Back Taxes Help Blog for State and IRS Tax Debt» Tax Settlements – Partial Payment Installment Agremeement, Uncollectibe Status, Offer In Compromise

Having Trouble Paying your Installment Agreement with the IRS?

Manny Davis — Fri, 09 Jul 2010 14:00:03 +0000

So, you’ve entered into an installment agreement with the IRS and now realize that you are unable to pay, what do you do? First off, don’t panic or become discouraged- the economy is extremely volatile and tough economic situations are understandable- even to the IRS. Take a moment to consider your situation, and how you arrived at your current state. Your wages may have recently been cut, or maybe you have been unemployed. Perhaps you have been negatively affected by an economic cycle, or you have taken ill. Whatever the case may be, it’s important to formulate and focus on your next actions rather than dwell on the past.

That being said, make sure to act quickly in informing the IRS of your situation and inability to pay. The worst thing that one can do when unable to taxes would be to do nothing, and unfortunately this seems to be the case time and time again. While it may be easier to ignore the problem and withhold payments for the time being, just one missed payment can begin a slew of unpleasant events with the IRS. It’s likely that the IRS will immediately detect the defaulted agreement and take action much quicker than you expect. And, once they begin, garnished wages, tax levies, and other forced collections, all become likely scenarios- causing you even more money.

Sound appealing? We didn’t think so, either. And, even though contacting the IRS to let them know that you cannot make your payments on your tax installment agreement may not be the most enjoyable thing to do, it’ll sure save you a lot of unnecessary stress and trouble. Be sure to explain your situation carefully, capitalizing on any details you deem important. Also, prepare for the call before hand with proper dates and documents to back up your assertion. If your case appears valid, the IRS will likely understand- they are human, too. In most cases they’ll work with you to adjust the installment agreement- either reducing the payments or even deferring them for a later time.

However, the IRS may not be so understanding if they investigate and consider your monetary actions and inability to pay unwarranted. Be advised that the IRS will study each situation carefully; even requesting income and expense documents, in order to make sure that an individual is truly unable to pay because of ill circumstances rather than unwise monetary actions- like gambling in Vegas or making extravagant purchases. But, even if this is this case, contact the IRS anyway, because defaulting on a tax installment agreement with no explanation can yield far worse consequences, as previously discussed.

Spotting Tax Settlement Scams

Debra Dragon — Tue, 09 Mar 2010 06:43:06 +0000

If you find yourself in the unenviable position of owing the Internal Revenue Service (IRS) taxes and are looking for help in paying or reducing the taxes owed, use caution before enlisting the help of a company that offers tax settlement services. The IRS is sometimes willing to negotiate the amount of taxes owed through their Offer In Compromise (OIC) agreement. It is important for taxpayers to know that this is not a common practice and you must qualify under very specific circumstances to even be considered for this type of agreement. As a general rule the IRS does not extend the OIC to any individual who they believe can pay the liability in full or through a payment plan. Understanding these facts can help you avoid being scammed by a number of companies that offer services which are not legitimate and may result in you facing more financial problems in the future. The following tips can help you weed out the companies that are just interested in relieving you of your hard earned cash.

