This article describes a common experience of many taxpayers. It also illustrates that some situations can be handled without a professional. Knowing when you need professional help is the key. http://syracusepoststandard.ny.newsmemory.com/publink.php?shareid=20cd2d031
A New York appellate court affirmed the state tax department’s position that environmental testing and monitoring services are subject to sales tax. The dispute involved payments made by Exxon Mobil to contractors between 2000 and 2004 for testing and monitoring on properties affected by petroleum spills
The Tax Law distinguishes between services related to maintaining, servicing or repairing property, which are taxable, and services adding to or improving such property by a capital improvement, which are exempt. There was no dispute that a purchase of services related to the remediation of spilled petroleum was taxable. Although the testing and monitoring services at issue were allegedly intended to ascertain the condition of the affected property, rather than to directly remediate the petroleum spill, the Court found them to be an “integral part of” the taxable remediation efforts. Exxon Mobil Corp. v. State of New York Tax Appeals Tribunal, 2015 WL 919788, 2015 N.Y. Slip Op. 01840 (3d Dep’t March 5, 2015)
The line between taxable and nontaxable services is not always clear. An otherwise taxable service performed on a site in close conjunction with a capital improvement might be considered a constituent part of a capital improvement and nontaxable. A portion of a taxable service may also be considered nontaxable because it is an integral part of a capital improvement
The distinction between taxable and nontaxable remediation services can be very fact-specific. The nature of the project, the purpose for the remediation, and the time between the remediation work and the capital improvement may all be factors when determining whether a particular activity is taxable. In addition, how these services are addressed in governing contracts, work orders, and correspondence may have an impact on whether such services are found to be taxable or nontaxable in a development project
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I was very pleased to see that the CNY Business Journal had published an article in this week’s issue that I originally posted as a two-part series on my blog. The information is certainly still relevant and worth reading again. You can find the entire article on our firm’s website at: http://bhlawpllc.com/wp-content/uploads/2015/02/Paul-Predmore-Tax-Article-CNYBJ-2-2-15.pdf
Very recently the IRS Taxpayer Advocate warned Congress that the IRS’s workload continues to increase while its funding is decreasing. The Taxpayer Advocate is concerned that under these circumstances, the IRS is not able to do the job it is tasked with doing. While some may smile when hearing such news and think– “Good, the less IRS the better!”– be careful what you ask for.
As the funding for IRS operations is reduced, services that we have come to expect from the IRS are vanishing as well. Reaching a local IRS agent by telephone is fast becoming a thing of the past. More and more often, matters are being assigned to 800-number call centers where you can be on hold for 30 minutes or more before reaching a live person. If you need to call back with more information, you endure the same wait and end up with a different person.
Delays are part of the process when dealing with a tax problem but now those delays seem longer than ever. With outstanding obligations accruing interest and sometimes penalties, delay can be costly. The IRS always encourages voluntary payments while an issue is being reviewed and given these delays, sometimes that can make sense.
As the IRS faces the same economic challenges of any other business, having an experienced advocate that knows where to go, knows how to streamline the process, and knows how to manage the ever changing bureaucratic landscape is important.
I am often asked: “If I can’t pay the tax due with my return, am I better off not filing until I have the money to pay?” While the situation presents some complexities, the advice is simple: it is always best to file your tax returns on time even if you can’t pay. Such filing eliminates the failure to file penalty (which, along with the failure to pay penalty, can grow to as much as 25% of the tax due) and the possibility of the much more serious criminal consequences for not filing. (These are the IRS consequences; each state has similar rules for their returns as well.)
But what happens if I didn’t file a tax return, or worse yet, several returns? Here’s the good news, it’s not hopeless. Many people don’t file their tax returns. The reasons for non-filing can run the gamut from serious medical or personal issues, natural disaster, economic reversal, business failure, and so on. (I intentionally exclude illegitimate reasons for non-filing as the consequences for those are much different.) In my experience, if someone hasn’t filed for one year, typically they haven’t filed for several years. This prolonged period of non-filing typically starts with one of the reasons listed above, but the repeated failure to file results from the uncertainty – – really the fear — that “coming back into the system” will be too costly and potentially devastating. Those that do not file one or more returns very often find themselves in what seems an inescapable and unsolvable predicament.
Fixing a non-filing situation is not always pain-free but there are options for non-filers and certain choices are much better than others. Most importantly, for at least 25 years it has been the IRS’ policy not to press criminal charges for non-filers who voluntarily file their past due returns. Returns are considered filed “voluntarily” as long as the IRS hasn’t commenced any investigation or contacted the non-filer before the returns are filed. So the best option for the non-filer is to get the returns filed – before the IRS asks you to file them. (Even when the IRS asks for unfiled returns, it is not automatic that criminal charges will be asserted.)
What if you haven’t kept your records (W-2s, 1099s, etc.) to prepare your returns? Don’t let that be an excuse. All of that information is available from the IRS. In fact, if you plan to file returns for the past several years it is a good idea to request that information before filing just to be sure you report everything that the IRS already knows about. Once the return(s) have been filed, there are three basic options to then consider in dealing with the amount due: full payment (all at once or over time), settlement through an offer in compromise, or having the debt found to be “currently not collectible.” If penalties are been imposed after the return is filed, which is very likely to be the case, those additional charges may be removed if the taxpayer can demonstrate that the late filing was due to reasonable cause and not willful neglect.
Nonfilers that I have worked with are almost universally relieved to learn that the heavy burden of not being in noncompliance can be resolved, often with consequences much less severe than ever envisioned.
After representing both the IRS (for over 4 years) and then taxpayers that have IRS and NYS tax issues (for over 22 years), it seems I have seen and dealt with just about every tax problem that a business or individual can face. Most taxpayers that I have worked with come to me with a problem that typically falls into one of the following categories:
- I haven’t filed a tax return for several years and I want to set things right
- I owe more than I can possibly pay and I’ll never dig out of this mess
- the IRS or NY just levied my bank account or garnished my pay and I can’t pay my bills
- I just received an audit notice and I don’t know how best to proceed
- I have fallen behind in making payroll tax deposits or sales tax payments
While all of these situations, and others like them, are serious and rightfully create real anxiety and concern, most of these tax problems have very manageable solutions. In fact, when these situations arise, oftentimes the IRS and NYS are looking for a solution as well.
So what is the best way to deal with a tax problem? Essentially it’s the same way you deal with other problems you may face. If you had an unusual health concern or your car broke down what would you do? You would look for someone (a doctor or a mechanic) who knows what s/he is doing, you would find out and understand your options, and then you would commit to do the things you need to do when the advice is given. You should follow the same course of action when you face a tax problem.
The Tax Advocacy Practice Group at Green & Seifter has decided to set up this blog as a forum to disseminate some practical information about what some of the options are when a tax problem arises. Of course, everyone’s situation is different and the specific facts and circumstances of each person’s (or business’) situation must be known before any final decision about what to do should be made. In this blog, a member of our Tax Advocacy Practice Group will consider some of the common situations that we see in our practice and share some of the strategies to consider when facing either an IRS or NYS tax problem.