Facts On IRS Installment Agreements

Installment Agreements allow a taxpayer that owes the IRS to repay the debt in a set amount of monthly payments. Installment Agreements are the most commonly accepted tax debt resolution. This blog post will help you get an understanding of what your installment agreement options are.

Non-Disclosure Installment Agreements
With these installment agreements, the IRS will never pry into your finances. You will never need to worry about your 401K or CDs being vulnerable to attack. In order to qualify for this agreement, your tax debt needs to be under $25,000. Your payments will be based on how much is needed on a monthly basis to pay your entire debt with penalties and interest in five years or when your statute of limitations runs out (if it is sooner). If you are in a temporarily binding financial situation, you may find that a Tiered Non-Disclosure Installment Agreement will work out best for you. In this case, you set what you know you can afford as your monthly payment for the first year and make up the difference with higher payments afterward.

Voluntary Disclosure Installment Agreements
If you owe more than $25,000 or cannot afford the payments offered by a Non-Disclosure Installment Agreement, you can disclose your finances to get into a payment plan. Your payments will be based on your ability to pay. You will have until your statute of limitations to pay your entire debt in full. Be extremely careful with this. Most people do not understand that the IRS has a different view on what standards of living entail than the majority of Americans have. Disclosing your finances may lead to extremely unaffordable payments or, much worse, levies on accounts that the IRS did not know about previously.

Seeking Help
If you owe more than $10,000 in tax debt, it is in your best interest to talk with a tax debt professional before setting up an installment agreement. My Hit Squad is the best in the business! We will be honest with you on what installment agreement options you have, as well as look into what other helpful tax resolutions you may qualify for. Just fill out the submission form or give us a call at 888-415-1337!

3 Hard Truths about IRS Tax Debt

The Truth hurts. But somebody has to say it. Every day when I check my inbox I have to dispell more and more IRS Myths. Here's a quick run-down of the common myths I hear, and the harsh realities.

"Settling your Tax Debt is a simple process"...This goes along with all of the other "Pennies on the Dollar" Tax Debt Settlement nonsense. An IRS Tax Debt Settlement is known as an Offer in Compromise. There is no quick and easy way to apply for an Offer in Compromise with the IRS.

The Facts:

• Only a small percentage of people qualify for an Offer in Compromise. There are a strict set of guidelines to adhere to.
• It can sometimes take up to 3 years for a Tax Debt Settlement to be approved.
• The IRS advises taxpayers not to submit an Offer in Compromise until other Tax Debt payment options were considered. The Offer in Compromise should be a last resort option.
• The Offer in Compromise is expensive to apply for (non-refundable payments of $150 and 20% of your offer).

"You can just call the IRS and pay them a little each month"... Here's a verbatim quote I heard from a friend, "Don't worry about the IRS, just agree to pay them $5.00 per month and they'll just leave you alone." HA! That's a good one, friend. You need to be in an official agreement with the IRS in order for collections to stop. And, the only way you are getting a payment plan that low is if you prove you ONLY have $5 extra a month. If you have credit card bills or eat out once a month, there's not a chance you'll wind up paying $5 a month.

"The IRS will automatically stop collecting on your Tax Debt once the statutes are up"...
If your Tax Debt is 10 years old or older, it's illegal for the IRS to collect on it. But beware, the following actions can extend the amount of time the IRS can collect on your Tax Debt.

• Filing for Bankruptcy
• Submitting an Application for an Offer in Compromise

Watch Out: A lot of so-called Tax Resolution companies might tell you that you can settle your tax debt for "pennies on the dollar" or pay the IRS practically nothing to the IRS. These are bogus statements, especially if they can tell you this without knowing your account details. Be careful when selecting a company to work with.

5 Ways to Choose the Right Tax Preparer

Preparing taxes is a daunting task. And although it feels like they were just filed, it's time to take another look at filing taxes. Small Business owners have a limited amount of time to take advantage of some special deductions this tax year. That’s why many business owners choose to hire a Tax Preparer or Tax Professional to handle their Tax Filing needs. But choosing the wrong Tax Preparer can lead you to owe the IRS or even be the victim of IRS Audits, IRS Liens, or IRS Levies. Make sure you avoid these 3 Red Flags and ask good questions if you don’t want to end up with an Income Tax Problem on your hands.

Red Flags
Steer clear of any Tax Preparer that does the following:

• Your Tax Preparer refuses to answer questions: You don’t want to owe the IRS, don’t let a shifty Tax Preparer get away with evading your questions. You have a right to answers.

• Your Tax Preparer wants a cut of your Tax Refund: This almost guarantees that the Tax Preparer will do anything it takes to increase the amount of your refund, even going against IRS codes and policies. This can result in IRS Liens and Levies being filed against you.

• Your Tax Preparer Guarantees a Tax Refund or IRS Settlement: There are no guarantees with the IRS, especially when it comes to Tax Refunds or IRS Settlements.