Do you qualify for OIC- Debt settlement is a popular method of debt elimination, however dealing with the IRS and owed taxes is an entirely different ballgame. In order to be eligible for an OIC, you must meet certain criteria which you can learn more about by visiting the IRS website. If you feel you are eligible per their guidelines, then you can consider working with a company that offers tax settlement services. By educating yourself first before moving forward you can reduce the chances of being scammed by a company that is not forthcoming with all the facts regarding the process.
Company offers guaranteed results without questioning your situation- Be on the lookout for companies that promise guaranteed results, fast without even bothering to ask you some basic questions. Does the tax lawyer or “expert” confirm why you owe the taxes? Do they question your ability to repay the taxes in a traditional method? If they are not asking you the right questions, but are instead pushing for an OIC without considering other options, they are more than likely not interested in resolving your problem with the IRS. In order to truly help you with your tax problems they must understand the background information. Secondly, no one is able to predict how the IRS will respond, therefore anyone promising fast results without even meeting the taxpayer to learn more, is selling results they can’t possibly predict.
Confirm physical locations- Telephones, fax machines and email have made it possible for most business transactions to require little or no physical meetings. This makes it possible for “dummy” companies to scam people without ever meeting them face to face. A legitimate company will have a physical address whereas con artists will set up locations that do not exist or they will not disclose their address. If you can’t meet with the people who are helping you resolve your tax problems, they are probably not conducting legitimate business services.
Amount of cash deposit required- Tax attorneys, like other attorneys generally require some sort of cash deposit before they begin working on your case. This in itself is not a sign of a scam, however honest attorneys will estimate how much your case will cost and determine a fair deposit amount based on that figure. If you have already discussed your case with a tax attorney and shared how much cash you have available to work with, and the deposit matches that amount….proceed with caution. In general, it is best to avoid companies with retainer fees (if possible) in order to limit your risk.
Unresponsive or changing representatives- You are dealing with a serious financial problem and need to have the ability to communicate with the person handling your case on a regular basis. If you find you are often waiting for replies or are dealing with company representatives that are constantly changing, the chances your case is being handled with the care and focus necessary to be successful are slim.

When it comes down to it, you have to use a bit of common sense and follow your instincts when considering a tax settlement company or attorney. Research the company prior to exchanging information and if you see red flags that just don’t seem right, continue searching until you find a company or person who you feel is competent in representing your case.

Types of Tax Experts and When to Use Each One

Manny Davis — Wed, 16 Dec 2009 13:13:53 +0000

With so many types of tax professionals some people have a hard time understanding when each one can help them out. Although all tax professionals offer benefits, some are better for particular situations. It is imperative that you hire the proper person for the task that you are trying to accomplish.

Below are four types of tax professionals and when you should consider using each one:

Tax preparer. Generally speaking, a tax preparer is who you want to see if you simply need help with filing your return. Most of them can help with both individual and company returns. Of course, this is something you want to check on if you are in need of somebody to help with your corporation. Many tax preparers are seasonal workers. For this reason they do not often times know as much as some other professionals.
Certified Public Accountant (CPA). To become a CPA a person must have a college degree in accounting or a related field, or take the proper educational courses – this is not the case to become a tax preparer. Additionally, a CPA must pass a state exam for the ability to practice. There are many things that a CPA can help with including tax return preparation, representing clients during an audit, and certifying audit statements. Also, they are a good choice for corporations in addition to individuals.
Enrolled agent. To become an enrolled agent a person must pass an exam that is administered by the IRS. When it comes knowledge of tax code and related laws there are not too many people who know more than enrolled agents. While an enrolled agent cannot perform audit reports, they have the ability to represent clients during the audit process. This is the type of tax professional that you want on your side if you are audited – many of them worked for the IRS in the past.
Tax attorney/Tax Lawyer. If you are in serious trouble with the IRS a tax attorney can assist you. For instance, income tax evasion cases need to be handled by a qualified attorney. Along with this, tax attorneys can also prepare returns, represent clients during an audit, and defend them in the court room.

Overall, there is more than one type of tax professional. The four above are most common. Again, they include: tax preparer, certified public accountant, enrolled agent, and tax attorney. All tax professionals have something to offer. The one you choose should be based on your tax situation. The services we offer are from a tax team that is composed of all of the above tax professionals to handle simple tax filings to the most complex ones while ensuring the most efficient and cost effective solutions for our clients. So if you are unsure of what professional would be best for you, it doesn’t matter, we can handle all tax problems.

Three Common Tax Relief Methods if You Can’t Pay Your Taxes

Manny Davis — Mon, 14 Dec 2009 12:42:48 +0000

When you can’t pay your taxes on time or in full you have various options available to you. This year, more than ever, taxpayers are receiving tax bills that they are unable to pay. The IRS is well aware that there are situations that arise that will make it difficult for everyone to comply with their tax obligations. For this reason the IRS has created various methods that are available to the taxpayers to pay back the taxes they owe without causing severe financial strain.

The IRS is pretty particular as to what methods they allow certain people qualify for. There are some methods that just about anyone can qualify for and then there are methods that you need to prove your financial situation through various complex form filings and detailed financial statements. Below are three common methods used by individuals that do not have enough money to pay the IRS in full for the taxes they owe.

