Small Business and 941 Payroll Taxes

Has your small business taken off? Are you finding that you need to hire more and more employees to keep up? This is an exciting time for you. It’s also an exciting time for the IRS because more money and more employees that need paychecks mean more chances for you to screw up with your taxes.

Let me tell you something…when I was an IRS-Hitman we used to love small and independent businesses. Why you ask? Because if one of these businesses made even the slightest clerical error on their taxes it could balloon into a massive debt and we would get to seize the business.

They’re circling…IRS agents are like vultures, and your business is a dying animal in the desert. Sooner or later they’re going to get you.

Get out from under the IRS…So what can you do to avoid the IRS taking everything it’s taken you years to build? Pay them the right amount of payroll taxes and pay them on time. Doesn’t that sound simple? Is anything with the IRS ever simple though?

Do you need help? The IRS-Hitman does have a couple of suggestions for dealing with the IRS, and keeping them out of your business.

Check the numbers…Make sure the right amount of taxes is being taken out based on your employee’s W-4 form. Taking out too much or too little can not only screw up your 941 quarterly filing, but it can also screw up your employee’s tax return.

No later than…Make sure you pay the IRS the payroll taxes on time every three months.

No exceptions! Do not put it off until the next quarter because you’re in a financial bind at the moment and need to use that payroll money for your business. Remember that isn’t your money, that’s Uncle Sam’s; and he’s worse than the mob when it comes to collecting on a debt.

Be a success! If you start to get larger and larger numbers of employees and your business is growing you should get an accountant or CPA to handle your books. Once your little business gets bigger there are so many tax forms and different filings that have to be done there’s little chance of you being able to do it. Besides you need your time to focus on running your successful business. Also if you do happen to get in trouble with the IRS you have all the tax records in nice, neat, books to make sure an IRS audit doesn’t turn into a serious disaster.

IRS Scam Help- The Big Income Tax Fraud Signs

The IRS releases an official list of IRS Scams to avoid every tax season, when Income Tax Fraud issues become rampant. Here's a review of the top Income Tax Fraud issues the IRS warns about as part of their IRS Scam Help program. Don't trust any IRS Tax Professionals that are guilty of any of these scams.

Phishing- This is a tactic Income Tax Fraud scammers use to trick victims into revealing their personal information. This is usually in the form of an e-mail from "The IRS" requesting financial information. Watch out, this is Income Tax Fraud, the IRS never sends e-mails to personal accounts and never requests personal financial information online.

Offshore Income- Hiding income offshore is a version of Income Tax Fraud that the IRS will not forgive. The IRS is aggressively pursuing those who hide income in offshore bank accounts.

Filing False Forms- Filing false or misleading forms to the IRS counts as Income Tax Fraud and typically involved filing false withholding credits. Many taxpayers and even some IRS tax Professionals will tell you it's okay to overstate deductions or basically lie on your tax returns, but this is Income Tax Fraud. Don't follow bad advice about Filing False Returns.

Fuel Tax Credit Scams- The IRS is receiving claims for the fuel tax credit that are unreasonable. You cannot use this credit for nontaxable uses of fuel when your occupation or income level makes the claim unreasonable. This is considered Income Tax Fraud and can result in a stiff IRS penalty of $5,000. Don't claim this credit improperly, even IRS Tax Professionals urge you to do so.

Choosing the right IRS Tax Professionals to get IRS Scam Help
It's important to choose IRS Tax Professionals whom you trust so you don't wind up with Income Tax Fraud. One way to know whether the IRS tax Professionals you are considering using are trustworthy and can provide IRS Scam help is to check their Better Business Bureau rating.

First, you'll want to make sure the company is a Better Business Bureau accredited business. Then you'll need to check and make sure the company has an A Rating or higher, which proves you're working with a company that can be trusted.

Small Business Tax Filing Forms: File Your Taxes and Avoid IRS Debt

It is tax time again… Are you ready to take care of your taxes for your small business? Make sure you have all the right forms to send in or you could be the victim of an IRS audit or worse, and IRS debt! Here are some of the forms you should have to keep track of your taxes and make sure you file your return correctly.

Tons of paperwork… Let’s go down the list of forms you should have to file your taxes, specifically the forms that have to do with your employees.

