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Reconstructing Tax Records

After a Natural Disaster or Casualty Loss

Reconstructing records after a disaster may be essential for tax purposes, getting federal assistance or insurance reimbursement. After a disaster, taxpayers might need certain records to prove their loss. The more accurately the loss is estimated, the more loan and grant money there may be available. For taxpayers who have lost some or all of their records during a disaster, there are some simple steps to take that can help. The following information includes steps to take after a disaster so taxpayers can reconstruct their records and prove loss of personal-use and business property.

Reconstructing Tax Records

  • Get return transcripts from the IRS at: Get Transcript tool
  • To order transcripts by phone, call 800-908-9946 and follow the prompts. Taxpayers can also request transcripts using their smartphone with the IRS2Go mobile phone app.
  • To get transcripts of previous years returns by mail, file a Form 4506-T, Request for Transcripts of a Tax Return. 
  • If none of these suggestions work, contact Selig & Associates at (212) 974-3435.
  • To request copies of past returns by mail, file Form 4506, Request for Copy of Tax Return. 
  • Write the appropriate disaster designation, such as “HURRICANE HARVEY,” in red letters across the top of Forms 4506-T and 4506 to expedite processing and to waive the normal user fee.

Personal Residence and Real Property

Real property, also called real estate, is land as well as generally anything built on, growing on, or attached to land.

  • Take photographs or videos as soon after the disaster as possible. This helps establish the extent of the damage.
  • Contact the title company, escrow company or bank that handled the purchase of the home to get copies of appropriate documents. Real estate brokers may also be able to help.
  • Use the current property tax statement for land-versus-building ratios if available. If they are not available, owners can usually get copies from the county assessor’s office.
  • Establish a basis or fair market value of the home by reviewing comparable sales within the same neighborhood. This information can be found by contacting an appraisal company or visiting a website that provides home valuations.
  • Check with the mortgage company for copies of appraisals or other information they may have about cost or fair market value in the area.
  • Review insurance policies, as they usually list the value of a building, establishing a base figure for replacement value insurance. For details on how to reach the insurance company, check with the state insurance department
  • If improvements were made to the home, contact the contractors who did the work to see if records are available. If possible, get statements from the contractors verifying their work and cost.
    • Get written accounts from friends and relatives who saw the house before and after any improvements. See if any of them have photos taken at get-togethers.
    • If there is a home improvement loan, get paperwork from the institution that issued the loan. The amount of the loan may help establish the cost of the improvements.
  • For inherited property, check court records for probate values. If a trust or estate existed, contact the attorney who handled the estate or trust.
  • If no other records are available, check the county assessor’s office for old records that might address the value of the property. 
  • If none of these suggestions work, contact Selig & Associates at (212) 974-3435.
  • A licensed Public Adjuster can Successfully Negotiate Property Damage Claims. 
  • A licensed Public Adjuster can evaluate your existing insurance policies to determine what coverage may be applicable to your claim. 
  • A licensed Public Adjuster can research, detail, and substantiate damage to buildings and contents and evaluate any additional covered expenses, including business interruption losses and extra expense claims for businesses.

There are several resources that can help determine the current fair market value of most cars on the road. These resources are all available online and at most libraries:

  • Kelley’s Blue Book 
  • National Automobile Dealers Association   
  • Edmunds

Additionally, call the dealer where the car was purchased and ask for a copy of the contract. If this is not available, give the dealer all the facts and details, and ask for a comparable price figure. If making payments on the car, check with the lien holder.


