After you file a tax return with a balance due, the IRS will send a progression of IRS notices. The first notice is known as an Amount Due notice. This notice will inform you of your balance due and any penalties and interest that have accrued. This notice will give you 30 days to pay the balance due or contact the IRS to determine repayment options. The next notice is known as the Final Notice of Intent to Levy. This notice is issued roughly 45 days after the amount due notice. The IRS must issue this notice in order to take collection actions such as wage garnishments or bank levies. Therefore, even if you established a repayment plan, the IRS will still send this notice.
Most IRS collection notices are issued from the Automated Collection System or “ACS” for short. Therefore, most delinquent taxpayers are directed to contact ACS to address their tax issue. However, certain files are sent to the field for enforcement. If your file is moved from ACS to the field, you will receive contact from the agent that gets assigned to your file. The agents in the field are known as revenue officers. Most files that are sent out to the field owe over a certain threshold, have a history of not filing returns, or are self-employed individuals. Revenue officers are required to be much more scrutinizing in the evaluation of your financial circumstances when determining your tax resolution options. Therefore, if your file is transferred to the field, be prepared to provide massive amounts of financial paperwork.
Whether your delinquent tax file is assigned to ACS or the field, knowing what you must present is key to the outcome. Most taxpayers assume that the IRS knows everything about their financial circumstances and therefore, provide more information than necessary. The financial presentation is critical in negotiating your tax resolution with the IRS. Too much information can disqualify or alter your tax resolution options in a negative way. In fact, this is why most tax practitioners do obtain superior tax resolution outcomes. Here at Resolve Tax, we know exactly what financial information to present, how to present it, and how it will effectuate the tax resolution outcome. If you have delinquent taxes, it is advisable to seek assistance from a tax practitioner before contacting the IRS. We recommend every delinquent taxpayer assert their publication 1 rights and retain a tax practitioner.
There are 3 types of approved IRS tax practitioners.
- CPA; or,
- Enrolled Agent.
All 3 designations are approved to represent taxpayers before the IRS. There is ABSOLUTELY no different treatment or distinction made by the IRS regardless of designation.
Unfortunately many tax resolution firms have capitalized on the tax practitioner distinction by selling the false claim that you want to be represented by an attorney. An Attorney is provided the right to represent taxpayers before the IRS simply because they are licensed attorneys. There is no special education or specific training that an attorney must take to represent taxpayers before the IRS. Often times, many of the large tax resolution firms will hire an attorney simply for advertising purposes. It is very common for the attorney at large resolution firms to be nothing more than a figurehead. Many of them do not actually work the tax resolution client files at all. This was the case with the Tax Offices of Roni Deutch, Freedom Tax Relief, Taxmasters, JK Harris, Signature Tax Relief, and Optima Tax Relief.
The only tax practitioner who is required to have actual working knowledge of the IRS to earn their credentials are Enrolled Agents. An enrolled agent must pass a rigorous exam administered by the IRS. This exam covers all forms, publications, and extensive knowledge of IRS rules and procedures. This is why you will find that most tax resolution firms use enrolled agents to actually negotiate and truly represent their tax resolution clients.
Even CPAs have more direct education and training in regards to actual tax representation than attorneys. The CPA exam is 14 hours long and tests the competency of accounting. Many tax resolution firms hire CPAs to prepare tax returns, handle client bookkeeping and company accounting and billing.
It is unfortunate that so many taxpayers have been led to believe that an attorney is required to represent them before the IRS. It would be even worse for those taxpayers who bought into the myth to find out that the attorney never worked their file and that they were charged much more than they would have had they just hired an Enrolled Agent or a CPA.
The worst thing a taxpayer can do is not file tax returns.
If you earn enough income to be required to file, you should do so even if you owe. The IRS charges a penalty for late filed tax returns that can be avoided by filing on time. Unfortunately, if you cannot pay on time, you will still incur penalties and interest. However, filing on time will waive the failure to file on time penalty which can be substantial.
If you do not file tax returns for years you met the filing requirement, the IRS will eventually file them for you. These returns are known as “SFR” or substitute filed returns. The IRS SFR unit simply uses the income documents reported under a taxpayer’s social security number to prepare the unfiled returns. When the SFR unit creates the unfiled return, they send a Notice of Deficiency to the taxpayer to inform them of their determination. The notice of deficiency will provide the taxpayer the opportunity to:
If the taxpayer does not respond by the due date on the notice of deficiency, the SFR return is finalized by the IRS and after a certain period of time, collection notices will be mailed. The SFR unit does not collect outstanding taxes so once the SFR filing is closed, the file is transferred to the “ACS” automated collection unit for further action. ACS will send a progression of collection notices for each tax year there is a balance due. The 1st notice is known as the amount due which provides the total balance due with penalties and interest. It provides the ACS phone number and normally gives 30 days to pay the balance due or contact the IRS to resolve the tax balance. If the taxpayer does not respond, the IRS will send the final notice of intent to levy informing the taxpayer that the IRS may seize income or assets after the date on the notice without further warning.