Questions to Ask:

These questions are determined by the National Society of Accountants.

• What credentials do you have? You want to work with certified professionals with excellent track records for success.

• How long have you been in practice? Experience is an excellent indicator that you’re working with a trustworthy individual or company. Look for at least 10 years of experience.

• Have you ever dealt with tax situations like mine? You want to work with a Tax Preparer with a ride range of experience. They should know how to handle every IRS Lien, IRS Levy and any other IRS problem in-between.

• Are you the person who will be handling my return? It’s important to know who will be handling your Tax Issues. You need their name and contact information.

• What organizations do you belong to and do they have a code of ethics? You want your Tax Preparer to be a member of organizations like the Better Business Bureau that require companies and individuals to adhere to a strict set of ethics. Look for the highest ratings possible within these organizations.]

Final Tip: You don’t want to owe the IRS or risk an IRS Audit because you chose the wrong Tax Preparer. Remember, if choose the wrong Tax Preparer you can be held liable for all of the damages incurred.

How to Declare Financial Hardship with the IRS and Stop Collections

Can't Pay? Don't pay! If there is no feasible way to pay your IRS Tax Debt, you can declare Financial Hardship to stop their fierce collections efforts. Although this is usually a temporary reprieve, it is still a valuable tool for taxpayers in desperate situations.

Currently Not Collectible (CNC)
The IRS cannot force you to pay if doing so would force you to go without necessary living expenses. If you cannot pay the full balance or pay the IRS through an Installment Agreement without sacrificing basic needs, the IRS is required to report the account as “Currently Not Collectible” (CNC). Basic Needs Include:

• Rent/Mortgage Payments
• Food Expenses
• Utilities
• Gas/Transportation
• Medical Bills/Expenses
• Basic Clothing

Who Qualifies for Currently Not Collectible Status (CNC)?

According to a Report issued by the IRS on January 6, 2009, IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes:

• Taxpayers that have recently become unemployed
• Taxpayers that rely on Social Security or Welfare Income
• Taxpayers facing devastating illness or significant medical bills

Applying for Currently Not Collectible (CNC) Status

The IRS needs ample proof that you are unable to pay your Tax Debt before they will change your account status to Currently Not Collectible. Here’s what the IRS will request:

• Completion of Form 433F, Collection Information Statement
• Additional documentation, such as receipts, past due bills, and bank statements
• Up-to-date Tax Filings

All contact from the IRS will cease while they determine if you qualify for Currently Not Collectible Status.

Temporary Reprieve

Currently Not Collectible status is not a permanent solution for solving your Tax Debt. Your case will be reactivated if there are any indications that your financial situation has improved. For example, the IRS collected over $400 million from cases in Currently Not Collectible Status in 2006 alone.


Case Denied
Despite the IRS’s recent claims to ease the burden on the Taxpayer, collection efforts have increased. This means it will be harder to be approved for Currently Not Collectible status unless you display exceptional need. Consider working with a qualified professional to increase your chances of getting your case approved.

Act Now, and Save. New Special Tax Break for Small Business

Small Business Tax Help: The IRS is cracking down on Small Business this year, watching every move for a slip up. But the dark cloud of added scrutiny has a silver lining. The IRS is allowing special Tax Deductions for Small Businesses.

New Small Business Tax Breaks: See if you apply for any of these new Small Business Tax Breaks.

Faster Write-Offs for Capital Expenditures

Usually, any investments a business makes are recovered through annual depreciation over the years. But now, most or all of your property and equipment investments can be written off on your 2009 Tax Returns.

An additional "Section 179" deduction allows small business to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture, and other qualifying property used in 2009. Before, the limit was $133,000.

Claim these on IRS Form 4562, more details are in the form.

Expanded Net Operating Loss Carryback

Many small business had expenses exceeding their incomes for 2008. Now you can carry the losses back for up to give years instead of the usual two. That means if you were profitable in the past but lots big in 2008, you could get a special tax refund this year.

But act fast, the deadline to take advantage of this is Oct. 15, 2009.

Exclusion of Gain on the Sale of Certain Small Business Stock

Investors in small business stock can now exclude 75% of the gain upon sale of the stock. But the stock has to be acquired after Feb. 17, 2009 and before Jan. 1, 2011 and held for more than five years.

Estimated Tax Requirement Modified

According to the IRS, many individual small business taxpayers may be able to defer, until the end of the year, paying a larger part of their 2009 tax obligations. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. More details are available in Publication 505.

The Deadline You only have a few months to take advantage of these deductions and save big on your taxes, double check with a CPA or tax relief professional to see if you qualify.

Have a Happy and Safe Memorial Day Weekend!

Even the IRS Makes Mistakes- What to do When You Don’t Owe the Accessed Taxes

I’m INNOCENT, I tell ya! Is the IRS banging your door down, and sending threatening letters when you know you don’t owe? You’re not alone. I talk with dozens of people daily that believe they don’t owe the IRS.

