Federal, state and local tax assessments and penalties can be avoided or diminished under certain circumstances, and where properly addressed by counsel. The attorneys at RMI Law have had success in minimizing assessments and penalties for our clients, a few examples of which we include below.
941 Penalties/Payroll taxes
Companies are required quarterly to make deposits and file 941 returns for federal taxes withheld from employees. Failure to turn over payroll taxes to the IRS opens up both the company and its responsible management to full assessment for the amount of the unpaid taxes, plus penalties and interest. Because the responsible management’s personal liability equals that of the company, it is sometimes referred to as a “100% penalty”. Where the company has not turned over payroll taxes for some time the penalties can be severe.
RMI Law attorneys were called in to assist a southeastern Pennsylvania manufacturing company that had neither filed its payroll tax returns nor turned over payroll taxes to the federal or state authorities for a period of three years. Approximately one million dollars in penalties and related interest was assessed by the IRS. Following a full investigation of the unique circumstances surrounding the failure to report and pay, we were able to negotiate an agreement whereby the payroll taxes were paid, and the penalties and their associated interest were abated (removed). We were also able to file a nunc pro tunc (out of time) appeal of state penalty assessments for one year in question, which had not been timely appealed by the company, and obtain abatement of the state penalty for that year.
A client of RMI Law was audited regarding a foreign trust for which she was a beneficiary. With the settlor (creator) of the trust having passed away, the IRS initially threatened our client with a § 3520 non-reporting penalty for failing to report the assets of the trust, which could amount to one third of the assets in the trust. Thereafter, they assessed the taxpayer on the full amount of the trust assets distributed to her, in addition to assessing her penalties and interest. Between the potential assessments, penalties and interest, the taxpayers faced liabilities in the millions of dollars.
Following a full investigation, RMI Law attorneys were able to reach agreement with the IRS to forego any 3520 reporting penalty. Because the trust documents were all in a foreign language, we hired an interpreter with extensive foreign banking experience who was able to decipher the trust records and document the contributions made to the trust (which would be a non-taxable “basis”). We were able to reach agreement whereby the Service would abate the non-payment penalties assessed taxpayer and recalculate the amounts owed based on the settlor’s contributions and a prior partial tax payment. The net result to the client was a tax liability about 20% of the total amount threatened or assessed.
RMI Law attorneys were asked to assist a local auction house which had been assessed by the state for over $100,000 in taxes (primarily sales taxes). Following our comprehensive examination and representation of the auctioneer, the auctioneer’s liability was determined to be less than $10,000.
Taxpayers who were assessed by the IRS for unreported income by virtue of receipt of life insurance policies were able to obtain partial relief through RMI Law attorneys. We were able to identify another helpful case which was decided one week before scheduled trial, and used it to obtain a settlement with the IES which cut our client’s liability nearly in half.
The IRS valued real property of our estate client at the sales price received nine months after the decedent’s death. We were able to obtain a date of death appraisal at nearly two million dollars less than the sales price of the property and after negotiations with the IRS had our lower appraisal accepted for the property.
These are a few examples of the work we’ve done for tax clients. If you have a tax issue, contact us and we can discuss about how we might be able to help you.