Personal Property

It can be difficult to reconstruct records showing the fair market value of some types of personal property. Here are some things to consider when cataloguing lost items and their values:

  • Look on mobile phones for pictures that were taken in the home that might show the damaged property in the background before the disaster.
  • Check websites that can help establish the cost and fair market value of lost items.
  • Support the valuation with photographs, videos, canceled checks, receipts or other evidence. 
  • If items were purchased using a credit card or debit card, contact the credit card company or bank for past statements. Credit card companies and banks often provide user’s access to these statements online.
  • If none of these suggestions work, contact Selig & Associates at (212) 974-3435.
  • A licensed Public Adjuster can Successfully Negotiate Property Damage Claims. 
  • A licensed Public Adjuster can evaluate your existing insurance policies to determine what coverage may be applicable to your claim. 
  • A licensed Public Adjuster can research, detail, and substantiate damage to buildings and contents and evaluate any additional covered expenses, including business interruption losses and extra expense claims for businesses.

If there are no photos or videos of the property, a simple method to help remember what items were lost is to sketch pictures of each room that was impacted:

  • Draw a floor plan showing where each piece of furniture was placed – include drawers, dressers and shelves.
  • Sketch pictures of the room looking toward any shelves or tables showing their contents.
  • These do not have to be professionally drawn, just functional.
  • Take time to draw shelves with memorabilia on them.
  • Be sure to include garages, attics, closets, basements and items on walls.

Business Records

  • To create a list of lost inventories, get copies of invoices from suppliers. Whenever possible, the invoices should date back at least one calendar year.
  • Check mobile phones or other cameras for pictures and videos taken of buildings, equipment and inventory.
  • For information about income, get copies of bank statements. The deposits should closely reflect what the sales were for any given time period.
    • Get copies of last year’s federal, state and local tax returns. This includes sales tax reports, payroll tax returns and business licenses from the city or county. These will reflect gross sales for a given time period.
  • If there are no photographs or videos available, sketch an outline of the inside and outside of the business location. Then start to fill in the details of the sketches. For example, for the inside of the building, record where equipment and inventory was located. For the outside of the building, map out the locations of items such as shrubs, parking, signs and awnings.
    • If the business was pre-existing, go back to the broker for a copy of the purchase agreement. This should detail what was acquired.
    • If the building was newly constructed, contact the contractor or a planning commission for building plans.

Casualty and Disaster Tax Losses

A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. If damage is to personal, incomeproducing or business property, taxpayers may be able to claim a casualty loss deduction on their tax return. 


Taxpayers generally must deduct a casualty loss in the year it occurred. However, if the property was damaged as a result of a federally-declared disaster, taxpayers can choose to deduct that loss on their return for the tax year immediately preceding the year in which the disaster happened. A federally-declared disaster is a disaster that took place in an area declared by the President to be eligible for federal assistance. Taxpayers can amend a tax return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.


Figuring Loss

Taxpayers may need to reconstruct their records to prove a loss and the amount of the loss. To compute loss, determine the following figures: 

  • The decrease in fair market value of the property that resulted from the casualty or disaster.
  • The adjusted basis of the property – this is generally what was paid for the property, increased or decreased, because of certain events. 

Taxpayers may deduct the smaller of these two amounts, minus insurance or other reimbursement. Additionally, certain deduction limits apply. See Publication 547, Casualties, Disasters and Thefts, for details on these limits and Publication 551, Basis of Assets, for additional information on basis. 

If the casualty loss deduction causes a taxpayer’s deductions for the year to be more than their income for the year, there may be a net operating loss. For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates and Trusts.

Determining the Decrease in Fair Market Value

Fair market value (FMV) is generally the price for which the property could be sold to a willing buyer. The decrease in FMV used to figure the amount of a casualty loss is the difference between the property's fair market value immediately before and after the casualty. FMV is generally determined through a competent appraisal. Without a competent appraisal, the cost of cleaning up or making certain repairs is acceptable under certain conditions as evidence of the decrease in fair market value.