• W-4 Employee’s Withholding Allowance Certificate: This one is obvious. Any new hire you have has to fill this out. They have to let you know what their filing status is and how many exemptions they can claim. This form is critical because it determines how much in taxes you take out of their check.

• W-5 Earned Income Credit Advance Payment Certificate: If you have employees who are eligible for the Earned Income Credit can get part of their credit payment in advance when they fill out this form.
  

• W-2 Wage and Tax Statement: Again, this is the form everyone knows. It’s the form an employee receives at the end of the year showing their earnings as well as how much was taken out of their salary for taxes. As an employer you are responsible for making sure the W-2 is correct and the proper amount of taxes were taken out.
  
• 940 Employer’s Annual Federal Unemployment Tax Return: This is the form you need to fill out to show how much you paid out in unemployment.
  

• 941 Employer’s Quarterly Federal Tax Return: I don’t need to tell you how important this is! You have to file a 941 payroll tax every quarter, no exceptions. This form shows how much you paid your employees for the quarter and how much was withheld for taxes. You have to pay the IRS the withheld amount.
  
• 1099-MISC Miscellaneous: This is your income minus any applicable deductions. You also report any contractors you hired on this form as they’re not regular employees.

Just in case… Make sure you have copies of all these forms for both your employees and yourself. The IRS takes a special interest in small businesses and just waits for you to make a mistake so they hit you with a debt and come after you. Don’t let the IRS hurt your business because of a single form.

You may already have a copy, but just in case here’s the link to the IRS Employer’s Tax Guide.

Consequences of Refusing to File Your 2009 Taxes

For One Reason or Another...you didn't file this year. It could be because you forgot, or maybe something was financially keeping you from doing so. Or maybe you just didn't want to file because you thought you could beat the system. Unfortunately to the IRS, they don't really pay attention to why you didn't file. All they know is you didn't and you've just given them the green light to attack. Well it's important to know exactly what happens when you don't file.

It Starts With Penalties: As soon as the IRS finds out you haven't filed, they start slapping your debt with penalties. The Failure to File penalty is 5% of the debt per month, up to 25%. Chances are good that they will also hit you with a Failure to Pay penalty, which is 1% of the debt each month. There is no cap on the Failure to Pay penalty so the longer you wait, the higher it grows.

Don't Forget the Interest: As if you didn't have enough on your plate with penalties accruing, you've also got to think about the interest. The standard for interest 6% of the debt per year. However, interest is compounded daily on top of penalties so the annual interest rate is actually much higher than that. Keeping that in mind, if you owe $10,000 dollars, if a year goes by you'll owe $15,000 dollars; let 3 years go by and you'll owe about $35,000 dollars. And that's just from interest and penalties.

Jailhouse Rock: Not to mention, the IRS can legally send you to jail for not filing. You have to understand, the IRS is the largest collection agency in the world. They're going to get their money. You not filing, whatever the reason may be, tells the IRS that you don't care. That does nothing but make their blood boil and give them reason to take their actions to the fullest extent of the law. In this case, you'll be behind bars.

How to Stop It: The best way to avoid these situations is to file on time, every year. Even if you can't pay off an amount you might owe, you can certainly call the IRS and set up some form of payment. It's much better than letting the penalties and interest add up just because you didn't file.

Too Late? If your debt is already sky high because of penalties and interest and you know the reasons you didn't file was because of extenuating circumstances (death of a family member, illness of a family member, etc.) then you may qualify for penalty abatement. Speak to a reliable tax professional and see how you can get your issue resolved. Even if you can't get penalty abatement, you may qualify for something else that can put you in a much better spot than the one you are already in.

Not even IRS Employees are Immune to the IRS

I've stated it before, but not even IRS Employees can avoid the fierce wrath the IRS employs to those who break the tax law. Recently, IRS employee Candace M. Morrow admitted that she failed to report her income while she received federal rental assistance between 2005 and 2009. She could face up to a year in prison and she may even lose her job!

Tax Debt and Losing Work: Many government workers are in danger of losing their jobs if they owe the IRS. IRS Employees are no exception. If the IRS will bring up chargers against one of "their own", what chance do you think you have this tax season?

