3 Bona Fide IRS Collection Alternatives to Solve Back Taxes
There are three main IRS collection alternatives taxpayers use to solve back taxes: Installment Agreement, Currently Not Collectible and Offer-in-Compromise.
IRS collection alternatives if you cannot pay the back taxes
We know the story: things are tight financially, so you either (1) do not file the tax return, or (2) file the return but don’t pay the balance due. But do not worry, you tell yourself, next year will be better.
Now it is 2-3 years later and a letter arrives from the IRS, and the threats start, and maybe it has even gotten to the point of actual levy and seizure activity.
Now the IRS is wreaking havoc on your financial life and you simply do not know what to do.
We know. We have helped many clients through that exact scenario. Fear not, there is a light at the end of the tunnel.
The most commonly used alternatives are extensions of time to pay and streamlined installment agreements. That’s because most individual taxpayers just need a few weeks to get the funds to pay their tax bill, or they can pay monthly.
As it turns out the IRS is usually only too happy to work with taxpayers, but there are some ground rule you need to be aware of and a roadmap to follow.
1. Tax Compliance
The first step in resolving your tax issue is to get into “tax Compliance.” Compliance means that you have filed all tax returns due for the last 6 years and have made your current tax payments. Once you are in tax compliance we can now work on resolving the back-tax issue.
2. Collection Alternatives
There are three main collection alternatives to resolve a back-tax debt: Installment Agreement, Uncollectable Status, and Offer-in-Compromise.
An installment agreement is an agreement to pay the taxes back over time. There are three variations of the installment agreement: Regular, Streamlined, and Partial-Pay.
Which type of agreement works best for you will depend upon your personal circumstances and is something we can help you address when you are ready.
Uncollectable status is when the IRS determines that you are unable to make current tax payments.
When a taxpayer is deemed uncollectable the IRS may still file a Notice of Federal Tax Lien to secure its position in the taxpayer’s assets but will not otherwise take enforcement action to seize (or levy) the taxpayer’s assets or income streams.
If you cannot pay the IRS, you can request currently not collectible (CNC) status, which strictly limits allowable expenses to necessary living expenses limited by IRS collection financial standards. CNC status is usually temporary; the IRS uses manual and automated procedures to determine whether your client’s financial situation has improved.
For CNC arrangements, the IRS will file a tax lien if more than $10,000 is owed. To request a CNC arrangement, you must contact the IRS by phone, in writing, or in person.
An Offer-in-Compromise is an agreement where the IRS agrees to accept less than the total amount owed to it and the taxpayer agrees to pay the amount negotiated, as well as maintain his or her tax compliance for 5 years following the acceptance of the Offer-in-Compromise (“Offer”).
The basis for an Offer is a formula referred to as “Reasonable Collection Potential” or “RCP.” RCP is effectively the net equity in assets plus the taxpayer’s excess future income for 12 or 24 months, depending upon how the Offer is structured.
There can be significant planning done to help a taxpayer maximize the potential for the Offer acceptance.
If you or someone you know has an issue with paying their federal taxes and needs help to end their IRS nightmare, please contact us by either phone at 844-888-1040.
HOW TO FIX PAYROLL TAX ISSUES AND PITFALLS
If you have workers in your company you are expected to owe payroll tax. Based on the size of your payroll you can need to make tax deposits with the IRS as soon as you pay your workers on the day after.
Whenever taxes are not paid on time then the IRS imposes interest and fines. If you let things go too long the fines and interest can surpass the payroll taxes.
HOW PAYROLL TAX ISSUES AND PROBLEMS OCCUR
Payroll tax issues occur in a variety of ways. When a business is short on cash and they are not paying your vendors or landlord, they are going to be out of business very soon.
In comparison, the IRS works slowly. It can be months before the IRS gets serious. Many company owners hope they will have enough money to fix their payroll problems by the time the IRS calls or visits.
Unfortunately, it does not normally happen. Instead, the issues with payroll taxes increase quarter after quarter, and interest and fines continue to accrue. By the time IRS appears things got so bad that the IRS threatens to shut down the company.
In certain cases, failure to pay payroll taxes can be a criminal offense subject to incarceration or a fine penalty. With my professional help, I may be able to prevent the IRS from making the owner taking personal responsibility for these payroll tax debts.
Under the IRS rules and regulations, there are tools that you are entitled to include the ability to contact a CPA to help you get tax relief. As a CPA with expertise in IRS tax cases, I will help you address your tax problems.
SOLUTIONS FOR PAYROLL TAX ISSUES & PROBLEMS
Solutions for your problems may include:
-Send an Offer In Compromise deal to reduce the tax debt
-Get a short-term deferral of your tax liability to give you time to get back on track
-Negotiate an Installment Payment Plan to settle your tax obligation
-Check your records to find if the IRS has determined your taxes correctly
-Determine if the IRS has expired or will expire early to recover your payroll tax debt
-Negotiate waivers of federal tax obligations so you can get a loan to cover your taxes
-Getting your tax debt ruled noncollectable so you can get a tax break from your old payroll tax debts
-Seeking relief from payroll tax levies
-Filing interest and penalty waiver charges
Each case is of course different and you need an experienced tax professional to advise you about the best approach to your situation.
BANKRUPTCY FOR PAYROLL TAX ISSUES & PROBLEMS
Insolvency filing isn't going to fix the payroll tax issues. Even if the company is a corporation, the IRS may be entitled to obtain from the owners, officers, and often even independent contractors and workers a portion of the payroll tax debt. This is defined as a penalty for the trust fund, a penalty for the recovery of trust assets, a penalty of 100 percent, a criminal penalty, or a penalty under Code Section 6672.
