IRS Tax Solutions
IRS Offer in Compromise – The Offer in Compromise program allows the unpaid tax debt to be settled for a fraction of what is owed. The application for Offer in Compromise allows the inclusion of all delinquent taxes including interest, penalties or additional amounts that have been applied under IRS regulations. To be considered for an IRS Offer in Compromise, all back tax filings must be handled and the taxpayer must be current with all federal tax deposits for the prior two quarters.
This program is one of the most preferred forms of IRS tax relief.
There are three primary reasons that the IRS may be willing to compromise the tax debt: (1) Doubt as to Liability: there is some doubt as to whether the assessed tax is accurate, (2) Doubt as to Collectability: doubt that the taxpayer will ever be able to pay the full tax amount owed, and (3) Effective tax administration: there is not a question about the tax liability being due or a dispute over the amount, but there may be severe economic hardship or special circumstances which would allow the IRS to grant the application for the Offer in Compromise. To maximize the chances for success in having an IRS Offer in Compromise accepted/granted, using IRS tax experts to handle the application process may be a wise decision.
Installment Agreement – Setting up an installment agreement with the IRS is similar to making monthly payments like on your credit card bills, with some big exceptions. First, the IRS is going to choose the amount you pay them based on your calculated disposable income. Second, defaulting on your payment with the IRS imposes severe consequences. You will be discharged from your installment agreement and additionally, you will not be able to sign up for another installment agreement for another year. If an individual knows they can pay their bill off in installments over the course of three years, an installment agreement is a good idea.
IRS Penalty Abatement – For those in need, the IRS offers the tax penalty abatement program. This is by no means a free-for-all program. This is intended only for people who display “reasonable cause” for having the IRS penalties removed from their tax debt liability. Taxpayers who qualify include victims of natural disasters, individuals who neglected to pay on time due to sickness, or people who had their tax records destroyed in a fire or by another unavoidable accident. In order to qualify, proof of need has to be presented to the IRS. You need documented evidence such as hospital records and police reports. You then present your evidence to the IRS along with Form 843 "Claim for Refund or Request for Abatement," to request this Tax Penalty Abatement. Because IRS penalties can be as high as 25% of the tax liability amount, using professional tax advisors is considered wise.
IRS Interest Abatement – IRS interest abatement is the elimination or reduction of accrued interest amounts that will result in a lesser tax liability for the taxpayer. IRS interest rates change every three months and are currently 5% per year for underpayment of tax. You are allowed to request a Tax Interest Abatement whenever you have had interest applied to your account as a result of an IRS error of a managerial or ministerial task (i.e. paperwork loss) or an IRS delay of a managerial or ministerial task (i.e. delay in processing paperwork). It's important that you be able to show that you could not have caused any significant impact upon the error or delay. Keep in mind that interest abatement will not be granted if the error or delay can be attributed to the taxpayer involved. This request is made on IRS Form 843. The IRS does not easily grant an Interest Abatement Request.
Unfiled Tax Returns - Neglecting to file your tax returns is a fatal mistake. The IRS has a solution for individuals who do not file their taxes. They can file a substitute for a return, which usually does not include the proper amount of deductions. That's why it is important to file your unfiled tax returns “on your own”. You can contact the IRS to receive the forms from prior tax years. If that is not possible you are allowed to send a substitute tax form, which should resemble the original IRS tax form as closely as possible.
Payroll Taxes – Failure to properly file and remit payroll taxes is a one of the most serious IRS tax problems. This lack of filing exposes not only the company's assets but, in some circumstances, can also cause liability for the owners, officers and certain employees of the company/business. Employers are required to deduct and withhold a predetermined percentage of each employee's wage and then remit that amount directly to the IRS. These deducted employee taxes are held “in trust” by the employer for the federal government. Therefore, the IRS rightfully considers these withheld employment taxes to be the property of the United States Treasury.