If you have unfiled tax returns and need a tax preparer, Resolve Tax can help. Whether you have your income documents for each year, Resolve Tax will file a power of attorney and order those documents to prep the unfiled returns. Once we get you compliant we can determine what tax resolution options are available to you. If you would like more info, please contact Resolve Tax at 800-721-3890.
If you have amassed an IRS tax debt, you may be a candidate for the IRS offer in compromise program. This program is the only option available to possibly receive tax relief that provides a significant reduction in not only the principal balance due but the penalties and interest that have accumulated as well.
In order to be considered for tax relief through the offer in compromise, you must be compliant. Compliance requires 2 things:
Most often delinquent taxpayers are not having the proper withholding on their paychecks or they are self-employed and not paying taxes on this income. If you are an employee and not paying enough tax then you must correct your W4 with your employer so that sufficient taxes are being deducted. If you are self-employed then most likely you must be paying estimated tax payments. These are quarterly payments you send to the IRS throughout the year. Normally the amount of your estimated tax payment is determined from your prior year tax return balance due. Your tax preparer should provide 4 voucher slips indicating the amount you should be sending quarterly and where to mail these payments.
Once you have become compliant, you may be a candidate for tax relief through the Offer program. Most often, the best candidates are those who have little equity in real estate, bank accounts, and investment accounts. Additionally, you must be able to show the IRS that your monthly expenses are in line or exceed your monthly income. The key to determining this is to know which expenses will be allowed by the IRS. Many expenses are not considered necessary and as such will not be subtracted from your monthly income.
Roughly 35% to 40% of annual offers in compromise submitted are accepted. Most accepted offers are submitted by tax practitioners since they are versed on packaging offers. Resolve Tax has a 97% acceptance rate of the offers we have submitted. Our tax attorneys, CPA’s, and enrolled agents have extensive experience in negotiating offers. If you believe that you meet the criteria above or simply want a free consultation to determine your tax relief eligibility, give Resolve Tax a call at 800-721-3890.
Did you know that if the IRS issues a wage garnishment on your current employment they could leave you with as little as $199 per week! When your employer receives Notice of Levy from the IRS, it comes with IRS Publication 1494. Pub 1494 is a chart that instructs your employer on how to calculate the amount of your check to seize per pay period and remit to the IRS.
Publication 1494 determines your garnishment based on the following information:
1. Your Filing Status;
2. How often you are paid; and,
3. How many exemptions you are entitled to claim.
Therefore, someone who is single, paid weekly with no dependents would be entitled to no more than $199 per period whereas someone who was married with 2 dependents would be entitled to $533 per check. Either way, the IRS has no compassion when it comes to effectuating IRS wage garnishments. As you can see, the implementation of a wage garnishment is completely calculation based and clearly creates financial hardships for most immediately.
Normally when an employer receives a notice of levy to garnish your paycheck from the IRS, they should provide a copy of the notice to you. The notice of levy will indicate the type, years, and amounts that the IRS claims are owed. Many employers will not implement the levy for 1 pay period in an attempt to give their employee an opportunity to get an IRS levy release to them. An IRS levy release is issued by the IRS and sent to the employer directing them not implement the levy. This release can be in full or partial.
Requirements for Levy Release:
1. The IRS will not consider a levy release if you are not compliant. This means that all past tax returns must be filed. If you have not done so, you will be required to fax any unfiled returns to the IRS before they will discuss a possible levy release;
2. You will be required to negotiate an IRS Installment Agreement. If the balance owed is less than $25,000, the IRS will usually accept an offer of a monthly payment that will pay off the balance in 60 months. For example, if you owe $15,000, the IRS should allow a monthly payment of roughly $250. If the balance due is above $25,000 and below $50,000, the IRS will usually allow a monthly payment that can repay the balance in 72 months as long as you agree to have your payment directly debited from a financial institution.
If an installment agreement is established, the IRS agent should be willing to fax the IRS levy release to your employer. You should have your HR or payroll departments fax number available as you will be required to provide. If you do not, the IRS agent will mail the levy release to your employer and until your employer receives, the levy will stand.
If you cannot afford an installment agreement, then you might qualify for a reduced installment agreement or a temporary uncollectible status. In order for this to be determined, the IRS will require that you present your financials to them. The IRS has a form 433F that can be completed and presented via phone. It is important to note that many of the expenses that we all pay, may not be expenses that the IRS deems acceptable in determining an inability to repay. Essentially, the IRS has created “allowable” expense categories and limits on them as well. Therefore it is very important to understand the allowable expenses and limits as all too often taxpayers present their financials to be told they can actually afford more then had they not presented their financials. Some expenses that will not be allowed are the cost of private school for your children, higher education cost for your children, repayment of your child’s student loans, more than 1 vehicle payment up to $517 per taxpayer who owes the tax liability, and, whole life insurance payments. Additionally, there are maximum allowed expenses amounts for housing and utilities, operating expense for vehicles, and for food and the like.
If you feel that your financials warrant the inability to establish an installment agreement you may want to contact ResolveTax.com at 800-721-3890. We offer a free financial analysis to determine if this may be the case. There is even the possibility that your financials will warrant tax settlement whereby we can reduce your total tax repayment to pennies on the dollar. We have a 97% success rate in negotiating tax relief for our clients. Why not let us determine if IRS tax relief is an option for you?