Alleviating the stress of back-taxes
Back taxes can be daunting and crippling for any business or individual. Government agencies, like the IRS, have the power to garnish your wages, place liens on your property, and levy your bank and retirement accounts.
There are, however, many tools at our disposal to either settle or reduce your tax debt!
Offer In Compromise (OIC)
Currently Not Collectible Status (CNC)
Tax Return Amendments
Contact us today to find out what you qualify for!
Before beginning the tax resolution process, it is important that you:
File all delinquent returns: the IRS requires that taxpayers be compliant with all tax laws if it is going to agree to terms with a taxpayer who owes. This includes, but is not limited to: filing all tax returns.
Be current with all tax payments outside of the agreed-upon period: that means proper withholding on your paychecks and being up-to-date on your estimated tax payments (for the taxpayers who are self-employed).
If you meet both of the above criteria, you have a good chance at resolving your back taxes.
Most individuals try to arrange matters so that they won't have to pay any additional taxes when they file their income tax returns. However, things don't always work out as planned and it's possible to find not only that there is tax to pay at filing time, but also that there is insufficient cash to pay. You do not have to pay the tax liability in one lump sum. The IRS has made it possible for taxpayers to pay delinquent taxes in monthly installments. Of course, fees and interest must be paid but, most often, the alternative of not taking a proactive approach is far less desirable.
Applications for installment agreements are easy to make and are generally granted. They are guaranteed to be granted for individuals (but not businesses) if the tax liability is $10,000 or less, the taxpayer has been compliant for the past five tax years, and the taxpayer agrees to pay the entire liability within three years. Drawbacks to setting up an installment agreement include the continued accrual of interest and penalties on the tax owed. Also, the IRS may proceed to issue a notice of federal tax lien or Institute levy action against a taxpayer who defaults on the agreement.
To apply for an installment agreement, complete IRS Form 9465, Installment Agreement Request and attach it to your tax return. You may file electronically. But in any event, you have to supply information such as the name of your bank and the amount and date of the proposed monthly payment. If the IRS approves the request, there will be a user fee. Some taxpayers may qualify for a reduced fee.
Streamlined Installment Agreements. There are four types of installment agreements, but for individuals and businesses, one of the simplest and most hassle-free is the streamlined installment agreement. In early 2012, the IRS announced enhancements to streamlined installment agreements. Under the updated streamlined process, no financial analysis of a taxpayer’s ability to pay is required by the IRS. The IRS also raised the monetary threshold for streamlined installment agreements from $25,000 to $50,000 and also increased the maximum term for a streamlined installment agreement from 60 months to 72 months.
The IRS is authorized, in most situations, to enter into a partial payment agreement with a delinquent taxpayer. Under this rule, the IRS is no longer restricted to seeking a payment agreement that will "satisfy the liability." Instead, the goal of the agreement is to have the taxpayer "make payments" in "full or partial" satisfaction of the liability.
When you enter into an installment agreement you must agree to make the monthly payments on time. You also must agree to meet all future tax liabilities. As a result you should arrange for your withholding from salary or wages and payments of estimated tax to be sufficient to ensure that taxes will be paid in full when a future year return is timely filed.
The IRS can terminate an agreement if you don't timely pay an installment (and for other reasons). But it will give you 30 days to respond to its intention to terminate and an agreement that is terminated can be reinstated. There is a fee for restructuring or reinstating an installment agreement.
It's important to be aware that even if an installment payment request is granted by the IRS, interest and a reduced late payment penalty applies to any balance due. Therefore, to minimize interest and penalty charges, you should timely file the return and pay as much tax as possible with the return before making an installment payment request.
Once you take into account these interest and penalty charges, it may be less costly to borrow funds from an alternative source and use them to pay your tax rather than asking the IRS to allow installment payments. Please contact us if you would like more information or if we can help you figure out an installment payment arrangement that is best for you.
OFFER IN COMPROMISE
Often, taxpayers seek to pay only part of what they owe to the IRS. If the IRS accepts, this is known as an offer in compromise. Many taxpayers mistakenly believe that an offer in compromise is a right. The IRS has sole discretion whether or not to approve an offer in compromise and the IRS approves very few
The compromise that the IRS is willing to make takes the form of installment payments to pay off the tax liability over time. This is particularly useful because it prevents the IRS from liquidating major assets, such as a home or a retirement fund, which can be devastating, both financially and emotionally, to the taxpayer. Terms can be rather generous. But if a taxpayer can't swing an installment deal with the IRS, his or her financial situation may be such that an "offer in compromise" may prove to be an even better alternative. An offer in compromise actually lowers the total amount of liability outstanding, usually in return for a commitment to pay this reduced amount over a period of years.
If you decide to make an offer through the IRS's Offers in Compromise program and the IRS accepts, you end up paying the lesser amount in full satisfaction of your tax liability. The IRS cannot collect the additional tax from you. It may accept an offer only if there is doubt whether the tax liability exists or doubt whether the tax can be collected. A doubt as to collectibility must be supported by a Collection Information Statement (IRS Forms 433-A or B) which requires disclosure of a taxpayer's assets. It also requires a nonrefundable $150 fee, designed primarily to discourage frivolous claims from clogging up the pipeline for taxpayers with legitimate problems. The offer in compromise itself is made on a separate form.
A preliminary consideration for someone making an offer is whether to use assets to make estimated tax payments that are due rather than holding the assets to increase an offer. This is because the IRS cannot accept an offer in compromise if tax returns are not current or if tax liabilities aren't being paid as they accrue.
Of course, there are some disadvantages to making an offer. For example, you make it easier for the IRS to identify property that it can seize and levy upon (although the legislation prohibits the IRS from levying against property while a compromise offer is pending). Further, the offer usually operates to extend the statute of limitations. Still, in many situations, the offer in compromise route may be the only way to go.
We can figure what amount to offer and explain how to go about doing it. Please do not hesitate to call if we can assist you.
CURRENTLY NOT COLLECTIBLE STATUS
When a taxpayer has enough non-liquid assets to settle their debt but is currently not in a financial position make tax payments, the IRS may place them in CNC status. CNC status will usually remain until the debt its Collection Statute Expiration Date (CSED) or the taxpayer's income exceeds a certain prescribed limit.
We are here to provide the best tax and accounting services for our clients, giving them long-term strategies for financial success. Contact us today.