This is why the IRS is so incredibly strict with regard to the payment of employment taxes and the collection of outstanding employment tax liabilities. Businesses that are struggling with cash flow may mistakenly choose to not file employment tax returns until they have the funds available to pay the taxes. This is a critical error in judgment, but not an uncommon occurrence. Not only will the business have to pay the taxes, but there are also large penalties for not filing the return on time, not making federal tax deposits, and not paying the tax and the interest. Even more daunting is the reality that the individual who has check signing authority can be held personally liable for a portion or even all of the taxes not paid to the IRS.
IRS Bank Account Levy – The IRS bank levy is one of the most financially crippling tax levies experienced by delinquent taxpayers. The receipt of a Notice of Intent to Levy instructs your bank to freeze all the money in your account(s) as of the day they receive the IRS Notice. This freeze on your account may cause your previously issued checks to bounce leaving you with NSF and other bank charges, and also unable to use any of those funds to pay your current obligations. The bank levy notice instructs your bank to send your money to the IRS within 21 days of its receipt. The IRS will never return those funds to the taxpayer. Because there special rules/requirements for securing a bank levy release, and because time is critical, expert IRS tax help is suggested for taxpayers who have just had their bank accounts frozen by the IRS.
IRS Wage Garnishments – IRS wage garnishments are a very powerful collection weapon used by the IRS to collect back taxes owed through your employer. A wage garnishment, often called an IRS Wage Levy, is the result of the IRS enforcing its rights under the law to obtain payment on a delinquent IRS tax liability. Garnishment rules vary, but essentially the IRS takes a very large portion of your “net paycheck” every pay period, and remits/applies that garnished amount toward paying off your IRS tax debt. The “net paycheck” which remains and is yours to keep, likely will not cover even basic monthly obligations. This wage garnishment will remain in place until your tax is fully paid or until a wage garnishment release has been properly processed and accepted by the IRS.
IRS Tax Lien Solutions – The IRS commonly implements liens on individuals whom owe taxes. The tax lien is an effective method of collections, but it ruins the credit for those taxpayers it is applied to. Although it is hard to remove an IRS tax lien once it has been applied, there are a couple of tax solutions. The obvious answer is paying the tax debt off in full. Once your tax debt is paid off, the tax lien will be “lifted”. For most delinquent taxpayers, that is not an option. Secondly, if you can prove the tax lien is preventing you from paying your debt, the lien will be lifted. For example, if a tax lien is preventing an individual from obtaining a bank loan to pay off the IRS back debt, the tax lien can be lifted (or released). But keep in mind, the IRS tax lien is typically never releases until the tax debt is resolved or the statute of limitations to collect on the debt has expired. That is because the tax lien is one of the IRS's most effective weapons for collecting on IRS back tax debt.
Currently Not Collectible ("CNC”) – "Currently Not Collectible” is a disposition the IRS uses for accounts that have special circumstances. Perhaps the person is on disability, has been unemployed for years, or is a single mother with little income. If an individual proves there are external circumstances beyond their control preventing them from paying their debt to the IRS, the collections activity will cease. If you have a permanent disability, the account may stay in Currently Not Collectible status until the ten year statute of limitations runs out. However, the IRS is going to check on the status of the individual every few months to a year. If the individual's financial situation has changed, the status will be lifted and collections activity will resume.
Innocent Spouse Relief – When you file your tax returns jointly, the law makes both you and your spouse liable for the taxes. If tax debt or fraud is involved, both spouses take the blame. But what if only one spouse is guilty of a crime? The innocent spouse may be abated of the debt along with its penalties and interest. This is known as “innocent spouse relief”. In order for the innocent spouse to qualify they need to prove they had no idea their spouse did something unlawful (usually understating tax). It's a good idea to provide supporting documentation along with IRS form 8857.
IRS Audit Notices – An IRS audit can be prompted for a multitude of reasons, but typically it is triggered because of irregularities on a tax return that require the taxpayer to produce records and defend their position. IRS audits are also initiated by random selection. Whatever the reason for the IRS audit notice, it is an event to be taken seriously by the taxpayer. Sometimes resolving the issues identified in the IRS letter are straight forward, but more often than not, it is wise to have the skills of a tax audit professional when responding to your IRS Audit Notice.
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