Installment agreement: An installment agreement is the most common method used by taxpayers to pay back their taxes when they cannot pay in full. An installment agreement is fairly easy to qualify for and does not require a very detailed filing like other methods. An installment agreement allows the taxpayer to pay back the taxes they owe in monthly increments until the balance is paid off. There are various forms of installment agreements and the one you use is dependent upon how much you owe in taxes. If you owe under $10,000 and can pay off the amount in a period less than 3 then a guaranteed installment agreement should be used. If you owe less than $25,000 in taxes and can pay off the entire tax balance in a period of less than 5 years then it is best to file for a streamlined installment agreement. If you owe over $25,000 in taxes you will be required to file for a financially verified installment agreement which requires a bit more paper work to show you will financially be able to make the minimum payments required.
IRS Financial Hardship: If your financial situation is to the point where you cannot pay your taxes and you can’t even make the minimum payments required with an installment agreement then proving financial hardship to the IRS could be an option. When someone proves financial hardship they are declared temporarily uncollectible. When they receive this status the IRS does not pursue collections on the individual for a time being. This is only a temporary tax relief method but it does allow the taxpayer some time, often years, to try to improve their financial situation. When one’s financial situation has been improved enough then the IRS will require the taxpayer to pay back the taxes they owe.
Offer in Compromise: If your financial situation is to the point where you cannot pay your taxes owed and don’t think you will ever be able to pay the taxes owed then an offer in compromise may be for you. With an offer in compromise the taxes owed can be negotiated for less. The amount that they are negotiated for should be equal to or greater than the amount the IRS would ever expect to collect from you, even through forced collection mechanisms. This is a very detailed filing with a low acceptance rate. It is suggested that you hire a tax professional to help you with this kind of filing if you feel you meet the requirements.

If you know you will not be able to pay your taxes it is a good idea to work with the IRS as soon as possible on order to come up with a resolution. If you do not put in place a resolution you will be charged with various penalties and interest after the due date for taxes. If you are unsure of what resolution method to use it is a good idea to talk with a tax relief professional.

Use Tax Experts Instead of a Debt Settlement Firm for Tax Problems

CHARLIE JONES — Fri, 27 Nov 2009 16:48:57 +0000

With debt becoming a large problem not only for individuals, and businesses there has been a proliferation of debt management and debt settlement companies promising to reduce your liabilities by saving you thousands in interest and penalties. Moreover, many are even claiming to be tax experts or IRS tax professionals who can help you resolve the major tax problems you are having with the IRS or State.

Let’s first discuss the debt settlement or debt management companies in general. Many from the mortgage industry moved over to debt settlement and debt relief companies during this economic downturn. They work by charging someone in debt typically 10-15% of what they owe in fees for their”debt relief services.” These services often entail negotiation and the settlement of your debts with your creditors (creditors could be credit card companies, health care providers, banks etc). Many charge other lavish fees and often times leave you with more debt than when you started. Furthermore, these debt reduction companies will often times settle with one creditor but leave the other creditors unrestrained in calling and bothering you for their money. Whether you have worked with a good company that followed through with promises or you haven’t, they are not best positioned to help you with major tax problems such as IRS back taxes.

Working with a debt settlement company to settle or resolve your tax problems is like using a stock broker to manage your finances. Why? Dealing with the IRS is very different than dealing with a credit card creditor or bank. The IRS has more powerful collection mechanisms, takes priority in collecting on debts, and has a set of formal procedures and mechanisms to be followed. Debt settlement companies have experience in working with everyone but the IRS and their “debt consultants” most likely haven’t even gone to school to resolve these financial issues.

At least with a tax resolution company, or a good one, professionals on staff range from tax attorneys, CPAs, tax accountants, Enrolled Agents, to former IRS agents. CPAs, tax attorneys, and Enrolled Agents are licensed professionals. There are many new “tax relief” firms out there who have tax consultants who will qualify you and document the problems you are having with the IRS or state — then if you qualify they will put you in the hands of a licensed tax professional who can help you file, pay, and settle IRS taxes. When selecting a tax resolution firm make sure they have a diversified set of tax professionals, a money back guarantee, and reasonable fees ($3000 is the industry standard fee depending on the service). Ask them what their success rates are for certain types of tax mechanisms (Installment Agreements, OICs, Partial Payment Installment Agreements, filing unfiled tax returns etc) Furthermore, make sure they don’t charge these sticky retainer fees (deposits before service), and at least offer a free consultation before committing to anything.

