“It was the best of times, it was the worst of times.”  When Dickens wrote his Tale of Two Cities, he wrote of more than times in the past, but for times we even share today.  My neighbors, friends and family in Tennessee learned this only too well earlier this month, when a “thousand year flood” ripped through homes, business and lives with an unrelenting force.  We bent, but we didn’t break.  And we got the privilege of helping one another rise from the muck and mess together.

Even our Uncle Sam has been offering help!  By declaring middle TN a disaster area, some great tax benefits come into play.  The casualty losses we have incurred can be deducted NOW against last year’s income tax returns, rather than waiting until we file our income tax returns in 2011.  The IRS will process an amended return claim within several weeks, and give us back some of the taxes we paid in the past to recognize the reduction in our present tax, due to this flood.  The first step is to file Form 1040x.

Casualty losses are subject to different treatment, depending upon whether the losses are personal or business in nature.  Personal losses are subject to a reduction by $100.00 plus 10% of our adjusted gross income.  Business losses are not.  Folks who are self-employed might have incurred losses of both types.  For example, if someone who operates a business which requires a truck also drives a car for personal use, both vehicles might have been damaged or washed away.  The claim would amend last year’s 1040 by deducting the loss incurred on the car as a casualty loss on Schedule A, subject to the $100/10% rule.  The truck loss would be claimed against Schedule C, without the reductions.

To our neighbors from Middle TN, and friends around the U.S. who live and/or work in other declared disaster areas, you already have our prayers and encouragement to continue the hard work of recovery with good spirits and hope for the future.  Let me also encourage you to file a claim, and get the tax reductions NOW which will help in the rebuilding process.

Gary Dettloff
Tax Advocate One

It’s important whenever we call the IRS to understand the background and perspective of the person on the other side. Revenue Officers, ACS, even Special Agents have different goals and different training. They are looking for answers which make sense to THEIR needs and expectations. It helps to have a background. The ex-RO prepared the financial docs. The former IRS Attorney laid out the plans. Years’ old experience on the phone lines at the computer center brought to mind and employed the respectful responses which are necessary if we are to make good contact, and get good results. Levy released. On to the next problem. Tax Advocate One.

Today, taxpayers are inundated by ads and high-pressure calls promising to settle their problems for “pennies on the dollar”.  But it’s not just that easy.  Nine of ten offers in compromise are rejected.  However, more than nine of ten we handle end up accepted.  What is the difference?  Preparation.  Understanding what the IRS wants and needs to grant acceptance.  Perseverance.  Research.  Relationships.  Where to apply the Manual.  The Code.  Court precedents.  When and how to appeal.  How to analyze the financial and other reasons which might support the Offer.  How to present them.  A sales rep is not likely to successfully navigate such a maze.  Neither is a cookie-cutter standard form process.  Each situation is unique, and calls for an individually designed and submitted plan.

We have processed and successfully obtained accepted offers for parts of three decades now.  Many of our Offer clients come to us after spending thousands and getting nowhere.  Don’t make that same mistake.  Speaking as one who was part of the process which brought about the change in Offer procedures and availability, anyone who wants to submit an offer should engage the help of someone who is directly qualified and experienced.  Who has handled a lot of offers with a lot of success.  Who is the person who will actually do the work.  Who is experienced, tenacious, and available on a regular basis.

There are reasons these qualifications apply.  It’s the only way to get to the Lowest Legal Tax.

Gary R. Dettloff, J.D.

REQUIRED DISCLOSURE UNDER TREASURY CIRCULAR 230.  Unless expressly stated otherwise to the contrary, nothing contained in this transmission, including any attachment, was intended to be used or relied upon by any taxpayer for the purpose of avoiding penalties that may be imposed upon the taxpayer under the Internal Revenue Code of 1986, as amended.  Any statement contained in this transmission, including any attachment, relating to the tax consequences of a transaction or situation was not intended nor may it be used by a taxpayer for the purpose of avoiding any federal tax or for the promotion, marketing or recommendation of an entity, investment plan or arrangement.

A generation or two ago, the Soviet Union dominated a half billion people against their will.  The government controlled all major information outlets, broadcast and press.  So when President Reagan described the USSR as an “evil empire” there was no evidence of such a pronouncement within the Soviet bloc.  Except for one little thing.  The people themselves, unwilling to stay in bondage, began their own “unofficial news agency.”  Using typewriters, mimeographs, photocopies and scraps of paper furtively circulated from one to another, the samizdat was born.

So it was that the words and efforts of reformers and thinkers, like Lech Walesa and Fr. Schmemann, Alexander Solzhenitsyn and John Paul II, pierced through an Iron Curtain Churchill called impenetrable.  In the end, the truth is what brought the Wall down.  The truth does set you free.

The internet serves us in the same way.  We can learn from one another, no matter what the “official” line says.  We will endeavor to provide all who visit this blog with new or little-know information.  Truth about the IRS.  Truth about taxes.  Truth that can free us from undue hardship of taxes higher than the law requires, or overly aggressive collection efforts.  This will be our samizdat and we will help one another to find the truths that lead to the lowest legal tax.

We can have the right to relief from penalties.

Take Penalties, for example.  Most people and business struggle under heavy penalty burdens, exceeding 50% or more from federal and local tax agencies, if they make a mistake, or even if it just looks like a mistake was made.  What can be done?  Anything?  A lot can be done.  The U.S. Supreme Court has ruled that penalties are not to be inflicted upon a company or a person whose problems arise from other issues.  The Internal Revenue Code and even the Internal Revenue Manual (the inside rules which are supposed to direct IRS actions) provide that for any reasonable cause, such penalties are to be removed.

So why not challenge the assertion of penalties which the Court and the Statutes and the Rules suggest should not apply?  Those same rules indicate that when an appeal against such penalties is taken, the IRS should ordinarily stop collection efforts, and review the matter objectively.  We can fight such penalties.  Save thousands or more.  We should.  It’s part of getting to that lowest legal tax.