IRS Federal Charges: Appearing in court, Candace M. Morrow plead guilty to a charge of theft of public money. She could face a prison sentence of six to twelve months when sentenced on July 12.

It's not Worth it to try to con the IRS. You'll face fines, you could lose your job, and you could even wind up in jail. Be sure to file and pay your taxes on time this year to avoid serious tax issues.

Signs of a Bad Tax Help Company

Many people make mistakes like Candace M. Morrow because they took the wrong advice from a Tax Resolution company. The following signs are hallmarks of a bad Tax Help Company that will take your money and lead your further into debt with the IRS.

1. Signs of a Bad Tax Help Company, Retainer Fee: Retainer Fees and Retainer Agreements are binding contracts. Once you sign one, a Tax Help Company may charge more fees later. Look for Tax Help Companies with a flat fee that doesn't change.

2. Signs of a Bad Tax Help Company, Pressure Agreements: a Bad Tax Help Company will try to pressure you into an agreement, even if you are not sure if they will help you avoid tax issues. You need to work with a Tax Help Company that won't pressure you on the phone or in person.

3. Signs of a Bad Tax Help Company, Asking for Personal Information on the Phone: A Bad Tax Help Company will request your personal information over the phone. Never give your important personal information over the phone. It's a good idea to simply hang up if a Tax Help Company requests information over the phone. These kinds of Tax Help Companies won't help you Avoid Tax Issues, they could lead you further into Tax Debt!

Do-it-Yourself Tax Filing Tips for 2010 Taxes

There's officially less than one month to get your taxes filed. Many taxpayers are crunching the numbers and filing their own taxes rather than hiring a professional to file their taxes for them. It's truly a sign of the times. But could this be hurting your chances at a return?

Here are a few tips that will help you more effectively avoid mistakes when you file taxes on your own:

1. Sign Your Names As the IRS puts it, a unsigned return is the same as an unsigned check. INVALID! Filing Jointly? Make the Spouse sign, too!

2. Incorrect or misspelling of dependent’s last name - The dependent's name must be spelled exactly as it appears on their social security card.

3. Recovery Rebate Credit - This is an important one, as many returns filed in 2009 have errors involving the Recovery Rebate Credit. This is a credit for people who:

-DID NOT RECEIVE A STIMULUS PAYMENT IN 2008, or
-DID NOT receive the MAXIMUM amount.

You need to know how much you received as a stimulus payment for 2008. Go here to find out how much your stimulus payment was.

4. Incorrect or missing social security numbers - Any Social Security Numbers listed on the Tax Return must be entered exactly as it appears on the Social Security Cards. Double Check!

5. Incorrect bank account numbers for Direct Deposit - You want your money! Check and double check your routing and account numbers.

6. Filing status errors - Do you research and make sure you choose the correct filing status for your situation.

7. Math errors - Get your calculators out and make sure you review all addition and subtraction. This is one of the easiest ways to make a mistake. When you file electronically, the software takes care of things for you, but you can't blame Turbo Tax if your taxes don't get paid! Double check electronic returns as well.

8. Computation errors - Here's where the IRS sees the most computation errors:

-Taxable Income
-Withholding and Estimated Tax Payments
-Earned Income Credit
-Standard Deduction for age 65 or over or blind
-The taxable amount of social security benefits
-Child and Dependent Care Credit

9. Incorrect Adjusted Gross Income information - Electronic returns require identity verification with a personal identification and your AGI number. AGI is the Adjusted Gross Income amount for your 2007 federal tax return. You can't use an AGI amount from an amended return, Form 1040X or a math error correction made by the IRS.

-If you filed electronically last year you can use your prior year PIN.

10. NOT working with a Professional - When people have very complicated IRS Problems, I'm earnest with them. I tell them to bite the bullet and hire a reputable CPA or Tax Resolution Professional. You will not regret this investment. Frustrated individuals are so much more likely to ignore the issue, making things worse.

We Hate Delays: Errors on Tax Returns delay processing, and errors made on Tax Returns will delay your return check! Avoiding these common errors will help ensure your refund arrives on time.