The Straight Answer: From my personal experience, only 2% of taxpayers who claim they don’t owe actually have a case against the IRS. If you want to stand a chance, get out your pen and paper and take some notes.

The Top 3 Relief Plans When You Know Don't Owe

Innocent Spouse: If your spouse is to blame for your debt, you can try to move the blame to them. This will work in some cases, but there’s a strict set of rules that must be adhered to. For example, if you signed the tax return with your name on it, you’re responsible for that debt. Even if you didn’t access it! So make sure you read the returns before you sign them.

Equitable Relief: If the client does not qualify for innocent spouse relief, the IRS will look to see what other equitable relief the taxpayer may qualify for. It’s hard to qualify for equitable relief, but the following two factors can weight in your favor:

-Whether your spouse (or former spouse) abused you
-Whether you were in poor mental health on the date you signed the return (or at the time you requested relief.)

Amended Tax Return: An Amended Tax Return can be used to prove the validity of a Tax Debt. For example, if you need to prove your tax deductions are justified, you might file an Amended Tax Return with documentation attached to prove your innocence. You’ll need your original tax return to file an amended one, because the IRS won’t always have it on file.

Proving your innocence: It’s incredibly difficult to prove you’re innocent of the tax charges accessed against you at any point during the collections process. The IRS is rarely wrong about these things, but it’s possible that you’re one of the few that slipped through the cracks. If you need to prove you’re innocent, I highly recommend working with a tax relief company or reputable tax attorney.

IRS Tax Deductions: Everything you Need to Know to Save Money on Next Year's Taxes

Personal Tax: Tax Season just recently passed. And I've noticed that a lot of people didn't claim all of the tex deductions that they could have. Don't throw money away! Get the scoop, and save money next year. Here's the answers to your Tax Deduction Questions.

Get Started Get your financial paperwork for the year in a nice, neat pile. You’ve calculated your how much your gross income was for the year. Now you need to figure out if you have any deductions available, if they're legitimate deductions, and how much they can save you.

Here are some of the standard deductions you can claim on your taxes:

• Interest on your home loan: That’s right the interest your lending institution assessed on your home loan for the tax year can be included on your taxes as a deduction.

• Charitable Donations: If you’ve made any donations to charity over the taxable year you can claim those donations as deductions on your tax return. If you’ve donated some clothes to the Salvation Army it really isn’t worth bothering to claim them as deductions. You really should only claim charitable donations if you donated more than $500 for the year. To get the deduction for charitable donations you should have receipts or a written statement from a charity that you did make donation and the amount of the donation. This is very important if you made any donation over $500.

• Medical expenses: If you had a large amount of medical expenses for the taxable year you can claim some of that total as a tax deduction. Medical expenses allowable for deductions include any doctor visit, hospital stay, or prescription drugs. Non allowable medical expenses include anything that is considered cosmetic medical procedures. A good rule of thumb to follow is that if your insurance company doesn’t cover a procedure, you shouldn’t claim it as a
deduction.

Small Business Tax:

While a small business owner or independent contractor can claim any of the above
deductions, there are some specific deductions that apply to self run businesses:

• If you operate your business out of your home and you can prove that part of
your home is used as your primary place of business then you can write off part of
your property tax. Even if you rent your home you can claim part of your rent as
a deduction.

• Interest on business loans can be claimed; again you must prove that the loan is
applied to your business.

• Travel expenses that pertain to business can be written off. If your vehicle is
used for business, especially if you are a private contractor, you can write off gas
and maintenance on the vehicle. Save all of your receipts.

• Equipment, and office supplies specific to your business are eligible. Be careful
on this one, certain expenses are considered legitimate and others aren’t. A new
truck to expand your business is acceptable. A new car for yourself does not,
even if you claim it is good PR because it shows you’re successful.

• You can also write off insurance premiums related directly to your business.

Confusing? If all of this is still way over your head, I reccomend working with a reliable account, CPA, or tax preperation company. Don't take a tax responsibility all on your own if you don't have to.

Can't pay the IRS? Here's your options- Learn about the IRS Payment Plans

If you owe the IRS, there’s no time to lose. You need to pay, and fast! If you call the IRS directly you’ll learn they only want to talk about one thing, and that’s how soon you can pay in full. But that’s not your only option. You can pay the IRS in monthly installments or in partial payments.

IRS Installment Agreement
Much like how you pay on your credit card debts, you can pay the IRS in monthly payments. However, there are some key differences. You decide how much you pay creditors, but the IRS determines the amount you’ll pay them monthly. They do this by taking a close look at your financial situation and determining your disposable income. So making a valid case when you apply for an Installment Agreement is a must. Additionally, the amount you pay monthly must satisfy the entire tax debt within three years. In order to apply fill out IRS Form 9465, Installment Agreement Request.