Generally, the cost of cleaning up or making repairs if the repairs are: 

  • Actually made
  • Not excessive
  • Necessary to bring the property back to its condition before the casualty 
  • Only made to repair damage
  • Not adding value to the property or making it worth more than before the disaster happened

For more information on losses, see these IRS publications:

  • Publication 547, Casualties, Disasters, and Thefts – This has information on figuring your casualty loss deduction.
  • Publication 584, Casualty, Disaster, and Theft Loss Workbook – This can help individuals make a list of stolen or damaged personal-use property and figure the loss. It has a room-by-room listing to help recreate an inventory and figure the loss on the home and its contents and any motor vehicles.
  • Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook – This is available to help businesses list stolen or damaged business or income-producing property and to figure the loss.

The IRS Whistleblower Program

The Internal Revenue $ervice (IRS) Whistleblower Office rewards whistleblowers who provide information about entities that have failed to pay taxes owed. A whistleblower may receive as much as 30% of the additional tax, penalty, and other amounts collected if the IRS uses the whistleblower’s information to pursue an action and subject to certain additional conditions. For additional information click on the links below:,,id=180171,00.html


This video is why we support Public Adjusters

Don't let the Insurance Company push you around (Part III)

7 Things to Do (when you have an insurance claim)

1.) Notify your insurance company, viz. put them on Notice.

2.) Keep good records, e.g. the day, date and whom you spoke with; your claim number, and the name of the insurance company’s adjuster.

3.)  Ask for a “Certified Copy” of your insurance policy.

4.) Mitigate your losses, e.g. turn off water, secure doors and windows, etc.

5.) Take photos of the damage and photos of all items that you had to throw away.

6.) Keep a detailed record of all expenses and save your receipts.

7.) Contact a qualified Public Adjuster.


Don't let the Insurance Company push you around (Part II)


  • A Public Adjuster is a professional claims person who is licensed by the State Insurance Department to advise and assist individuals and businesses in the preparation, filing and negotiation of claims against their insurance companies. A good public adjuster is an authority on loss adjustment who you can retain to assist you to recover the full amount due you based on your insurance coverage. He or she must pass a comprehensive test, post bond with the state and comply with continuing education requirements.



  • A Public Adjuster is engaged by you, the policy holder, to protect your interests. He or she works exclusively for you and has no ties to any insurance company. The insurance company will assign its own adjuster to look after its own interests.



  • A Public Adjuster’s responsibility covers every phase of preparation and presentation of your claim, as well as the negotiation of a fair and satisfactory adjustment and recovery of all monies that may become due with regard to the claim. It does not ordinarily extend to the process of replacing damaged or destroyed property.



  • A good Public Adjuster’s experience and expertise can greatly hasten final settlement of your claim. Through prompt and expert inspection and analysis of your loss, a Public Adjuster can preserve and provide evidence that might otherwise be overlooked or destroyed. He or she will thoroughly document and complete the claim. The more detailed the claim presentation, the more money you will recover.



  • In this event, the policy provides for a process called “appraisal”, which is much like arbitration. It is much quicker and less expensive than litigation (suing in court). This is seldom necessary, simply because the Public Adjuster and the Company adjuster understand value and loss and usually can amicably determine the measure of damage.



  • Public Adjusters work on a percentage of your paid claim. The wording of a Public Adjuster Compensation Agreement in New York is specified by the State Insurance Department and cannot be changed except for the percentage. However, no Public Adjuster is allowed to charge any fees in excess of 12.5% of the loss, and most will negotiate a lower fee. When a Public Adjuster is hired as an appraiser, the fee is hourly or a flat fee rather than a percentage.



  • A properly detailed and prepared claim will invariably result in a higher settlement. The professional services of a Public Adjuster can make the resulting payment from the insurance company far more than it might have been without those services. Many items that qualify for payment may not need to be replaced (Do you need those pants that are two sizes too small?)



  • Lawyers, bankers, accountants and businessmen in addition to homeowners and tenants. Once people experience the skill and knowledge of a competent Public Adjuster, they will rarely attempt to settle a claim without one. A Public Adjuster’s best source of new clients is the referral from those they have successfully served.



