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Philip H Karter

Philip Karter’s Answers

11 total


  • Do I need to file a petition with the US Tax Court?

    I was divorced in 2010 and awarded $500/wk in ch support for our 2 kids. I never asked for alimony but my decree states that $150 is for ch support and $350 is for maintenance as long my ex continued to pay the rest of our Ch13 BK pmts. When t...

    Philip’s Answer

    The general rule is that a payment is fixed as child support only if the divorce decree or separation instrument designates it as such. Therefore, child support generally may not be inferred from intent, surrounding circumstances, or other subjective criteria. However, there is a limited exception to this general rule if any amount specified in the divorce or separation instrument is to be reduced (1) upon the occurrence of a contingency specified in that instrument relating to a child (e.g., attaining a specified age, marrying, dying, leaving school, or a similar contingency) or (2) at a time that can clearly be associated with that kind of contingency, an amount equal to the amount of such reduction is to be treated as an amount fixed as payable for the support of children of the payor spouse.

    Because the Tax Court has dealt with this issue by applying the above standards stringently, you are unlikely to succeed there under any other circumstance. That said, without more detail or research, it is difficult to tell whether your circumstances might fit within the "similar contingency" standard of the exception that could allow you to prevail in court. In any case, and putting the possible merits of your case aside, be advised that the deadline for filing a petition in Tax Court petition is absolute; it must be filed within 90 days from the date of the Notice of Deficiency. Given the amount of the proposed assessment, you could use the simplified Small Tax Case procedures for filing a a case in the Tax Court. If you don't file a petition within 90 days to preserve your rights to contest the proposed deficiency, your only recourse to dispute the IRS' determination will be to pay the tax and sue for refund.

    If insufficient time remains before the expiration of the 90-day filing deadline for you and your legal adviser to determine whether you have a meritorious argument that at least some of the amounts treated as alimony fit within the exception described above, you should consider filing the petition protectively to preserve your ability to litigate the matter in Tax Court. Should you thereafter determine that the claim is not worth pursuing, you can always voluntarily dismiss the petition.

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  • What to do I'd I default on my irs tax installment

    I been sick need 2 week extension

    Philip’s Answer

    It takes a while for a nonpayment of an installment obligation to trigger a default notice from ACS (The IRS' Automated Collection System). The best thing to do is make the late payment as soon as you can and accompany it with a cover letter explaining the circumstances for the delay. Thereafter, continue to make the regular payments as scheduled under the installment agreement. That will likely be the end of it. However, in the event you do receive a default notice for the late payment, you will want to call ACS (800-829-3903) to explain what happened. It is highly likely you will be able to resolve it with a simple phone call. Expect a medium to long wait (up to 60 minutes or more) to have your call put through.

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  • I need someone to help with IRS tax liens that are against my property. Do I hire a private tax lawyer or Tax Help Assoc.

    We have a small business and owe a lot of fed. back taxes. Closing the business in Nov. and wanted to sell our home. Liens are against our home and prevent us from selling our house. Need offer in compromise to get us out of this so we can move...

    Philip’s Answer

    Just to expound on attorney Lorenzana's response, although lien releases are possible to negotiate before a tax liability is paid in full, the larger the tax liability, the more difficult it is to get that lien release even in an offer in compromise situation. The reason for this is that once a notice of federal tax lien or NFTL, is filed, that filing entitles the IRS to a legal priority against other subsequent creditors to collect against the taxpayer's property. Once the lean is released, the IRS loses that lien priority against other creditors which it is hesitant to do, particularly if it appears that the tax debt is likely to be unsatisfied by the assets against which the lien attaches.

    All that said, it is still worth trying to negotiate the lien release without full payment, even on a large debt, particularly if you can craft a compelling argument that release of the lien will help facilitate the collection of tax. Because you have indicated you are trying to sell your home, there is a reasonable likelihood you can negotiate the lien release to facilitate a sale by agreeing that your leftover sale proceeds (i.e., your equity) will be used to pay down the tax debt, or in the case of an offer in compromise, to pay off an agreed-upon settlement amount. Without knowing the specifics about the size of your debt, the equity in your home, and your other assets or financial situation, it is difficult to prognosticate with any degree of precision about the range of settlement alternatives that may be available to you.