IRS Partial Payment Installment Agreement
In a Partial Payment Installment Agreement, the taxpayer makes regular monthly payments to the IRS, but the payments do not pay off the tax debt in full like the classic Installment Agreement is intended to. After the terms of the Installment Agreement are fulfilled, the remainder of the IRS Tax Debt is forgiven. Although requesting a Partial Payment Installment Agreement with the IRS is easier than submitting an Offer in Compromise, it’s still tricky. First, you need to write a letter stating your request for a Partial Payment Installment Agreement and submit it to the IRS along with IRS Form 9465 and IRS Form 433-A. Consider consulting with a qualified professional to help you with these steps.

Paying in Full When you Don’t have the Cash
Taking out a loan at the bank to pay your IRS debt is a good way to stop interest from accruing on your account. Even if your credit is in trouble you can still qualify for a loan and decrease your Tax Debt. A Bank Loan is cheaper than an IRS Debt. Penalties and Interest on Tax Debt are a lot higher than a loan from a bank. A typical Bank Loan, if you can get one, is around 6.5% interest versus Penalties and Interest on an IRS Debt which is usually 8% compounded daily. If you have the option to pay your Debt in Full with a Bank Loan, you should consider this solution.

If there is any way possible for you to pay your Tax Debt in full, consider that solution as a priority. Remember, penalties and interest continues to accrue on your Tax Debt when you choose to pay with an Installment Agreement. You’ll be saving money in the long run if you borrow money to satisfy your debt.

IRS Tax Issues: 3 Things You Should Never do with Your Taxes

Be Prepared: Most people learn more from their mistakes. But you don't want to make a mistake when it comes to IRS Issues. Here are three key things you should NEVER do when handling your IRS Tax Issues.


1. Get to it “Later”
Procrastination will drain your bank account. The IRS adds interest and penalties for every month your IRS Debt goes unpaid. Put it off long enough, and the IRS will be forced to use their collection methods against you. That's right, the infamous IRS Liens, Levies, and Seizures

2. Fail to Proofread
Even tiny mistakes can cost you big when it comes to IRS Issues. For example, when you submit Form 656 “Offer in Compromise” you have to pay a $150 dollar application fee. If you make a mistake the $150 is nonrefundable! Double check every section of an IRS document before you submit it! Common errors include:

-Leaving questions blank
-Not including supporting documents with forms
-Omitted your signature where needed

3. Neglect to File
Every year people refuse to file their taxes. They rationalize, “I can't pay my taxes this year, so I shouldn't file!” Bad idea. Failure to file is illegal. And although few people are thrown in jail, the maximum sentence you can face for failing to file your taxes is 3 years. If you are taken to court for failure to file, you will be held responsible for court and Attorney fees. If that doesn't convince you, check out some more reasons why you MUST file every year:

-Late filing penalties and interest will make your debt skyrocket out of control

-You will not qualify for Penalty Abatement or an Offer in Compromise if you're not current with your tax filing

-You can lose your promotion, or your job, for not being up-to-date with tax filings.

Final Tip: What will happen if you're already guilty of one or all three of these deadly offenses? It's never too late to fix your tax debt issues, just follow step one and get to it NOW.

IRS Tax Levy: Your Questions and The Expert Answers

Got Questions? I've got answers. I recieve tons of questions about Tax Levies, so here's the exclusive exposé. And I'll be honest, there's no simple way to remove a Tax Levy. But it's not impossible.

How Long does a Tax Levy Last? When it comes to Tax Levies, there's three tribes:

Wage Levies are continuous. The IRS can keep seizing a portion of your paycheck until your debt is paid in full.

Bank Levies are usually one-shot deals. The IRS cleans out the bank account(s) in one fatal swoop. It's cruel, but is usually used as a wake up call. The IRS can come back in a month to collect from your account(s) again, but they would rather you worked out an agreement.

Asset Seizures are the least common of the three. The IRS usually won't seize your primary residence. But if you own luxury cars, boats, vacation homes, or business assets beware! The IRS will work to seize your assets if you don't pay.

Can I sue the IRS for levying my assets?
According to IRS Code 6343B, you can only sue the IRS if you've been wrongfully levied. To be frank, I've never seen the IRS wrongfully issue a levy on anyone.

Can the IRS levy my business assets?
The IRS can seize your business assets, accounts receivable, and even shut you down if that means they'll get paid.

It's never "Too Late"... Have your assets already been seized and auctioned off? You still have a small chance at redeeming your property. This is called your “Right of Redemption,” and it gives you a chance to repurchase the property from the new owner.

Regardless of whether you are able to get money or assets the IRS has taken from you, you need to get into a tax resolution! If things are this serious, you should talk to a tax debt professional right away. Call 888-391-2037 or fill out the submission form now for a free consultation!

Have a happy and safe weekend! I'll be here on Monday to answer more Tax Debt questions.