Last Minute TaxTips- How to Get an Extension of Time to File

Special IRS Bulletin: The April 15th deadline to file IRS Taxes swiftly approaches. If you're not ready to file and don't think you'll be ready with the next few weeks, it's a good idea to get an Extension of Time to File your taxes. I've detailed the steps below.

Extension of Time to File, Step by Step Guide

Step One: Pull your head out the sand and get to work. There are more colorful ways to state this, but really, stop putting this off!

Step Two: File Form 4868 Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. (Available at IRS.gov)

Step Three: File this form by April 15, 2009. I’d recommend downloading the form and getting this out of the way NOW before your forget to do it later.

There you have it, three steps and it couldn’t be easier. But how do you know if you qualify? As always, I’ve got you covered:

Qualifying for an Extension of Time to File

To get extra time you must:

1. Properly estimate your 2008 tax liability using the information available to you
2. Enter your total tax liability on line 4 of Form 4868, and
3. File Form 4868 by the regular due date of your return.

Word of Caution: I’m not trying to mislead anyone. An Extension of time to File is not an Extension of Time to PAY taxes owed. No matter what, they’re due April 15th. If you do not pay on time you will be charged penalties and interest. Form 4868 does not extend the time to pay taxes.

Claiming the Homebuyer Tax Credit on 2009 Tax Returns

I've been receiving many questions about how to claim the Homebuyer Tax Credit on your 2009 Tax Returns. The IRS announced some new rules and regulations on how to do this on January 19, 2010. Here's a quick run down.

First, you must fill out and turn in Form 5405, thew new First Time Homebuyer Tax Credit form. Then you have to turn in the following:

* A copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.

* For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

* For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.

Tips on Declaring Financial Hardship with the IRS

The Economy is Shot We're losing our jobs and ours homes. Many taxpayers don't have money to pay the IRS back. Don’t let the IRS back you into a corner@ If there is no feasible way to pay your IRS Tax Debt, you can declare Financial Hardship to (temporarily) halt 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).

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.

First Coast News - The IRS Dirty Dozen Tax Scams

I work closely with the Tax Attorney Ronnie Hicks. He was recently featured on First Coast News where he discussed the IRS's "Dirty Dozen" Tax Scams in detail. I highly recommend checking it out. A full article is listed here as well.

Options When You Can't Afford to Pay IRS Debt

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.

Tax Settlement Secrets- See 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.

Get IRS Penalty Abatement with Tax Help

If you’re facing penalties from the IRS because you fell behind on your taxes, you’re not alone. You are among hundreds of American who have the same exact problem. Did you know that if the IRS sticks you with penalties you have recourse? It’s called a Penalty Abatement and it can save you tons of money, and worry.

Stop the Fees! Penalty Abatement is when the IRS forgives some or all of the penalties that accrued on a tax debt. I’ve even seen cases in which the IRS will completely revoke the penalties. Their penalties are sometimes automatically added to a delinquent account without even considering individual circumstances. The IRS doesn’t even think about how you got into the problem in the first place and they just slap you with penalties for not paying. This means that even if you have a good reason for paying them late, the IRS doesn’t know and the system will continue to assess fees.

How to Qualify:

1. You must provide a sound reason as to why you think you qualify. You must provide all the details of the circumstance that prevented you from paying your taxes on time.

2. The IRS requires that you send all notices showing the penalty that you received, along with all documentation showing reasonable cause for being late.

3. You must fill our Form 843 (a request for abatement form)

Your Case Matters! Everyone’s specific case is different and what the IRS deems as acceptable depends entirely on the individual case. As an IRS-Hitman, I can tell you there is no magic formula in getting penalty abatement. The IRS will make the decision after looking at your situation. In most cases I’ve seen, it could take professional help to get tax penalties removed.

Play the Game! Once you have filed the proper paperwork, you will need to wait. If you do not hear from the IRS within 45 days or so, you will need to send another request. You don’t have to reinvent the wheel on this one; all you have to do is change the date on your request. The IRS should ideally respond within two months. If you did not get the response that you were hoping to get, your next recourse is to get professional assistance to see what else you can do.

Above all else, it is important you try everything you can to get out from under your tax debt. It is best that you try for a penalty abatement in addition to getting into a formal tax resolution. That way, if you are rejected, you will not be left vulnerable. If you are looking to apply, make sure you meet the above requirements. You should talk to a tax debt professional to find out if your situation would qualify.

