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What is the tax basis on the sale of gifted property?

If the fair market value of the property at the time of the gift to you is less than its adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Your basis for figuring gain is the same as the donor’s adjusted basis. Your basis for figuring loss is its fair market value when you received the gift. If the fair market value of the property is equal to or greater than your its adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.

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What are the tax consequences of a forgiven loan made to a family member?

A family member who voluntarily forgives a loan over $14,000 is considered to be gifting the value of the loan to the recipient. There are no tax consequences to the borrower of the money if the lender (family member) forgives the loan. However, if the lender was charging interest and the borrower defaulted on the loan then the borrower will experience tax consequences.

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Can abuse victims qualify for innocent spouse relief from having to pay delinquent income taxes?

Whether the the spousal abuse was physical or mental, they are both treated equally under IRS guidelines for determining if abused spouses can qualify for innocent spouse relief. In these situations, women may not have the opportunity to evaluate or understand financial matters, particularly income tax returns. In this event, the IRS will grant relief from having to pay for delinquent taxes which were mainly due to the former spouse’s fraudulent behavior.

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What is innocent spouse relief?

The IRS has the power to release a spouse from direct financial liability for unpaid taxes. This release from responsibility from having to pay tax debts of the other spouse (or estranged spouse) is called innocent spouse relief. The IRS will conduct an evaluation of the spouse’s education, work experience, relationship status (still married, divorced, or separated), physical or mental disabilities, and level of involvement in household finances to determine whether the spouse can qualify for innocent spouse relief.

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When does it make sense to hire a tax attorney to negotiate an IRS Offer in Compromise?

There are some occasions where an attorney is not only useful, but invaluable in assisting you with your IRS offer in compromise negotiation. An attorney can aid in reinforcing your current financial situation to the IRS and typically has more effective lines of communication with IRS agents. The attorney can clarify that all communications go directly through their office and can handle the paperwork and formalities for you, removing much of the stress and work so that you can focus on getting well. If your offer in compromise is rejected, you have the right to appeal to the tax court. As with any court of appeals, this appeal must be handled by an attorney.

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When should I hire a tax attorney to represent me in my IRS tax debt dispute?

While most negotiations with the IRS over your tax debt can be handled by the average American taxpayer, there are some instances where an attorney is both necessary and beneficial. If the IRS ignores your attempts to correct the mistakes, it is time to contact an attorney. An attorney can draft your letters to the IRS in a more direct way that is guaranteed to get the IRS’s attention. Those taxpayers who do not qualify for the Streamline Offer in Compromise program should consider hiring a tax attorney to handle their IRS negotiations. An attorney can better negotiate with the IRS and help them fully understand your financial situation, framing it in the way that the IRS needs to hear for offer acceptance.

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What Causes an IRS Tax Audit

The IRS uses three techniques when selecting audits. The first technique is computer screening and random selection. The IRS sets up random numerical formulas to select a certain number of people for auditing within a specified group. The next technique is related examinations. When the IRS audits a business, they also audit anyone who worked for that business. If your records do not match the documents they have on file, then you will be formally audited. The final technique is document matching.

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