Real Ways to Stop an IRS Tax Levy, and the Myths to Avoid

Getting This Far: You were warned. The IRS sent you notice after notice, which were promptly ignored. Then the “Final Notice and Intent to Levy” arrived. It's certified mail, and it looks serious. And it is. The IRS can seize your assets or garnish your paycheck if you don't act fast.

Can you Stop a Tax Levy? Absolutely! But don't be taken in by all the myths are rumors about stopping or avoiding IRS Tax Levies or Asset Seizures. It's a lot harder than it looks.

Myth 1: To keep the IRS from levying your assets, just transfer the ownership!

Not so fast. If you already received that Final Notice, the IRS is keeping a close eye on you and your assets. If you transfer your assets to a friend, coworker, family members, the IRS can follow your paper trail, seize the asset, AND try to levy their assets, too!

Myth 2: You can lie to the IRS about your assets, they will never find out.

The IRS can and will find out. You don't have to answer their questions, but it's a violation of Federal law to lie to the IRS about your assets. Additionally, the IRS can search public records to find out what you really own.

Myth 3: File For Bankruptcy and the IRS can't touch you!

Bankruptcy is a terrible tool for combating Tax Debt. Depending on which chapter you file, you assets could be liquidated to satisfy the debt! Isn't that what you were trying to prevent in the first place? Here's some additional reasons to avoid Bankruptcy for resolving Tax Debt:

-The Tax Lien remains
-The Statute of Limitations on your Tax Debt is extended
-Interest and Penalties continue to accrue behind the scenes

So 5 years after your Chapter 13, your Tax Debt could be waiting for you, bigger and badder than ever! The Real Deal: There's only one way to stop an IRS Levy. And that's working with the IRS to pay the debt. You can submit an Offer in Compromise, propose an installment agreement, or request a hardship plan. None of this will be easy, but they are the only real options for stopping a levy. Act fast, you don't want the IRS to seize your assets or wages.

Collection Agencies versus IRS Collectors: Who Should You Pay First?

Drowning in Debt? Don't Know What To Do? Pardon the infomercial language, but this is the reality for a lot of my readers. When the IRS Collectors AND Collection Agencies are banging on your door and calling you for their cash, what should you do? Who do you pay first? The answer is simple.

The Truth about Credit Card Debt: Credit Cards do NOT count as a necessary expense as far as the IRS is concerned. So this means the IRS expects you to pay THEM before you pay your creditors.

But what about my creditors? What about them? The IRS doesn't care, they want their money. You have to decide for yourself which debt will take precedence. But I'll share the break down of how severe the collection actions of the IRS and IRS collection agencies are.

Let’s look at the collection agencies first.

Can I be sued? I’m sure if you’re in debt collectors have already threatened you with all forms of legal action trying to scare you into paying off your debt. Here’s the deal on legal action that can be taken against you with collection agencies:

Collection agencies have to abide by the State laws that you live in. Only 19 States allow legal action such as home levies, or wage garnishment on debtors. That means if you live in one of the other 31 states all that collectors can do is call and harass you.

Repo men…Collection agencies can only repossess the property that you owe your creditors on. Collection agency repossession agents can not walk into your home and take whatever they want.

State’s rights…Even in States where collection agencies can garnish your wages or levy your home they are limited in what they can do. They can only garnish W-2 wages. If you’re an independent contractor or if your income comes from tips they can’t go after your wages.

Settled in Full…You can actually settle your debt with a collection agency with a single lump sum payment that can be anywhere from 80-40% of the original debt. Most collection agencies have the ability to negotiate a settlement right over the phone.

Now let’s talk about the IRS collection branch.

Your lifestyle in jeopardy…Let’s start with wage garnishments, home liens, and bank account seizures. The IRS is not bound by individual State laws concerning collection practices. That means regardless of where you live the IRS can take collection action against you, and they don’t even have to take you to court.

Nothing is safe…Not only that, they can seize any and all assets to pay off your debt. They have to leave you with items required for basic living, but everything: including your grandmother’s jewelry is fair game.

They can take it all…The IRS collection machine can garnish any and all money that you make or have invested in accounts. If you’re a contractor they can demand their due from your clients before you get paid. It doesn’t matter what you do; they can seize your money.

Not that easy…Settling your tax debt for a single lesser sum is almost impossible to do with the IRS. In fact only 2% of Settlements for “pennies on the dollar” are ever even accepted. Plus the process is long and difficult.

The lesser of two evils… That’s what you will have to deal with when you owe the IRS. The IRS expects their debt to be paid first, and the collection actions they can take against you make regular collection agencies seem almost charitable. Get your priorities straight, then get to work and resolve the issue.

Tax Tips for Freelance Workers: Know Your IRS Advantages and Finally Get Ahead

Good News: Considering the economic climate, many people are working freelance to get ahead. Being a freelance worker actually qualifies you for tax advantages other professions don't have. As long as you're careful and use a little common sense, you can use the IRS code to your advantage and save a little green along the way.