IRS Gives Tax Evaders Till October 15th To Fess Up

Manny Davis — Thu, 24 Sep 2009 04:10:21 +0000

A couple days ago, the IRS extended their deadline for taxpayers with hidden offshore accounts to voluntarily come forward and report any account over $10k. This pushed back the deadline from September 23rd to October 15th, 2009. Remember, as a US taxpayer you need to file a tax return and report income whether working abroad, or if you own foreign equities or stock.

The IRS has been more active than ever recently taking on UBS and forcing them to hand over 4450 names, and pay over $780 million in penalties and back taxes.

The IRS, more specifically, their Commissioner Doug Shulman, stated that those who come forward now and voluntarily report wrongdoing or unreported foreign accounts will be treated much better by avoiding criminal prosecution and higher penalties. Doug States in a letter on IRS.gov, “People who come in voluntarily will get a fair settlement.”

Realize, if you are one of these individuals that has not come forward even as the IRS extends this amnesty period, you could be prosecuted and experience jail time if you are caught so it is in your best interests to fess up and deal with the issue before it becomes a bigger problem. UBS is notifying their US account holders if their is a problem and the Swiss government is then expected to report their names to the IRS over the next few months. Appealing to the Swiss government is not really an option unless you want to admit to the IRS that you have unreported foreign accounts.

One thing to note, is that Federal back taxes, penalties, and interest will still be waiting for no matter what tax evaders decide to do so so working with a tax resolution firm is a wise decision. Currently, each tax evader will be liable for six years of back taxes and interest as well as be liable for delinquency penalties.

Tax Services: Use a Large, Nationwide Firm or Small Local Firm?

Manny Davis — Tue, 01 Sep 2009 23:36:59 +0000

If you have tax problems and are looking for professional help it is important to find a reliable tax company to help. There are many companies out there that can help, large and small. Both large and small companies have their benefits. Depending on what you are looking for in a tax company and what your tax situation is should determine what type of company you should use.

Small tax firms are typically better for establishing a long standing relationship to file taxes and maintain accounting records. If you own a business and you need someone to help maintain your books and do normal tax filings that every business needs to make, it is a good idea to go with a local company since this will be an ongoing relationship. Even if you are looking for a professional to help with tax returns and general accounting a local tax firm would be the way to go. Small firms are not better for handling complex tax debt and back taxes issues. Small, local tax companies tend to focus on the normal tax filings and don’t have the manpower and expertise needed to efficiently and effectively handle the complex tax issues that are not seen as frequently.

Large tax firms that serve individuals nationwide have a great advantage over the small tax firms that tend to serve local communities. These large tax firms are able to achieve efficiencies on more complex tax issues. Many of the large firms will hire a variety of different tax professionals (Tax attorneys, CPAs, Enrolled Agents, CPAs & Ex IRS Agents) to handle complex tax issues such as unfiled tax returns, large amounts of tax debts, tax levies, tax liens etc on a daily basis. A tax professional that handles tax levies every day is going to be more efficient and effective than a tax professional that handles them occasionally. Most small firms only see these types of cases occasionally, so it would be a wiser choice to go with a large firm in these cases. Large firms are typically cheaper as well because they know how to navigate IRS issues quicker and more efficient, therefore billing out less total hours on your case. Below are some instances where it would be a good choice to hire a large tax firm that helps individuals nationwide:

Most people have an apprehension to using a large tax firm that they cannot sit down with directly because they are not local, they shouldn’t. Tax cases are slow moving and are all done by mail and email and there is no need to use a local firm. Everything can be done more efficiently over the phone and through email. Hiring a large nationwide tax firm is a great idea to resolve complex tax issues because you have all the best resources and professionals in one central location to help you with your problem.