  • Have you ever sat down and tried to read your insurance policy? Many are book-like and contain terms and conditions that defy understanding by laymen. There may be contradictions between the main body of the policy and various endorsements and riders attached to it. Prior court decisions may affect the meaning of certain words or phrases found in your policy. An insurance company is not obligated to point out all the benefits available under their policy, but you can be sure they will take every advantage of clauses that limit your recovery. A good Public Adjuster has the technical knowledge to interpret coverage and make certain you get every available benefit.



  • It stands to reason that a Public Insurance Adjuster who makes adjusting his life’s work can do it more efficiently than the average insured, who may have one large loss in a lifetime. Even if you have experience, for example, if you were a contractor who often writes building repair estimates, a Public Adjuster’s experience as to maximum insurance allowances, fine detail and estimate format can make a major difference. Insurance claimants seldom have the time and the resources to determine the degree of damage or to properly price each individual item. A professionally prepared claim is much more likely to be accepted by an insurance company.



  • The claim department of most insurance companies has little contact with the underwriting department or the individual agent who placed the insurance. A claim is usually handled on its own merits, without consideration of the fact that you have been claim free. However, insurers do share and keep track of every claim you ever made, which may result in closer screening of your present claim.



  • While it may seem logical to wait to see how an insurance company might respond to your loss before considering a Public Adjuster, you should be aware of the perils. Many insurance companies will use a first interview to pin you down to a position or develop information that they might later use to limit or deny your loss. Most people are emotionally distraught right after a large loss and may not always offer information that will be accurate and helpful to their claim. The sooner you retain a Public Adjuster, the sooner your claim will be settled and you will have funds to rebuild or replace damaged property.



  • It is usually best to hire a Public Adjuster immediately after a loss. However, depending on circumstances, a Public Adjuster will probably be able to assist you even though your claim was submitted. Most good Public Adjusters will offer you a free consultation to explore the prospect of whether or not they can help you. In some cases, a competent Public Adjuster can serve as your appraiser in the above-mentioned appraisal provision for settling a disputed loss.



  • The insurance company is prepared to pay what is due to you as it sees it. Even though most company adjusters try to be “fair”, most insurance companies overload their adjusters with a lot of claims. A company adjuster simply doesn’t have the time to give intense personal service to each claimant. There may be more than one way to look at a particular item of damage. A company adjuster’s first duty is to the insurance company who he or she represents. An insurance company is a business whose goal is to make money. The less money it pays out in claims, the more money it makes. Every insurance policy requires that YOU submit a claim. It is not the responsibility of the insurance company to prepare your claim. A Public Adjuster is your representative exclusively, and can devote whatever time is necessary to properly detail your claim with his experience and knowledge for your maximum recovery under the policy.



  • He or she is responsible for detailing and evaluating every item of damage and submitting all required paperwork. This usually involves taking a physical inventory and preparing a comprehensive estimate using his or her skill and experience, or obtaining the services of a proper expert. At the same time a Public Adjuster will make certain that all stipulations, deadlines and requirements of your policy are faithfully observed.



  • Absolutely. A Public Adjuster is your legal representative and must be recognized by an insurance company. Most company adjusters actually prefer to work with an experienced Public Adjuster rather than an inexperienced claimant.



  • Yes. A Public Adjuster is licensed to handle all claims of loss to property against your own insurance company, as well as contingent expenses, such as loss of use, business loss of income, and other expenses. A good Public Adjuster is an expert in all types of loss, including windstorm, explosion, snow, hail, smoke, water damage, damage to structures by motor vehicles, inland marine, business interruption, rentals, improvements and betterments, commission and profits, reporting forms and others.



  • An insurance broker serves you at all times in connection with your insurance coverage, but does not have particular responsibility for your claim. Many agents and brokers will assist you with minor claims and claim reporting, but generally do not have the time or experience to render the highly specialized service of insurance adjusting. It should be understood that an insurance agent is a legal representative of the insurance company, not you.