    RS Form 12277 is the form to use to submit a request for the lien release. You can attempt to handle this yourself, but a lawyer experienced in dealing with the IRS Collections Division will likely increase your chances of success.

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  • Who is the best lawyer in the southern NH area to help with a difficult IRS situation?

    Important documents were filed with the IRS long ago, they say they were lost, and now they are garnishing wages and wanting more than can be given that would cause a grave hardship. Who can help?

    Philip’s Answer

    Scott Harris of McLane, Graf, His bio is at http://www.mclane.com/attorneys/attorneys/bio.aspx?id=36.

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  • Large IRS Debt turned over to a Revenue office

    I owe a $200,000 IRS debt from 2000-2004, and I’m getting close to the statute of limitations. For many years, I've been on installment payments of $300.00 a month as it's all I could afford —I had a complete reversal of fortune. I recently got ...

    Philip’s Answer

    The generation of a CP 523 notice is usually the result of a default on an installment agreement, however it is true that a notice can also be sent for the purpose of obtaining updated financial information. That being said, and assuming you have not defaulted on making one or more payments when due, providing the IRS with updated financial information showing that your circumstances have not changed for the better should eliminate any collection activity. You can find more about how the service handles these situations in the Internal Revenue Manual. A relevant discussion can be found at http://www.irs.gov/irm/part5/irm_05-014-011.html.

    The statute of limitations on collections is 10 years. Absent an extension of the statute (i..e., assuming you filed your 2000, 2001 and 2002 returns timely), the collection statute on those years should already have run. At the very least, you should check on how much of the outstanding debt is attributable to open tax years (probably 2003 and 2004). The assignment to a Revenue Officer at this stage of the game is probably more due to the expiring statute of limitations than the size of the liability. I wouldn't attribute too much significance to the reason you were given when you called, as a good deal of misinformation is often communicated by IRS personnel responding to telephone inquiries about IRS collection notices.

    Finally, an assignment of a collection matter to a Revenue Officer is not necessarily a bad thing because you can have one point of contact rather than having to deal with multiple representatives responding to telephone inquires about the ACS (Automated Collection System) process. Oftentimes, I have found that working with a reasonable RO is the quickest way to resolve a situation like this. However, in some instances, where the RO has been less than reasonable, I also have engaged the assistance of the local office of the Taxpayer Advocate to help facilitate the desired result.

    I agree with those who indicate that having a representative who can advocate on your behalf in dealing with the IRS is the best way to go here. In the worst case scenario, if collection action appears imminent, a representative can help you navigate the various procedural options, including appeal rights and/or seeking relief through the Collections Due Process (CDP) procedure.

    Finally, a discharge of the tax deficiencies through the bankruptcy process remains an option, but if that is the only reason you would be filing a petition, it seems premature at this point.

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  • Is there anything I can do to about the certified IRS letter I got saying my ex husband and I owe over $1000?

    For the tax year of 2011 my ex husband filed joint taxes (at that time we were still legally married, but separated), and apparently did not claim all of his income. He was the only one working, the one who filed the taxes, and had the refund dir...

    Philip’s Answer

    As attorney Campbell has suggested, your unfortunate situation appears to fit the criteria for innocent spouse relief. Now that you have received notification from the IRS, you should promptly file Form 8857 with the IRS to get the ball rolling on extricating you from this liability. You can find more information about qualifying for innocent spouse relief in Q&A format at http://www.irs.gov/Individuals/Innocent-Spouse-Questions-&-Answers. A capable accountant or lawyer should be able to assist if needed. Finally, whenever communicating with the IRS, be sure to carefully document all mailings by sending certified, return receipt requested.

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  • I am forming a new LLC , it consists of three equal share partners. How do we decide if we should file for s-corp status?