Bankruptcy Doesn't Discharge Tax Debt- Get the Scoop

I receive tons of e-mails throughout the day from people in desperate need of Tax Help. I never mind answering questions, feel free to drop me a line if you have specific questions. But I never usually share them along with my answers with the readers. But now, I'm sharing the answer to one pressing questions about Bankruptcy:

I filed for chapter 7 on 1/31/09 and obtained a discharge on 5/19/2009. At the time of my filing for chapter 7, I had IRS debts for the following tax periods;

Years 2000, and 2004 both filed on 12/5/2005
and year 2005 filed on 10/30/2006

I thought that I could wipe out the 2000 and 2004 tax liabilities since it's been more than 3 years from the time they were due, but when I spoke to the IRS today I was told the debts are not dischargeble. Is there something here that I'm missing? The person that I spoke to had a typical IRS response? what can I do? Is it better to write to them and if so to whom?

My Reply:
There are a couple of factors that could rule you out of having your tax debt discharged.

1. You had to have personally filed the return, if a Substitute for Return or SFR was filed, that tax year will not qualify

2. The Tax Return has to have been filed and accessed more than 24 months to filing for bankruptcy. This means the returns were filed AND processed and you were billed for tax debt 24 months before applying for bankruptcy.

Most taxpayers can’t clear those hurtles to have their tax debt discharged, and unfortunately it seems a lot of bankruptcy attorneys will erroneously claim tax debt can universally be removed. And about the “typical IRS response,” if the person you spoke with had the, “Yeah right, you owe it” attitude, that’s the culture of the organization. Typically, the Taxpayer does owe the IRS, and this makes them particularly difficult to communicate with.

The IRS Announces Easier Tax Settlements

Recent Tax Settlement Announcements: IRS Commissioner Doug Shulman recently announced that the IRS is loosening it's rules for negotiating Tax Settlements (Offer in Compromise) to allow taxpayers hit by the recession to pay less than they owe.

Why the change? IRS Commissioner Doug Shulman claims that IRS Agents will be more lenient for those who have had a drop or loss of income due to the current economic recession.

The IRS will process over 100 million tax returns this year, and most people who file will qualify for Tax Refunds. However, with the loss of more than 8 million jobs since the start of the U.S Economic Recession, many taxpayers will not be able to make payments toward their tax debt.

But is it true? This goes along with what the IRS announced last year. There was talk of a "kinder" and "gentler" IRS all while they ramped up their collection efforts behind the scenes. If the IRS is trying to have more mercy, why do I keep getting hundreds of emails and calls from taxpayer that needs help fighting the IRS?

About Tax Debt Settlements: These new announcements might give people the wrong idea about Tax Debt Settlements. I want to go ahead and rebuke some of the common myths surrounding Tax Debt Settlements, actually known as an IRS Offer in Compromise.

1. First of all, less than 1% will qualify for "Pennies on the Dollar" settlement amounts proclaimed by shady tax companies and as seen in commercials.

2. Second, it's very hard to qualify for an Offer in Compromise at all. Only those who truly cannot afford to pay the IRS even in installments will qualify to have a Tax Debt Settlement with the IRS.

3. Third, unemployment alone will not help you qualify to Settle your Tax Debt with an Offer in Compromise. The IRS will evaluate your financial situation, they will predict the amount of money you stand to make when you become employed again.

I'm not convinced by the IRS's sudden announcement that they will make Tax Settlements easier for taxpayers in need. I think they'll continue to do the same thing they always have, fiercely collect no matter what that means to taxpayers.

How To Handle a Sudden IRS Attack

The Last and the Worst: Most people don’t put the IRS at the top of their priority list and here’s why: If you don’t pay your electric bill, they cut off your power. If you don’t pay your car insurance, they terminate the policy. You could go years without hearing anything from the Federal Government. So why worry right? Wrong! The thing that separates the IRS from every other collection agency in the world is that when they come, they come hard!

Round One! So you haven’t filed in the last few years. You’ve probably gotten a couple of letters from the IRS, asking about your debt. Now you find yourself holding a letter that says Final Notice. While this may not seem important at the time, you’d better pay attention! That’s the IRS’ final warning before the onslaught begins. And trust me; you don’t want to be on the receiving end of an IRS attack. Here’s what they will do.

