Delinquent IRS Taxes and Collection Process

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, I 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. I recommend every delinquent taxpayer assert their publication 1 rights and retain a tax practitioner.

The Difference between Tax Practitioner Designations & IRS Representation

(Updated 7/19/2019)

There are 3 types of approved IRS tax practitioners.

  1. Attorney;
  2. CPA; or,
  3. 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.

 If you are an individual or business with an IRS tax debt, have a wage garnishment, bank levy, or have unfiled tax returns, call 1-800-721-3890 or fill out the form below. Resolve Tax has helped many satisfied taxpayers that were in the same position you find yourself in right now. Let Resolve Tax help you with your tax debt issue as quickly and favorable as Resolve Tax did for past clients. All information provided is confidential and nothing will be shared.

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Unfiled IRS Tax Returns & IRS Substitute Filed Returns

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:

  1. Accept the SFR return, or,
  2. Appeal the SFR prepared return.

 

 

 

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 you become compliant I can determine what tax resolution options are available to you. If you would like more info, please contact Resolve Tax at 800-721-3890.

Settling IRS Debt through the Offer in Compromise Program

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:

 

  1. All past tax returns must be filed; and,
  2. You must have corrected the issue that caused you to have balances due in the past.

 

 

 

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 in packaging 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.

Stopping IRS Wage Garnishment on Paycheck

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. Resolve Tax offers 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 I can reduce your total tax repayment to pennies on the dollar. Why not let Resolve Tax determine if IRS tax relief is an option for you?

7 Big Tax Changes in 2015

Below is an article by Jeff Reeves of Investorplace.com providing some the of major tax changes coming in 2015.

As 2014 draws to a close, it’s nearly time for the annual deluge of tax forms – including 1098’s reporting mortgage interest or W-2’s from employers reporting your annual wages.

But while gathering documents for the past year’s taxes is important, equally pressing is the need to adjust your budget to account for changes in the tax code that take effect starting on New Year’s Day.

After all, you have been paying taxes and making retirement contributions all year even though taxes don’t need to be filed until the following April. While there are a handful of last-minute strategies to play catch up on 2014 tax obligations, the sad reality is that many folks who have waited until now to think about their taxes are too late.

A better strategy is to plan ahead based on what you think you will owe the Internal Revenue Service, and be proactive on your withholding and savings strategies.

Regardless of what your situation looks like in 2014, here are seven big changes that will affect a large number of taxpayers starting in January 2015.

Health Insurance Penalty: Part of the Affordable Care Act mandates that all Americans have health insurance, or pay a tax penalty as a result. In 2014, the penalties are 1% of your household income or $95 per person – whichever is greater. But in 2015, those penalties ramp up significantly to 2% of total household income, or $325 per person. That can really add up for a middle-class family of four. If you’re not covered and paying a penalty on your 2014 taxes, make sure you get health insurance ASAP to avoid penalties as we enter a new tax year in January.

401(k) Limits: The limit on employee contributions to a 401(k) plan will increase to $18,000, up $500 from 2014’s cap. That means you tell your payroll department to adjust up your contribution starting on the first of the year to ensure you save the maximum allowable in 2015. Also, the “catch-up” allowance for those over than 50 has also been increased, allowing for an additional $6,000 in contributions instead of the $5,500 cap previously. These new contribution levels are also applicable to 403b accounts and most 457 retirement plans as well.

Flexible Spending Account Limits: The annual limit on employee contributions to flexible spending accounts is now $2,550 for qualified health care expenses. That’s up $50 from 2014, so make sure you opt in for this new maximum amount if you take advantage of a health care FSA.

Standard Deduction: The standard deduction – that is, the basic tax break extended to all Americans each year — rises to $6,300 for single filers and $12,600 for married taxpayers filing jointly in 2015. That’s up $100 and $200, respectively, from 2014 figures. The standard deduction is crucial to tax planning and withholding, because if you cannot itemize enough deductions to surpass this amount, this is the only tax break the government will likely be giving you on next year’s tax return.

Tax Brackets: For the new tax year starting in January, income tax thresholds have again been adjusted up for inflation. The highest tax rate of 39.6%, for instance, will now apply to single filers who make over $413,200 and married couples making $464,850. Both figures are up about 1.6% from tax year 2014. For more information on specific income tax brackets by filing status, check out the latest IRS revenue procedure document.

IRA Rollovers: Starting in 2015, you can only make one single rollover from an IRA in a 12-month period. This is a bit tricky, because you can still make as many “trustee-to-trustee” transfers as you wish, moving your money directly from one provider to another. What the new IRS rule targets is the practice of withdrawing all those funds and then re-depositing them in a new account – a tactic some folks were using as a short-term, interest-free loan. To protect yourself, limit all rollovers to direct transfers in 2015 if you plan on moving money more than once.

AMT Changes: The so-called “alternative minimum tax” is quite a headache for many middle-class Americans. Since certain breaks can significantly reduce your tax bill, the IRS created the AMT to set a limit on those benefits – and ensure a minimum tax burden on you. The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 for individuals or $83,400 for joint filers. That’s up slightly, about 1.5% from 2014.

IRS Relaxes Review of Tax Relief with Fresh Start Program

Did you know that the IRS recently implemented the Fresh Start Program which has relaxed the rules in regards to releasing an IRS tax lien, implementing an Installment Agreement, and negotiating tax relief through the Offer in Compromise Program:

For IRS tax liens, it used to be that once the IRS filed the lien, they would not consider releasing until the tax debt was paid in full. With the Fresh Start Program, the IRS will now consider the release of an IRS lien if a taxpayer negotiates a direct debit installment agreement and once 3 consecutive payments have been made. The IRS will only consider this for installment agreement where the balance due is under $50,000. Additionally, the IRS has increased the requirement of filing a federal tax lien to tax balances above $10,000. Therefore for taxpayers who owe less than $10,000 the IRS will normally not bother pursuing a lien. The IRS will also allow certain taxpayers to apply for withdrawal of lien if they meet certain payoff criteria and apply by filing the appropriate paperwork.

The IRS is now allowing taxpayers to negotiate installment agreements on tax balances up to $50,000 without the necessity to provide a full financial disclosure. This is an increase from the prior requirement that demanded financial disclosure once you owed over $25,000. Normally, the IRS will consider allowing the repayment of a balance up to $50,000 over 72 months as long as the taxpayer agrees to the payments being directly debited from their bank account. If a taxpayer would like to negotiate this type of an agreement they must complete form 9465 and mail to the IRS for review and acceptance.

The most significant alteration made by the Fresh Start Program is in the relaxing of the way an Offer in Compromise is reviewed. The Offer in Compromise program allows those taxpayers who cannot repay their outstanding tax debt the opportunity to settle for a fraction of what is owed. The IRS has revamped the calculating formulas used to determine a taxpayer’s “ability to pay.” This has drastically increased the number of taxpayers who qualify for tax relief. However, due to the complexity of preparing, submitting and negotiating an Offer very few qualifying taxpayers have taken advantage of this opportunity.

If you would like more information, have questions, or want to be represented in front of the IRS regarding a back tax issue, please contact Resolve Tax at 800-721-3890. I’m are here to help.