  • It depends upon the type and amount of insurance you carry. Some policies cover the full cost of replacement while others cover only depreciated value. There are usually strict limits and sub-limits. There may also be issues of under insurance. Because of the variety of coverage that might be afforded, it is suggested that you consult a qualified Public Adjuster to determine how your policy will respond to your loss.



  • If you hire a Public Adjuster immediately after a loss, he or she can advise and assist you each step of the way. All policies require that you report the loss as soon as practicable to the insurance company and take steps to preserve property from further damage, including theft. Failure to comply with these obligations may limit or completely void your coverage.



  • The choice of a Public Adjuster should be a careful one, as you are putting a large asset in the hands of someone you probably don’t know. You should carefully interview a prospective Public Adjuster just as if you were hiring an employee. Check references thoroughly and carefully question each person with whom you speak. Often a lower percentage does not mean you will be better off after settlement. Public Adjusters who are members of the New York Public Adjuster’s Association will often be more qualified as they have made an extra effort to stay in touch with the latest developments in the industry and are subject to the rules of the organization.



  • In New York State, no Public Adjuster is allowed to solicit your business between the hours of 6:00 PM and 8:00 AM unless you invite them. Report any violations to the Insurance Department.





Don’t Let the Insurance Company Push You Around!

An editorial by David Selig, Federal Tax Practitioner 

When your home or business suffers a covered loss, the Insurance Company will try to settle for “pennies on the dollar”. The Insurance Company knows that it’s nearly impossible to be objective when your property was just destroyed. It’s a traumatic experience for you and your family – but it’s business as usual for the Insurance Company. Houses catch fire, ships sink and water damages valuable inventory every day of the week. Insurance Companies are in business to make money, and every dollar they save is quite literally, a dollar earned. Accordingly, the Insurance Company employs an army of Adjusters, Accountants and Attorneys.  And each one of these coldblooded professionals is specially trained to skin you alive. You’ve got to protect yourself, says David Selig. In the rough and tumble world of claim settlements, fair exchange is no robbery! You need an aggressive advocate in these difficult times, says Selig. In most cases, a Public Adjuster and Attorney will negotiate a bigger cash settlement than a policyholder ever could. For more information about settling insurance claims, contact Attorney Bradley Dorin at Selig & Associates. 



Tax Representation for Minority and Woman-Owned Businesses


Treasury Identifies 8 Regulations as Burdensome

By Alistair M. Nevius, The Tax Adviser’s editor-in-chief.

After reviewing all 105 final, temporary, and proposed Treasury regulations issued from January 2016 through April 2017, the Treasury Department has identified eight as burdensome, for which it will propose reforms as required by Executive Order 13789 (Notice 2017-38).The regulations identified as burdensome include the regulations under Sec. 385 implementing rules that would recharacterize certain transactions between related parties that are ostensibly debt as equity, curbing the practice of “earnings stripping,” and proposed regulations under Sec. 2704 that would prevent taxpayers from taking certain estate valuation discounts. Executive Order 13789, issued in April, directed Treasury to review significant regulations that were issued in 2016 and 2017 to determine if the regulations cost too much, are too complex, or exceed the IRS’s statutory authority. Treasury determined that 53 of the regulations issued during the review period were “minor or technical in nature” and not significant. It treated the remaining 52 regulations as potentially significant and reviewed them under the terms of the executive order. It determined that eight qualified as significant and met the criteria of the executive order.Those eight regulations are:


1. Proposed regulations under Sec. 103 on the definition of political subdivision (REG-129067-15);


2. Temporary regulations under Sec. 337(d) on certain transfers of property to regulated investment companies (RICs) and real estate investment trusts (REITs) (T.D. 9770);


3. Final regulations under Sec. 7602 on the participation of a person described in Sec. 6103(n) in a summons interview (T.D. 9778);