Levy – This tactic involves the IRS putting a federal lien on your bank account and holding all funds. In short, you’re frozen out of your bank account. And if you have direct deposit, you can kiss your paychecks goodbye. The worst part? Neither you nor your bank has any say in the matter.

Lien – A tax lien can be placed on your credit, meaning you can’t do anything that involves credit payment. This can ruin your credit score for the rest of your life! The IRS can also place liens on your house, making it impossible to sell or renovate. Eventually, these liens turn into seizures, and the IRS sells your property in order to pay off the tax debt.

Wage Garnishment – This is my personal favorite, and probably the most effective. The IRS will contact your employer and start taking a percentage of your check in order to pay off the debt. They can legally take out up to 80%, and a good IRS Hitman will take as much as he can.


Here’s What to Do: File your taxes! Even if you owe money, and you have to file an extension, make sure you file. The IRS can put you in jail if you don’t file, and the penalties are up to $50,000 per year not filed. If you know you’re not going to file on time, file for an extension. Contact with the IRS is extremely important. The IRS is not the collection agency to mess with.

Going at it Alone: An IRS debt can be a terrible situation. As an IRS Hitman, I know how brutal they can be. If you’re in a rough spot, and you’re losing hope, contact a tax professional. They have the knowledge and experience needed to get the IRS off your back.

How to Remove Tax Liens from your Credit Report

Tax Liens wreck havoc on your Credit Report. And the bad news is, Tax Liens can remain on your credit report for years after you have already paid off your Tax Debt. Unpaid Tax Liens can remain on your Experian credit report for up to 15 years, and they will remain on Equifax and TransUnion Creidt Reports indefinitely!

When you do finally pay off the Tax Debt, a record of the paid Tax Lien stays on your credit report for seven years! The only way to remove the Tax Liens is after they have expired. Here's a quick guide on how to Remove Expired Tax Liens from your credit report.

The Facts: The Federal Fair Credit Reporting Act allows you to remove credit information that's no longer timely from your credit report. Act on your rights!

1. First, request copies of your credit reports from Equifax, Experian, and TransUnion. The law allows you one free copy of your credit reports annually. Use AnnualCreditReport.com to gather a copy.

2. Review your credit reports, make sure your tax debt was paid seven years ago. If your Tax Liens were paid seven years ago and they have not been removed, you can dispute the negative information with the credit reporting agencies. If the paid Tax Liens are less than seven years, you have to wait for the chance to remove them.

3. If seven years have elapsed, contact all three credit reporting agencies. You can send an email (their email addresses are on their websites) or you can send letters. Be sure to keep the emails and letters from your records. Make yourself copies and send your letter to the consumer reporting agency by certified mail, return receipt requested.

Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111

Experian
P.O. Box 2104
Allen, TX 75013
(888) 397-3742

TransUnion
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4. Whether you write a letter or send an email, have copies of supporting documentation included, like documents that prove when the lien was paid.

5. Wait 30 days for a response from the Credit Reporting Agency. They should reply with a copy of your Credit Report that reflects the new changes.

Don't let Tax Liens remain on your credit report forever. If seven years have passed since you paid your tax debt in full, get it removed.

Real Ways to Stop a Tax Levy

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 accure 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 propose an Installment Agreement, get into a Currently Not Collectible state, or request an Offer in Compromise. These all address vastly different problems. So, it is best to talk to a tax debt professional before deciding what course of action you wish to take. Act fast, you don't want the IRS to seize your assets or wages.

The Truth about Tax Liens

Tax Liens are devastating, so why would the IRS continue to impose them? The answer is simple; the IRS will continue to impose Tax Liens because they work. As long as Liens are being filed, taxpayers will be strained into paying their Tax Debt!

Ruined Credit
Once a Lien is filed your credit rating will be harmed and it will be nearly impossible to buy a house, buy a car, get a new credit card, or even sign a lease. Consequently, it is very important to work to resolve your Tax Debt before a Lien is filed against you.