Deductions: Being a freelance worker entitles you to make business deductions. The follow could qualify.

-Rent or lease for business property
-Legal and professional services
-Cost of Supplies
-Cost of Utilities
-Repairs and maintenance
-Qualifying classes and seminars
-Applicable business travels

Ordinary and Necessary Rule So you want to deduct something but it's not listed above? It could qualify. According to the IRS, to be deductible, a business expense must be both ordinary and necessary.

This means the expense is common and accepted in your trade, and the expense is necessary for you to run your business successfully. The IRS claims the expense does not have to be indispensable to be necessary. This gives you room to get a little creative. Just don't claim that new hot tub as a business expense! You know better than that.

Tax Reporting: Freelance workers use Form 1040 schedule C to list all their profits and losses.

Keep your reciepts: The IRS is keeping a close eye on deductions this year, so be cautious. If you're honest and keep your receipts for all purchases, you'll have ammunition if the IRS tries to cause problems.

IRS Secrets Revealed! 3 Ways to Determine if You Qualify for an Offer in Compromise

Insider Tips: It's notoriously hard to have your IRS Offer in Compromise approved. After all, this is Uncle Sam's money we're talking about. And he's doesn't want to lose one red cent of it. But there is a secret way to crack the IRS's code. You may have read this all before, but here it is in plain English:

The Three Factors: The IRS may accept the offer based on any of the following.

1. Doubt as to Collectibility: This means you can't pay in full, no matter what. But remember, if you have assets these could be sold to satisfy your debt.

2. Doubt as to Liability: This means you're not liable for the debt. Don't apply unless you can prove it, and don't apply unless your reason is legitimate. Constitutional arguments and "it's just not fair" excuses won't cut it. According to the IRS, here's what qualifies as legitimate reasons:

(1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

3. Effective Tax Administration These are exceptional hardship cases like when an individual is recently handicapped or widowed with no income. Basically, you must demonstrate that the collection of the debt would create an unfair economic hardship for you. (Ex: If the IRS does not accept your Offer in compromise, you cannot afford to pay your medical bills.)

Don't forget: Getting your Offer approved is only the beginning. When your Offer is approved you are entering a 5 year contract with the IRS. This means you have to file your taxes on time for five years straight. If you default on a payment or fail to file, the IRS can charge you the original debt amount plus penalties and interest!

An Offer is not always the right answer for solving your Tax Debt issues. If you don't know which way to turn, consider consulting with a professional for the right answer.

Don't let High Taxes for 2011 Ruin your Life, Deeper thought on Taxes

Deeper Thought: I’ve considered opening this blog to more subjective discussion. Tax issues encompass all classes, genders, and races. It’s a definite in life. We all must eat, breathe, and pay taxes. No one wants to pay MORE taxes yet we’ll ALL be paying more in 2011. But do higher taxes mean a lower quality of life? Not exactly…

The Scoop: Mercer Human Resource Consulting shared the highlights from their 2009 Quality of Living Survey. As expected, no city in the United States makes the Top 5 in the “Overall” or “Infrastructure” categories. Hell, even if you categorize by region NO U.S city is in the top 5 for the “Americas” (They’re all Canadian). So what’s the #1 best place to live?

Vienna, Austria. That’s right; a city in Austria has the highest Quality of Living according to Mercer. And the people of Vienna are up to their eyeballs in taxes. In fact, their income tax rates are as high as 50%! Now before you think, “I’m glad I don’t live there!” lets take a look at how they can be so happy paying big bucks to the tax man.

Quality of Life: Vienna has parks, recreation, reliable public transportation, museums, green space, medical insurance, affordable housing, and a myriad of social services available to all citizens. Would you pay more in taxes in order to receive free medical care and all the perks than come with that?

Contemplate… Think about how gas prices, rent/mortgage, and medical insurance costs are literally killing you. With all of these costs practically accounted for, people in Vienna and other European cities actually work LESS than we do here.

Feedback? I’d like to hear feedback on this issue. Don't get me wrong, I’m pretty proud of our system. The IRS system is more "tough love" than most taxpayers can handle, but they've cleaned up their act bit by bit over the years. I work long hours and I don’t mind it, because I love helping the American taxpayer with their issues. But what do you think?

Have a happy and safe weekend. I’ll be back in the office on Monday as always to help with your Tax Debt issues.

IRS Tax Debt and Bankruptcy, Bankruptcy Will Not Resolve Your IRS Issues

Repeat after me, "Bankruptcy is Bad": If you've been a reader long enough, you know I'm straight with my audience. I gave a presentation to a team of legal professionals yesterday morning, letting them know how Bankruptcy affects taxes and tax debt. I'll share the highlight reel with you. And trust me, it's not pretty.

Bankruptcy and IRS Tax Debt Scenario

In my days as a Revenue Officer, I knew someone that had a tax debt of $60,000 before bankruptcy. They tried 6 different bankruptcies in a 10-year period, all in the effort of outlasting the statute on their tax debt. But when all was said and done, the debt was $200,000 and their statute was extended. How could this be?