    If we should file to be taxed as an s-corp, can we wait until we start selling and collecting revenue or is it better to elect for this at the same time we file for the LLC? We are a putting out a line of organic food products. Many Thanks

    Philip’s Answer

    Before committing yourselves to setting the company up as a pass-through entity, you should consider the significant benefit available to entrepreneurs in the American Taxpayer Relief Act of 2012 for small businesses formed in 2013 as C corporations. To briefly summarize, the Act provides an exception to the normal C corporation rule of “double taxation” by excluding 100% of the gain on the sale of what’s known as “qualified small business stock.” A business that qualifies for this exclusion is therefore only subject to the corporate tax rate, which tops out at 35%, a maximum rate lower than the 39.6% maximum rate applicable to individuals. A good summary of the topic was posted by one of my colleagues earlier this year, which you can find at http://taxblawg.net/2013/04/22/to-minimize-taxes-for-years-to-come-consider-incorporating-your-business-in-2013/. This small-business friendly legislation is definitely worth a closer look as it would appear to fit your circumstances.

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  • Tax filing and FBAR requirements

    Hi - I have been filing tax since 2010 without filing the FBAR, as I was not aware of any such regulation. So, I have missed on filing the same for the years ended 2009,2010 & 2011. Now, that I know of the filing requirements I do want to be compl...

    Philip’s Answer

    • Selected as best answer

    Your question does not specify whether, in failing to file FBARs for these years, you also did not report taxable income attributable to the undisclosed foreign accounts. This is an important consideration in planning the best course of action. To explain the issue to other readers, the acronym “FBAR” stands for Foreign Bank Account Report, a form that must be filed each year a taxpayer has a financial interest in one or more foreign bank accounts, brokerage accounts or other type of foreign financial accounts, and the total value of all such foreign accounts exceeded $10,000 at any time during the year to be reported. FBARs are filed on Form 90-22.1 separately from a tax return and are due on or before June 30th of the year following. The FBAR filing requirement includes not only accounts over which you are the owner, but also accounts over which you have authority to conduct transactions on behalf of the account owner.

    If you failed to file your FBARs but reported and paid the taxable income derived from the foreign accounts, the corrective course of action is fairly straightforward. Delinquent FBARs should be sent to the Department of Treasury, P.O. Box 32621, Detroit, MI 48232. You should attach a statement explaining why the reports are filed late. If there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns, the IRS's current practice is not to impose a penalty for the failure to file the delinquent FBARs.

    If the failure to file FBARs also involves non-reporting of foreign account income, the situation is more problematic. The level of severity increases substantially if the failure to file was willful, which in extreme cases can expose the taxpayer to criminal penalties including incarceration.

    Since 2009, the IRS has offered non-filers the opportunity to participate in voluntary disclosure programs known as OVDP. The most current version of the program initiated in 2012 is less generous than its predecessors in terms of the penalties imposed, but can still avoid substantially greater penalties (including the fraud penalty) and alleviate the risk that IRS detection will lead to criminal prosecution. Although a voluntary disclosure will not automatically guarantee immunity from prosecution, the IRS will not recommend it in such instances. The OVDP is not available for taxpayers against whom the IRS has already initiated an examination, even if the examination is unrelated to the undisclosed foreign accounts.

    To participate in the OVDP, a taxpayer must (i) provide copies of previously filed original federal income tax returns for tax years covered by the voluntary disclosure, (ii) file amended income tax returns for the same years detailing the amount and type of previously unreported income, (iii) file original or amended offshore-related information returns and FBARs for the same years, (iv) pay a variety of tax penalties as well as the delinquent tax and interest due, and (v) meet certain other submission requirements. Taxpayers who are unable to make full payment of the amounts due under the OVDP can request the IRS to consider alternative payment arrangements, which the IRS may consider if the inability to fully pay is genuine.

    Some taxpayers have chosen to approach the FBAR non-filing problem by making what are known as "quiet disclosures," which are the filing of amended returns and delinquent FBARs reporting the foreign accounts and the income associated with those accounts, and paying the tax with the amended return. The IRS has made it plain that it does not look favorably on the quiet disclosure approach by cautioning that amended returns reporting increased income may still be selected for examination. In such cases, the reduced penalties available under the OVDP are not available and the IRS may still recommend criminal prosecution.