Tax Liens Defined
Basically, Tax Liens give the IRS legal claim to your property as security or payment for your Tax Debt. When the IRS files notice of the Tax Lien, creditors are publicly notified that the IRS has a legal claim against your property. This includes:

• Property acquired after the Tax Lien is filed
• Accounts receivable
• House, Car, or Real Estate

Releasing a Tax Lien
There are several options for releasing a Tax Lien. Unless you are paying your Tax Debt in full, it will be hard to remove the Tax Lien without professional help.

Options for Releasing a Tax Lien:

• Payment in full: The Lien will be removed when the Tax Debt is paid in full.

• Withdrawing Liens: You can file to have your Lien withdrawn if Notice was filed too soon, you enter an Installment Agreement with the IRS, or if withdrawing the Lien will speed up collection of the Tax Debt.

It’s a good idea to consult a professional to see which option would be best suited to your case with the IRS.

Statute of Limitations, the Ten Year Rule

Usually, Tax Liens are automatically released ten years after the Tax Debt is accessed. If you feel that the IRS has negligently failed to release a Lien and that the Statuary period has passed, you should consider working with an attorney to have the Lien removed. You can even sue the Federal Government for damages incurred by the Lien.

How to Fight Against Tax Leins

The Silent Killer You may have heard of the IRS Tax Levy. It's a vicious tool the IRS uses to seize money and assets. Tax Liens don't transfer your property to the IRS, but they certainly mess up your credit. Not many people know how serious the dangers of a Tax Lien are. Educate yourself; don't wind up with a ruined credit report and no assets to your name.

Goodbye, Credit! The most common Lien is the one placed on your credit. This is the kiss of death for your credit report. Your debt with the IRS and your failure to pay it is now public knowledge! Now, it's impossible to take out a loan, get a car, open a lease, or do anything else credit related.

The Clock's Ticking: Maybe your credit is already shot? Maybe you kept ignoring the IRS because you think a Lien can't hurt you? Think again! The longer you go without paying your IRS debt, the closer the IRS gets to turning a Lien into a Seizure. So if you don't settle your IRS Debt, get ready to ride the bus!

30 Day Deadline: A Tax Lien can be removed. The IRS must notify you that they've filed a Lien within five days after it's filed. You then have 30 Days from the day after the 5-day period expires to file an Administrative Appeal. But it won't be easy. It’s a good idea to hire a certified tax professional with an excellent track record. With help, you can avoid having bad credit. You can also avoid being homeless!

Be Prepared: The IRS will not remove a Lien without a fight. They gave you notice; you ignored them. Now they want to make you pay. But you don't have to take it! Now you know how to fight back.

More Tips for Choosing a Tax Preparer

Even if a professional is preparing your returns, it's important to note that ultimately, you're the one responsible of your Tax Returns. If your Tax Preparer makes a fatal error, you take the blame. Be very cautious when you choose a Tax Preparer.  Here's more tips to help you choose the right one.


1. Check for testimonials and ask for Recommendations
Real Client Testimonials are a good sign that a company or individual you choose to work with is legitimate. Check out the company website and look for testimonials. Additionally, ask friends and family about who they worked with to prepare their taxes. Good word of mouth goes a long way.

2. Check their Qualifications
You need to make sure you work with a qualified, knowledgeable Tax Preparer. Ask about their experience, certifications, and qualifications. Don't be shy to ask about their experience and track record for success.

3. Through thick and thin, Ask about Audits in Advance
You want your Tax Preparers support in the unlikely event of an Audit. Even if taxes are filed properly, an Audit could occur. You want to make sure your Tax Preparer will be available if you need help during an Audit. Ask if your preparer has Audit experience, but watch out if they have an ample amount of Audit experience!

4. Make sure they'll sign your return.
The law actually requires Tax Preparers to sign and date the return with an identifiying number. If they refuse, they have something to hide. Do not work with Tax Preparers that refuse to sign your return.

5. Check the Better Business Bureau
If you choose to work with a Tax Company, check the Better Business Bureau Rating for this company at bbb.org. You want to work with a BBB Accredited Business with an A Rating or higher.

Do your research and pick carefully if you choose to work with a Tax Preparer. A little caution and preparation will prevent Tax Debt issues in the long run.

Steps to Declare Financial Hardship with the IRS

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.