Quick Facts about Bankruptcy and your IRS Debt

• Filing Bankruptcy will stop the IRS from filing a Tax Lien or using any collection actions against you. You will not receive a notice from the IRS.
  
  
• If a Tax Lien is already in place, there's no getting rid of it until the debt is paid in full.
  
  
• BUT, the penalties and interest are still accruing in the background, making your Tax Debt climb to shocking new heights.
  
  
• Bankruptcy extends the amount of time the IRS has to collect on your debt (Statute of Limitations). For example, if your file a Ch. 13 Bankruptcy, you are extending your IRS Statues by 5 years!
  
  
• After Bankruptcy your IRS tax debt still stands, and it's larger than ever. You may have been paying a "pennies on the dollar" amount for a while, but it's not higher than the IRS interest rate.
  
  
  
  
  

Can Tax Debt be Discharged for Good with Bankruptcy?Sometimes Tax Debt can be discharged through bankruptcy. But three rules have to be met.1. The tax year must be at least 3 years old.2. You must have personally filed the Tax Return. If the IRS filed a Substitute for Return (SFR), you CANNOT discharge the debt for that tax year.3. This last one is killer, it gets most taxpayers. The Tax Return has to be filed AND accessed more than 24 months prior to filing for bankruptcy. This means the tax return was filed and processed and you were billed 24 months prior to the bankruptcy petition date.Basically, you can't file back taxes right before your file for bankruptcy in and effort to cover those tax years.I'm in Bankruptcy now and need to Resolve my Tax Debt, Now what?It's hard to work with the Bankruptcy AND IRS authorities to resolve your Tax Debt. I've seen experienced attorneys jump through flaming hoops to work on negotiations. If you're in Bankruptcy now and need to resolve your Tax Debt, you're going to need professional help!What Can I do?
If you pass the tests above, you might qualify for having your tax debt eliminated for good. But most people will not. If you don't want to wake up to a tax debt nightmare months or years down the line, face your debt and find a solution that doesn't involve bankruptcy.

Do You Qualify for Offer in Compromise? Settle Your IRS Tax Debt for Less

Offer in Compromise Review: A Tax Blog can never review "Offer in Compromise" enough! Most know that you can either pay your Tax Debt in full or pay on monthly payments. But there IS another option, settling your Tax Debt for less. This is not always the best or even the easiest option for resolving your Tax Debt. But if you qualify, it's definitely worth looking into.

Do you Qualify for an Offer in Compromise?
It's notoriously hard to have your IRS Offer in Compromise approved. But there is a secret way to crack the IRS's code. The IRS has three ways of determining if you Qualify for an Offer in Compromise.

The Three Factors: The IRS may accept the offer based on any of the following:

• Doubt as to Collectibility: If you know you cannot pay your IRS Tax Debt in full, you may qualify. Remember, if you have assets that could be sold to satisfy your debt then you will not qualify for an Offer in Compromise.

• Doubt as to Liability: If you think the debt liability does not fall to you, you're a good candidate for an offer in compromise. But your reasons must be legitimate. Here are three legitimate reasons listed on the official IRS website:

(1) the examiner made a mistake interpreting the law
(2) the examiner failed to consider the taxpayer’s evidence or
(3) the taxpayer has new evidence.

• Effective Tax Administration: If you know you owe the taxes and can also afford to pay them, there's still hope. There may be “Exceptional” circumstances. This means that if the IRS was to collect the debt in full it would cause the taxpayer a financial hardship or an unfair circumstance. This usually applies to people who are disabled, seriously ill, or single mothers.

Don't forget: Getting your Offer approved is only the beginning. When your Offer is approved you are entering a 5 year contract with the IRS. This means you have to file your taxes on time for five consecutive years. If you default on a payment or fail to file, the IRS can charge you the original debt amount plus penalties and interest.

Be Prepared for Tax Hikes in 2011

Ow, my aching wallet... time to face the inevitable. Taxes are going way up in 2011. And not just for those who earn over $200,000. The tax increases will hit businesses AND individuals. Kiplinger.com shares the following predictions on Tax Hikes for 2011.

Probable Hike for Individuals

• Boosts in top marginal rates from 33% and 35% to 36% and 39.6%.
  
• A higher rate on capital gains and dividends for those ion the top tax brackets. but only for those in the top brackets. They can expect a 20% rate, or higher.
  
• Caps on itemized deductions for top earners. The push to limit the value of deductions at 28% is receiving opposition from charitable groups, but the government isn't backing down.
  
• More easings for the alternative minimum tax, but no repeal.

Probable Hike for Businesses

• Higher SECA taxes for owners of S Corps and Partnerships.
  
• New restrictions on worker classification. This IRS wants to crack down on firms that treat employees as contractors to save money.
  