    We are in your vicinity if you would like to discuss further.

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  • What is typical timeline for appeal of a Tax Court decision (summary judgment) to US Court of Appeals ? When is brief due ?

    It is a non-deficiency case.

    Philip’s Answer

    • Selected as best answer

    You already have your answer regarding the time for filing your appeal. There are no specific deadlines regarding the filing of briefs in the Appeals Courts. A briefing schedule has to be set and the average time lag varies from circuit to circuit. Also, if you are the appellant, the other side will have 30 days to respond to your brief, and then you will have 15 days to file your reply. After the briefs are filed, assuming oral argument is requested and granted, that may not occur for another 3 - 6 months.

    Although the Tax Court has a procedure for taxpayers to handle small matters for themselves, appeals courts generally frown on self-representation. Unless the matter involves de minimis amounts where the cost of an attorney is disproportionate to the amount in dispute, I agree with those who suggest that a capable attorney can significantly enhance your possibility of succeeding in the appellate court.

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  • I had a Federal tax lien placed on me in June of 2001 and have not paid it. will it be dropped after ten years.

    I hired JK Harris to resolve my tax problem. All they did was get a lien placed on me in 2001. A tax attorney informed me that federal tax liens stay effective for ten years and if not renewed they are dropped. This attorney also said that the ...

    Philip’s Answer

    I believe you asked a similar question to which I provided the following response:

    You actually don't need a copy of the tax lien to determine when it expires. A federal tax lien expires, by operation of the Internal Revenue laws, after it is no longer collectable. The term "collectable" in this context means that the IRS has a legal right to proceed against a taxpayer administratively or in court in an attempt to collect a deficiency. There are two ways a tax lien can expire. The first is that the taxpayer’s liability is satisfied in full. The second is from the passage of time.

    With regard to the second way mentioned above, the general rule is that a tax deficiency can be collected up to 10 years after the tax was assessed. A federal tax lien can only first be filed after an assessment is made and notice and demand for payment are served upon you. Because you have indicated that the federal tax lien was recorded more than 10 years ago, it is possible that the time in which the IRS may legally collect has now expired. This assumes that no court actions were brought by either you or the IRS, in which case the collection time limit is suspended while the matter is in court. The 10-year collection limit also assumes you did not voluntarily agree to extend the statute of limitations (i.e., the time limit) on collections.

    If the lien is no longer collectable because of the passage of time, you are entitled to (and should) request a release of the lien. In fact, the notice of tax lien is supposed to be released within 30 days after it has become legally unenforceable. In the real world, this timely release rarely occurs, so taxpayers entitled to a lien release should proactively request one. The best place to start is the IRS Special Procedures Function (or SPF for short). SPF routinely handles the filing and release of federal tax liens, as an arm of the IRS Collections Division. If you have received correspondences from an IRS Revenue Officer over time relating to tax collection efforts, you can contact that individual and request to be put in touch with the local or regional SPF office to effectuate the lien release.

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    A few additional comments in light of the further details you have provided in this question.

    1. Renewals of liens are only necessary if the collections statute is extended. That doesn't sound like the case here.

    2. Traditionally, the IRS will attempt to reduce an expiring tax assessment to judgment to avoid the expiration of the collection statute. You should make sure that this did not occur by means of a default judgment or otherwise. Although it's possible that the file was coded as uncollectable and a judgment was not pursued, that tends to be the exception rather than the rule.

    3. Assuming your tax deficiency arose somewhere between 1998 and 2001, the prediction that your liability grew to $58,000 from the original amount seems greatly inflated. Ten years of interest should have approximately doubled the liability and failure to file and failure to pay penalties would have capped out at 25%. If the liability is now uncollectable, it doesn't matter, but if there are collections issues remaining, you should consider getting someone to do a detailed interest and penalty calculation for you to make sure the total TP&I liability isn't overstated.

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