As a tax expert, I will help you decide whether you are responsible for the reclamation penalty for the trust fund. If we agree you are not a responsible officer subject to the penalty for the recovery of the trust fund we will negotiate with the IRS tax officers and IRS Appeals Officers to make them withdraw the penalty for the trust fund.
I would also inform you on the best way to make any partial payments to the IRS to will your personal responsibility for the fiduciary fund tax. Many company owners make hundreds of thousands of dollars of payments to the IRS only to find later that the payments have not reduced their personal IRS payroll tax debt.
When having overwhelming tax problems, a majority of taxpayers are not comfortable calling the IRS for answers and that's where I can help.
I know what it takes to get you qualified for the best tax relief possible.
Call 844-888-1040 for information.
5 IRS Tax Relief Programs to Restore Financial Freedom
“In this world, nothing can be said to be certain, except death and taxes.” -Benjamin Franklin
I learned that a tax debt relief program exists for every IRS tax problem, giving back more taxpayers their financial freedom. In this post, I provide you information about 5 IRS tax relief programs that can provide you a Fresh Start for 2020.
Most people don’t go around bragging about their IRS problems. But that doesn’t mean they don’t exist.
Owing back taxes is way more common than you think with the number of delinquencies continues to go up while the ability to pay is decreasing.
According to Michael Rozbruch, a recognized entrepreneur and the founder of Michael Rozbruch’s Tax and Business Solutions Academy, more taxpayers have IRS tax debt right now than ever!
14 million taxpayers are in the IRS’s collection division that has a tax debt large enough to call for professional representation. 19 million people owe the IRS $391 billion right now.
It is very important that you don’t ignore an IRS issue and hope it will go away. The IRS will catch up with you and the penalties, interest, and fines will have only grown bigger!
If you are one of the 19 million people who owe the IRS back taxes, check out these 5 IRS tax debt relief programs aimed at resolving various tax problems (without hiring an IRS tax lawyer).
Grab one of a few NO COST consultations with TheCPATaxProblemSolver to see if you qualify for any of these IRS tax help programs Book Your Free Consultation.
Offer In Compromise (OIC)
This is one of the IRS tax relief programs that gets the most attention because it really gives you the best chance at a Fresh Start. An Offer In Compromise is an agreement between you and the IRS and the settling for an amount less than the full amount owed. It is an option for those who are not able to pay the past due amount in full, or if paying the full amount will cause financial hardship or leave you in a state of financial distress.
To qualify for an OIC, you must have filed all past tax returns & must be current with federal tax withholding or estimated tax payments for the present year.
The IRS will take the following facts into consideration once you file for an OIC:
- Ability to pay
- Total monthly/yearly expenses
- Assets and equity
When an OIC is approved by the IRS, there are two payment methods available. The first is a “Lump Sum” in which you pay the offer amount in one lump sum or in a payment installment of 5 or fewer payments within a set period of months. The second is a Periodic Payment Offer in which payments are made in 6 or more monthly installments and must be paid within 24 months.
If the IRS agrees to the OIC, you are required to timely file and pay all future taxes over the subsequent five years. If you do not abide with the set terms of the OIC, the IRS may consider the OIC to be in default. In this event, the OIC is null and void and the IRS will demand immediate full payment of the original tax balance plus penalties and interest.
When you cannot pay your tax debt in full immediately, you might be able to set up a monthly payment plan or Installment Agreement (IA). If you agree to pay the full amount, you may be able to reduce the interest owed and any other fees.
Folks may be eligible for an online payment plan if they owe less than $50,000 in combined individual taxes, interest, and penalties. You must have filed all of the necessary tax returns. You must also make the minimum required payment by the set due date. Any future tax refunds will be applied to your debt until it is paid in full.
A penalty abatement may be granted for the following penalties:
- Filing Late
- Paying Late
- Failure to deposit
Requests for penalty waivers may be filed if you meet the following criteria:
- Before the penalty has been assessed by the IRS, you can file a “penalty non-assertion request”
- After the penalty has been assessed, you can request a penalty abatement via a written letter to the IRS.
- Once the penalty has been paid, you can request a refund using Form 843. However, you must file this request within 3 years of the return date or within 2 years of paying the penalty.
You may request penalty abatement for the following reasons:
- Reasonable cause
- Statutory exceptions
- Administrative waivers
- Correction of an error on the behalf of the IRS
As many married taxpayers opt to file a joint return, this filing status leaves both partners liable for any taxes, penalties, and interest due in the event of a divorce. However, the spouse who feels they are being wrongly held liable may file for “Innocent Spouse Relief” in the event that one of the involved parties failed to report any income or claimed false credits or deductions.
Innocent Spouse Relief may be granted if you meet the following criteria:
- There are erroneous items on your joint return.
- You can prove that you did not know there was an error on the form at the time it was filed.
- You were coerced into signing a joint return or were unaware of the joint filing
Currently-Not-Collectible (CNC)/ Financial Hardship
Should you and the IRS agree that you do owe the amount in question, but you are unable to pay in full due to your financial situation, you may be able to apply for Currently-Not-Collective (CNC) or Financial Hardship status. In order to qualify, the IRS must determine that you cannot pay your cost of living expenses and your taxes at the same time.
When your necessary living expenses exceed your monthly income, the IRS will approve your CNC request and will not try to collect any past debts or issue any levies against you while you are in CNC status. However, the IRS has the power to add interest and penalties during that time, as well as to withhold any pending tax refunds and apply them to the amount owed.
Call Keith Jones, CPA TheCPATaxProblemSolver toll-free TODAY at 844-888-1040 to determine if you are eligible for a Fresh Start and get on the road to financial freedom! You Will Sleep MUCH BETTER TONIGHT!