• An elimination of some tax breaks for big corporations (deduction for domestic production, accelerated depreciation and incentives for foreign income and oil production.)

What does it all mean? The time is now to get prepared for 2011. If you're not in compliance with the IRS and you owe money, you must get your debt situation taken care of so you can have money set aside for the next round of taxes. It's a big blow to our finances, but preparation is the key to preventing future IRS issues. Now is a good time to look into working with a tax resolution professional or reputable CPA for handling your tax issues.

Small Business Tax Resources: Prevent Tax Debt Before it starts

The IRS is out to get your small business. Don't believe it? Don't take my word for it, take a peek at the treasury budget for 2009. The IRS hasn't exactly announced it, but they're cracking down on Small Business to collect revenue this year. Here's a verbatim quote:

"New enforcement initiatives will improve revenue reporting of small businesses and the self-employed—estimated to be the largest component of the tax gap..."

I decided to provide a couple of links for small business owners. Hopefully with great resources to reference, you won't have too much trouble keeping the Taxman out of your wallet this year.

• Business.gov (Official government resource, grants, tips, and more.)
  
  
• IRS Small Business and Self Employed Tax Center
  
  
• Starting, Operating, or Closing a Business (FAQ)
  
  
• Small Businesses Forms and Publications
  

Debt Help Services If you're already in trouble and none of the resources provided give you the answers you need, consider consulting with a Tax Resolution professional for advice.

The IRS's Official "Dirty Dozen" Tax Scams

Review I may have covered the issue before, but the time is ripe for scammers and I'm a little overdue for a comprehensive review. On April 13, 2009, the IRS updated their "Dirty Dozen" Tax Scams list for 2009.

1. Phishing

Phishing is when scam artists attempt to trick you into revealing financial information via Email. The Emails usually look official (see my previous post), but they're not. The IRS states that they NEVER initiate unsolicited e-mail contact with taxpayers about tax issues.

2. Hiding Income Offshore

This IRS has announced that they intend to aggressively pursue taxpayers and promoters involved in abusive offshore transactions. Don't expect to evade taxes by hiding income in offshore banks or by using offshore debit/credit cards or wire transfers.

3. Filing False or Misleading Forms

Don't use use false forms or file false or misleading information.

4. Abuse of Charitable Organizations and Deductions

Donating items to the Goodwill? Don't claim two old sweaters you donated are valued at $2,000. Basically, the IRS is keeping a close eye on non-cash donations to charitable organizations. If something looks fishy, they'll investigate.

5. Return Preparer Fraud

Be careful when choosing a Return Preparer. Some Return Preparers promote providing large refunds, but they don't tell you that they intend to take a big portion of your refund AND charge inflated fees to do it.

6. Frivolous Arguments

Quit the excuses. You have to pay your taxes, no matter what. Certain promoters encourage frivolous, unreasonable, and unfounded claims to avoid paying taxes owed. But if your file a tax return based on any of those positions, you could be subject to a $5,000 penalty.

7. False Claims for Refund and Requests for Abatement

The IRS states that many promoters are encouraging people to use Form 843, Claim for Refund and Request for Abatement, even though they have not previously filed tax returns or it does not apply to them. Participate in this scam, and you're committing Fraud. Don't request abatement of assessed tax without good reason.

8. Abusive Retirement Plans

The IRS announced that they're looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs and as transactions that are not properly reported as early distributions.

9. Disguised Corporate Ownership

Some people form corporations in certain states so they can disguise ownership of the business and/or financial activity. This allows them to underreport income, and make false. But the The IRS is cracking down on corporations this year, and they're working with state authorities to bring these businesses into compliance.

10. Zero Wages

Don't file phony wage or income related information return. People are using Form 4852 (Substitute Form W-2) or a "corrected' Form 1099 to reduce taxable income to zero.

11. Misuse of Trusts

According to the IRS, unscrupulous promoters have urged taxpayers to transfer assets into trusts. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from the IRS.

12. Fuel Tax Credit Scams

The IRS is receiving unreasonable claims for the fuel tax credit. People like farmers, that use fuel for off-highway business purposes, may be eligible for the credit. But you can't claim it if you simply use your car to get back and forth to work. Since fraud involving this credit is considered a frivolous tax claim, you run the risk of a $5,000 penalty if you're caught.

How to Report Suspected Tax Fraud Activity

People Email me often to ask how to report Tax Preparers and Accountants for Fraud. You can do any of the following:

• Use Form 3949-A, Information Referral
  
• Send a detailed addressed to the Internal Revenue Service, Fresno, CA 93888
  Include specific info, like who is being reported, the activity being reported, how the activity became known, when the violation took place, the amount of money involved, and any other details you have. You won't have to self-identify, but it would be helpful. Your name and information will be kept confidential.
  

Rewards Being a snitch might get you paid! Fill Form 211, Application for Award for Original Information to apply for your reward after you reveal the scammer. Have a Happy and Safe Weekend!