Is a NY State Tax Warrant?

A NY tax warrant is a lien against your assets. It secures the New York State Department's interest in your assets when you owe tax debts. Once a warrant is in place, the state can move forward with asset seizures and wage garnishments. If you sell assets while there is a NY State tax warrant against you, the state has the rights to the proceeds from the sale. 

New York State can issue tax warrants for unpaid state income tax, but the Department can also issue warrants for unpaid business taxes such as franchise tax, sales tax, and/or withholding tax. 
 

How Do NY State Tax Warrants Work?

The NY DTF files the tax warrant in the county where you live or do business as well as with the New York State Department of State. The liens attach to your assets, making it very difficult to get loans or sell property. 

To give you an example, imagine that you want to get a line of credit against the equity in your home. When the lender looks into your situation, they will see a tax warrant against you. This means that the state has a stake in your home. The bank won't loan you the money unless the state agrees to subordinate or remove the lien. 

Now, imagine that you decide to sell a vehicle for $25,000. You owe $5,000 on a car loan, and there is a $10,000 tax warrant against you. When you sell the vehicle, you don't get to pocket the $25,000. Instead, $5,000 automatically goes to the car loan lender and $10,000 goes to the state for the tax warrant. 

Beyond that, a tax warrant is the first step toward seizing your assets. Once the state issues the tax warrant, it has the right to move forward with asset seizures, bank account levies, and income executions (garnishments).

NYS Tax Warrant Vs NYS Tax Lien

NYS tax warrants and NYS tax liens are effectively the same things. Many states use the word lien, but the New York State Department of Taxation and Finance uses the term warrant. They both refer to a lien against your assets. They both secure the state's right to your assets or the proceeds of the sale if you sell your assets. 

NY Tax Warrant Vs IRS Tax Lien

Again, a tax warrant and a tax lien are the same things. They both do the same job. They secure the tax authority's interest in your assets. If you have $10,000 or more in tax debt, the IRS can issue a tax lien. The NY DTF doesn't publish a number for when the state will issue a tax warrant. It just says that if you don't resolve your tax debt in a timely fashion, the state can issue a tax warrant. 

An IRS tax lien stays in place for 10 years. The IRS generally cannot collect tax debts that have been assessed more than 10 years ago. In New York State, tax warrants last for 20 years. If you don't take action, the warrant will exist for two decades. 

IRS tax liens and NY tax warrants are both precursors to tax levies or asset seizures. Generally, the warrant or lien must be in place before the IRS or NY State can take your assets. However, if the IRS or NYS believes that the tax collection is in jeopardy, they may be able to move forward with a seizure without issuing a warrant/lien.

Can You Go to Jail for a Tax Warrant?

No, you will not go to jail if the NY DTF issues a tax warrant against you. A tax warrant is like a tax lien. It is not the same as a warrant for your arrest or a bench warrant. 

The word "warrant" refers to a document issued by a government authority to give the police or another body the right to carry out an action. For example, an arrest warrant is issued by the courts, and it gives the police the right to arrest you. Similarly, a tax warrant is issued by the NY DTF, and it gives the state a legal stake in your assets. 

This doesn't mean you should ignore a tax warrant. They are very serious. Again, once there is a tax warrant against you, the state can claim the proceeds when you sell an asset. It can also move forward with a seizure of your assets. But don't worry — you can't be arrested for a tax warrant. 

New York State Tax Lien Search

Tax warrants are public records. The NY DTF publishes a public database of tax warrants and updates it twice a week. If you want to see if there is a tax warrant against you, check out the NY State Tax Warrants search tool. You can search by your name, and you can also narrow down the search by the county where the warrant was filed, warrant ID number, docket amount, docket date, and type of tax. 

What If I Don't Resolve the Warranted Balance?

If you don't resolve the warranted balance, the tax warrant will continue to stay in place. As explained above, a tax warrant makes it very difficult and potentially impossible to get loans. It also means that the state will take the proceeds when you sell your assets. Even worse, the NY DTF can move forward with other collection actions, including taking your assets, seizing the funds in your bank account, or garnishing your paycheck. 

When Do New York State Tax Warrants Expire?

New York State Department of Taxation and Finance tax warrants stay in place for 20 years. During this 20-year period, your ability to sell or transfer assets or borrow money will be severely compromised.

How to Release a NYS Tax Warrant 

To get a New York State tax warrant release, you must pay the tax bill in full. If you set up a payment plan, the NY DTF won't pursue additional collection actions against you, but the warrant will stay in place until you have fully paid off your state tax bill. 

You may also be able to get the warrant released if the New York Department of Taxation filed it in error. You should contact a tax pro to help you. Once the tax has been paid, the NY DTF will notify the county clerk and the Department of State so they can remove the tax warrant from your records. 

What Is a Satisfaction of Judgment?

Once you pay off the New York State tax warrant, the DTF will issue a Satisfaction of Judgment to the county clerk. This shows that you have paid the tax liability. The state will also send you a copy. If you need a Satisfaction of Judgment letter before the state issues it, you can request a Notice of Pending Warrant Satisfaction if one of the following applies:

• You have given the NY DTF guaranteed funds (certified check, bank check, wire transfer, money order, or cash) for the full payment. 
• You have paid in full by credit card.
• You have made a payment that's posted in the NY DTF system, and you have proof that it has cleared your bank account. 

For example, if you're trying to take out a loan and you need to prove that you have taken care of this lien, you will need a Satisfaction of Judgment or Pending Warrant Satisfaction. Or, if you're trying to sell the property and you need to prove that it is not encumbered, you may also need one of these documents. 

Get Help With New York State Tax Warrants

Tax warrants can be financially devastating. They can create economic hardship. They can also lead to even worse involuntary collection actions. If you're dealing with a tax warrant, you need to reach out to a local New York tax pro. 

Using TaxCure, you can search for tax lawyers, CPAs, and enrolled agents in your area, and you can customize your search to ensure they have the experience you need. Then, review their profiles and give a tax pro a call. They'll talk with you about your state tax warrant and help you decide the best steps forward for your situation. TaxCure makes it easy to find the best New York tax resolution firm for your unique situation. 

You don't have to deal with the NY DTF on your own. You can get help from an experienced professional — contact a NY State tax pro today.