4. Proposed regulations under Sec. 2704 on restrictions on liquidation of an interest for estate, gift, and generation-skipping transfer taxes (REG-163113-02);


5. Temporary regulations under Sec. 752 on liabilities recognized as recourse partnership liabilities (T.D. 9788);


6. Final and temporary regulations under Sec. 385 on the treatment of certain interests in corporations as stock or indebtedness (T.D. 9790);


7. Final regulations under Sec. 987 on income and currency gain or loss with respect to a Sec. 987 qualified business unit (T.D. 9794);


8. Final regulations under Sec. 367 on the treatment of certain transfers of property to foreign corporations (T.D. 9803).


Under Executive Order 13789, Treasury is directed to submit a final report to the president by Sept. 18, 2017, recommending specific actions to mitigate the burdens imposed by the identified regulations. Treasury is asking the public for comments on whether these eight regulations should be rescinded or modified, and, if modified, how they can be modified to reduce burdens and complexity.



We Reached Maximum Legal Capacity!!!  


7 July 2017: Today’s event “Do it Yourself IRS Penalty Abatement Class” is now closed to the public. We apologize for any inconvenience, and look forward to seeing you at our next workshop.



14 Real Examples of Tax Fraud


(1) Underreporting income [or in layman’s parlance, lying about how much you earn].  (2) Pocketing cash to avoid paying tax. (3) Inflating business expenses, e.g. paying household expenses or other bills through the business. (4) Phony baloney business expenses. (5) Using fake social security numbers (6) Cooking the Books, viz. keeping two sets of books. (7) Claiming exemptions for you’re not entitled to, viz. fake wives, children and dependents.   (8) Concealing your crimes by destroying computers, books and documents. (9) Doctoring up checks, receipts and records, e.g. overstating expenses, understating or misclassifying income. (10) Hiding financial information from the IRS. (11) Transferring assets away from the IRS. (12) Creating or inflating charitable deductions. (13) Failure to file tax returns. (14) Lying to the IRS, e.g. deliberately making false statements while under oath. If you’d like more information about tax fraud, call Selig & Associates directly



Police in India have arrested a man they say was the ringleader of a network of call centers that allegedly swindled thousands of Americans out of millions of dollars. By Zahraa Alkhalisi


Sagar Thakkar, 24, was detained in Mumbai after arriving on a flight from Dubai on Saturday. "He was the mastermind of IRS scam call centers in the state of Maharashtra and one center in Ahmedabad," said Mukund Hatote, assistant commissioner of police in Thane, just north of Mumbai. Hatote said Thakkar stands accused of extortion, cheating, impersonation, criminal conspiracy as well as violating India's communications and tech laws. News of the scam broke last October when Indian police raided nine calls centers -- eight in Thane in Maharashtra -- and arrested more than 70 people on suspicion of posing as IRS agents to steal cash from U.S. citizens. Workers at bogus call centers used American accents to impersonate IRS agents. They told their victims that they owed back taxes and would risk arrest if they hung up or failed to pay up. Thakkar -- also known as "Shaggy" -- was one of 61 defendants mentioned in a U.S. indictment unsealed last October. The bogus call center workers were accused of stealing from 15,000 people by using the IRS scam and other fraud schemes. Related: IRS impersonators accused of stealing millions from the elderly U.S. prosecutors say the defendants also posed as immigration officers and threatened victims with deportation unless they paid a fine immediately. They said in October that 20 people across eight U.S. states had been arrested. Indian police say they have charged more than 390 people in connection with the scheme, and more than 12 remain in jail.