UBS To Hand Over 4450, Swiss Government Allows IRS To Probe Banks

Manny Davis — Wed, 19 Aug 2009 19:35:30 +0000

If you haven’t been following, the IRS vs UBS civil case was to be taken out of court with a tax settlement and the disclosure of UBS clients to the IRS. In February, UBS agreed to pay 780 million and disclose 250 clients suspect of tax evasion.

Most recently, UBS in cooperation with the Swiss government will hand over 4450 names to the IRS in a civil tax settlement. This is a new light for the IRS as they can clearly pursue foreign accounts and foreign institutions. It shows the IRS will go to no limits to find tax evaders and individuals who owe money to the them or the Federal Government. Many will argue this is an invasion of privacy and and abuse of power, other contend that the Swiss were only trying to comply with the US and help the IRS get the money it is owed.

Also reported today, is the fact that the Swiss agreed to allow the IRS to probe other banks suspect of harboring tax evaders. If you currently have a foreign account, it is best to come forward to the IRS as many if you can get a lesser sentence or leniency on penalties. If you have a tax lien, the IRS, State, or local authorities will eventually get their money. With a tax lien, it will damage your credit and prevent you from getting a car loan, mortgage, selling your house, and the like. It is in your best interest to get into compliance with the IRS as soon as possible, remove the lien, and settle with the IRS.

Federal Tax Levy – Steps to Resolution With the IRS

Manny Davis — Mon, 29 Jun 2009 22:21:28 +0000

Every year, thousands of letters are sent out letting taxpayers know that the Internal Revenue Service means business. These letters (CP 90/CP 297) in consideration are often referred as an IRS Intent to Levy. A Federal Intent to Levy means that the IRS is going to try to recover or collect back taxes in a more coercive manner. This forceful collection method translates into the IRS either taking a good portion of your paycheck (referred to as Wage Garnishment) every month or seizing part of all of your bank account (bank account levy).

With regards to an IRS bank account levy, the IRS will typically seize whatever is needed for the repayment of your back taxes or unpaid taxes. They will begin by notifying your bank and having your bank hold or freeze funds for twenty-one days. After 21 days, your bank will send the funds to the Feds. Therefore, if you have received any type of notice from your bank or the IRS about your bank account being levied it is in your best interests to immediately deal with the situation before it is too late. You will need to pursue a Federal Tax Levy Release and it most cases, a professional knows the forms and procedures to follow.

With a Wage Levy or IRS Wage Garnishment, the IRS will send notice of their intention to taking a part of your paycheck to your employer. Your employer MUST comply with the IRS under Federal Law and make deductions from your wages as necessary. Strong professionals, like our firm’s partners, will in most cases be able to release wage garnishment in three to five days.

To release any levy, you or your professional will need to complete various forms. However, before anything is done you must be in compliance with the IRS. That means, that all tax returns that you have outstanding must be filed with the IRS before anything. Therefore, you need to know what years, if any, you did not file and make sure to complete the the necessary ax forms.

1) Contact the IRS to see if you are in compliance (make sure to not disclose financial accounts or bank accounts etc as again the IRS will take advantage of every opportunity to seize your funds). An advantage of a professional here is he or she can call the IRS and shield you from questions the IRS agents are trained to ask. Knowing the limits here is important.

2) If you are are not in compliance, file the appropriate tax returns or have your IRS professional do them. In order to further penalties and interest, fax those returns to to the IRS so you can immediately get into compliance with the IRS.

3) Once you are in “compliance” with the Internal Revenue Service the next step is to figure out a form of settling IRS taxes owed. Settlement can be paying less than you owe or just pertain to an IRS Payment Plan like an IRS Installment Agreement where you obtain an agreement with the IRS that you will pay them over time instead of all at once. Settlement mechanisms, where you pay less than you owe, can also be pursued depending on where you stand financially. These “settle for less” methods pertain to a Partial Payment Installment Agreement (PPIA), an Offer In Compromise, getting declared Uncollectible and so on.

4) In conjunction with Step 3 above, you will need to work with your tax professional or fill out form 433F (if your situation is being dealt with by the IRS Automated Collection System) or form 433A if you are dealing with a field agent. Form 433 is your Collection Information Statement. Form 433 will detailed all your assets, income, liabilities etc.