Understanding Federal Criminal Tax Enforcement


The Government helps to preserve the integrity of this Nation's self-assessment tax system through vigorous and uniform criminal enforcement of the internal revenue laws. Criminal prosecutions punish tax law violators and deter other persons who would violate those laws. To achieve maximum deterrence, the Government must pursue broad, balanced, and uniform criminal tax enforcement. Uniformity in tax cases is necessary because tax enforcement potentially affects more individuals than any other area of criminal enforcement. Broad and balanced enforcement is essential to effectively deter persons of varying economic and vocational status, violators in different geographic areas, and different types of tax law violations. To achieve uniform, broad, and balanced criminal tax enforcement, the Attorney General has authorized the Tax Division to oversee all federal criminal tax enforcement and to authorize or decline investigations and prosecutions in tax matters. For more information about tax crimes and resolving your tax problems, call Selig & Associates at (212) 974-3435



A DIY Guide to IRS Penalty Abatements

Be gentle its my first time . .


According to the IRS, you may qualify for a first-time penalty abatement if certain conditions are met. Specifically, you were not previously required to file a tax return, or alternatively, you had no prior penalties during the past 3 years. *Estimated tax penalties don’t apply. 


Additionally, all of your tax returns have to be filed, and you have to have paid your taxes, or alternatively, made arrangements to pay your taxes by entering into a bona fide installment agreement.


Assuming that you meet this criteria, the IRS will probably approve your request for a first time abatement for Failure To File and Failure to Pay penalties.


But what about interest? In a nutshell, the IRS charges interest on tax, penalties, and interest until the balance is paid in full. However, if your request for a first time penalty abatement is approved, your interest payment should be reduced.


FYI the penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.


Eight Fun Facts on Late Filing & Late Payment Penalties

IRS Tax Tip 2013-58


  1. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline.


  1. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should  explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you.


  1. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.


  1. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.


  1. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.


  1. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent.


  1. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.


  1. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time.


The IRS is Racially Profiling Dominican & Hispanic Tax Return Preparers says Federal Tax Practitioner David Selig, of Selig & Associates. Bronx, Brooklyn and NYC is being unfairly scrutinized! 


Compared to the national average, Hispanic neighborhoods receive more Earned Income Tax Credits and have a disproportionate number of Head-of-Household filers. Accordingly, Selig suspects that the IRS has implemented a clandestine computer scoring system that profiles certain demographics e.g. Hispanic single parent families with low incomes, viz. bodegas, restaurants, domestics and other unskilled laborers. According to Selig, this program unfairly targets Hispanics and improperly punishes Hispanic Tax Return Preparers. 


EITC Due Diligence Law and Regulation Internal Revenue Code §6695 and related regulations set out the EITC Due Diligence requirements and the penalties for failure to comply with them.


IRC §6695(g) states that any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary by regulations with respect to determining eligibility for, or the amount of, the credit allowable by section 32 shall pay a penalty of $500 for each such failure. IRC §6695(h) allows a cost-of-living adjustment. The penalty for taxable years beginning in 2015 is $505.


There are four due diligence requirements. Generally, if you prepare EITC claims, you must ask all the questions required on Form 8867, Paid Preparers' Earned Income Credit Checklist, as well as, ask additional questions when the information your client gives you seems incorrect, inconsistent or incomplete. Complete and submit the Form 8867 for all paper and electronic tax returns and for all other EITC claims. It is required for all EITC claims, the ones with a qualifying child and the ones with no qualifying child. Also, keep a copy of the completed form. Prepare and keep the worksheet showing how you computed the credit. The table below provides more information on your record-keeping requirements. 


You could be penalized for each time you fail to meet all four due diligence requirements for each EITC claim. Among other things, Tax Return Preparers must:


1.) Complete Form 8867, Paid Preparer's Earned Income Credit Checklist, to make sure you consider all EITC eligibility criteria for each claim you prepare.


2.) Complete checklist based on information provided by your client(s).


2.b) For EITC EITC returns or claims for refund filed electronically, submit Form 8867 to the IRS electronically with the return.


2.c) For EITC returns or claims for refund not filed electronically, attach the completed form to any paper return you prepare and send to the IRS.


2.d) For EITC returns or claims for refund you prepare but do not submit directly to the IRS, provide the completed Form 8867 to your client to send with the filed tax return or claim for refund.


3.) Complete the EIC worksheet from the Form 1040 instructions, or Publication 596, Earned Income Credit, or a form with the same information.  The worksheet shows what is included in the computation, that is, self-employment income, total earned income, investment income and adjusted gross income. Most professional tax preparation software includes the computation worksheet.



3.b) Not know or have reason to know any information used to determine your client's eligibility for, or the amount of EITC is incorrect, inconsistent or incomplete.


3.c) Make additional inquiries if a reasonable and well-informed tax return preparer would know the information is incomplete, inconsistent or incorrect


4.) Know the law and use your knowledge of the law to ensure you are asking your client the right questions to get all relevant facts.


4.b) Document any additional questions you ask and your client's answer at the time of the interview.


FYI   To qualify for Head of Household filing status, taxpayers must be unmarried or considered unmarried at the end of the year, and have paid more than half the cost of keeping up a home for the tax year.


The Earned Income Tax Credit “EITC” is intended to help low-income earners with children. The EITC is a refundable tax credit, and according to several IRS Tax Examiners, it's nothing more than a "redistribution of wealth" scheme. 


FYI In addition to targeting Hispanics, the IRS uses a computer scoring system to determine who will be audited, referred to as “DIF” viz. Discriminant Inventory Function System.




A Do it Yourself Guide to NYS Offers in Compromise


According to Publication 220 “The New York State Offer in Compromise Program is designed to help financially distressed taxpayers who face overwhelming tax liabilities”. In fact, that single sentence sounds so good that I’m frequently asked the following two questions: (1) “Am I eligible for an Offer in Compromise?” and (2) “Can I do it myself?” to which I reply “maybe” and “yes” respectively.  


So let’s get to it! According to Publication 220  “To be eligible, you must show that you have been discharged in bankruptcy, you are insolvent, or (for individuals only) that collection in full would cause you undue economic hardship. You are considered insolvent if all your liabilities (including your tax debt) exceed the fair market value of your assets. Undue economic hardship generally means that you are unable to pay reasonable basic living expenses, which are those providing for the health, welfare, and production of income for your family.


We use Internal Revenue Service (IRS) standards to help determine allowable living expenses. We also consider other factors, including the taxpayer’s age, employment status, and employment history; any inability to earn income because of long-term illness, medical condition, or disability; and any obligation to dependents”.  


Tax Tip: This isn’t an invitation for sob stories and swan songs, but rather, this is your best opportunity to clearly and credibly present your case. The first step is to determine how much you actually owe. I recommend that you contact the State directly and request an account transcript that lists each unpaid tax liability. The second step is to list all of your expenses, including rent or mortgage payments, utilities, insurance, medical coverage and all uncovered medical expenses, childcare, child support and other court ordered payments. For food and incidental expenses, you should attach a copy of the IRS’s 2017 Federal Collection Standards re Food, Clothing and Other Items to your Offer.  The third step is to determine how much you should offer (which is easier said than done).


 Tax Tip. Remember, this is an adversarial contest. That is to say, the State wants to collect as much as it possibly can. Conversely, you want to pay as little as possible. Accordingly, the State will consider things that you’d probably prefer not to think about, such as anticipated future earnings; potential inheritances; personal injury lawsuits; increased earnings when your children are no longer considered dependents; when does your car come off lease; your ability to borrow, the value of your assets, retirement accounts, etc


Tax Tip. A successful Offer in Compromise addresses and successfully  answers each relevant issue. Remember, in this forum, you are the “Offeror” and the State is the Offeree. This means you have the burden of proof and persuasion, and if that wasn't enough, you must make the offer as attractive as possible. For questions about New York State Offers in Compromise or other tax matters, contact David Selig of Selig & Associates at (212) 974-3435

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