If you have been notified by the IRS, do something about it. It means the IRS has started their notorious automated process of collection and they will not subside until your back taxes are paid or you have an “agreement” of some type (discussed above) to repay them. If you have been informed by the IRS of a tax levy, have had your bank account garnished or your wages, start by signing up for a free tax analysis by using the “get quote” form on the right. Our partners will call you, diagnose your situation, make recommendations and let you know the cost of utilizing our services at no obligation or cost to you. Our services are structured so that our services only make sense financially – ie. we will save you more money and headache then if you tried to handle the situation on your own.

When to Settle Taxes With an Offer in Compromise

Manny Davis — Thu, 18 Jun 2009 21:11:51 +0000

What is an Offer in Compromise?

The offer in compromise tax settlement program offered by the IRS that allows individuals to settle their taxes owed for far less than the original amount. When filing for an offer in compromise the taxpayer makes an offer to the IRS of an amount that is less than the total amount they owe and the IRS accepts or rejects this offer based on future collection potential. This tax filing is difficult and time consuming. Before filing for it you better be pretty sure you have a high likelihood of qualifying. The IRS is extremely selective when accepting offers and the majority of them are rejected.

What the IRS Considers on Application

The main factor the IRS looks at when an applicant applies is their current financial situation and their anticipated future financial situation. The IRS states this, “In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential”. Pretty much what this means is that the amount offered must be equal to or greater than the amount they would be able to collect from the taxpayer through forced collection mechanisms. Below are the three premises the IRS accepts an offer in compromise on:

Doubt as to Collectability – The IRS thinks there is no way they will be able to collect the taxes owed before that statute of limitations expires on the taxes owed.
Doubt as to Liability – There is high doubt that the amount owed is correct and it is likely that the liability is not owed.
Effective tax administration – Under this, the IRS knows the tax amount is correct that is owed and there is a possibility that they can collect the amount owed, but if they were to collect it would create extreme financial hardship on the taxpayer and would not be fair.

If You Think You May Qualify

If you think you are a candidate for an offer in compromise you can file for it you’re your own through these offer in compromise filing instructions, or you can hire a tax professional to do the filing for you. It is highly suggested that you use a tax professional when filing for this type of settlement because they will analyze your financial situation and make a determination of the likelihood of you actually qualifying. When finding a tax professional make sure they have experience with these types of filings and they have a high success rate. A good tax professional will not make this sort of filing if they believe their client will not qualify so be sure they tell you their experience and success rate before you make a choice.

What if You Don’t Qualify for an Offer in Compromise?

If you do not qualify for an offer in compromise there are many other options available for the taxpayer to get back into good standing with the IRS. The most common method of payment is an installment agreement. An installment agreement allows the taxpayer to pay back the taxes owed in monthly installments over a period of time, up to 3 years.

Methods to Negotiate Taxes Owed For Less

Manny Davis — Fri, 08 May 2009 04:21:49 +0000

When it comes to owing the IRS taxes and you cannot afford to pay you will typically be forced by the IRS to pay the total amount you owe plus additional late penalties and interest on those taxes. Even if you enter into an installment agreement with the IRS they will still charge you additional interest, therefore you end up paying more taxes than you owed in the first place. There are actually ways to negotiate a lower amount of taxes that you need to pay with the IRS.

Penalty Abatement – Under this method you can negotiate to eliminate penalties that have been incurred on taxes owed. Basically what you need to do is show proof to the IRS that you had a legitimate reason for not filing or not paying your taxes on time and they will eliminate all or most of the penalties you owe.

Partial Payment Installment Agreement – Under this method the IRS allows you to pay monthly installments of taxes owed that end up being less than the total amount owed. The IRS rarely accepts this form of agreement, but they will consider it if you are in poor financial shape and if they were to make you pay the entire amount owed it would not leave enough for basic necessities.

Offer in Compromise – This is the method that can eliminate the majority of taxes owed. If you have ever heard of settling for pennies on the dollar, this is how it is done. This method is not easy to obtain and requires a lot of paper work. In the paper work you must prove to the IRS that your financial situation is so bad that they are better off taking your negotiated tax amount that you offer than having them force you to pay.