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Many taxpayers fail to file required tax returns for many reasons. The taxpayer must be aware that failure to file tax returns may be construed as a criminal act by the IRS. This type of criminal act is punishable by one year in jail for each year not filed. Needless to say, it's one thing to owe the IRS money but another thing to potentially lose your freedom for failure to file a tax return.
The IRS may file "SFR" (Substitute For Return) Tax Returns for you. This is the IRS's version of an unfiled tax return. Because SFR returns are filed in the best interest of the government, the only deductions you'll see are standard deductions and one personal exemption. You will not get credit for deductions which you may be entitled to such as exemptions for spouses, children, interest and taxes on your home, cost of any stock or real estate sales, and business expenses, etc. You have the right to file your original tax return, no matter how late it's filed.
The IRS Offers in Compromise program provides taxpayers, who owe the IRS more than they could ever afford, a chance to pay a small amount as a full and final settlement. This program also offers taxpayers, who do not agree with what they actually owe in taxes initially, a chance to file an Offer in Compromise and have those tax liabilities reconsidered.
The Offer in Compromise program allows taxpayers to get a fresh start. All back tax liabilities are settled with the amount of the offer and all federal tax liens are released, upon IRS acceptance of an Offer in Compromise and payment of the amount offered. An offer filed, based on the taxpayers inability to pay the IRS, looks at the taxpayer's current financial position and considers their ability to pay as well as their equity in assets. Based on these factors an Offer amount is determined.
Taxpayers can compromise all types of IRS taxes, penalties and interest and even payroll taxes can be compromised. If you qualify for this program you can save thousands of dollars in taxes, penalties and interest.
The IRS has 10 years from the date of assessment (usually close to the filing date) to collect all taxes, penalties and interest from the taxpayer. The taxpayer does not owe the IRS anything after the 10-year date has passed.
As with all IRS rules, there are exceptions to this rule. Some examples are, if the taxpayer agrees in writing to allow the IRS more time to collect from them or if the taxpayer files bankruptcy during the 10 year period. In both of these situations the period for the IRS to collect is extended for a specific time.
Taxpayers that are approaching this 10-year date should request copies of their IRS transcripts to verify the assessment date, so they can accurately compute when the 10-year statue to collect will expire. If the IRS is attempting to collect a tax liability which has expired under the 10 year statue, then the taxpayer must inform the IRS in writing that they no longer have the right to collect this tax liability. If the taxpayer is correct, the IRS will write off the tax liabilities which have expired. We are able to do this for you, as it is best to allow a tax professional to speak for you with the IRS.
The IRS will always accept some type of payment arrangement for past due taxes.
In order to qualify for a payment plan with the IRS, you must meet the following rules and provide the IRS with this information:
1. You must have filed all tax returns. (It's OK to owe money but you must file).
2. You will need to disclose all assets owned including all cash and bank accounts.
3. You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
4. You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
5. You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA's or 401K's.
Assuming that you comply with the above list, we can arrange a repayment of taxes with the IRS. The total dollar amount you owe usually dictates with whom the negotiations will be handled. Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than $25,000.
The IRS will ask you to complete a personal financial statement and if a business is involved, then you will need a business financial statement. The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses. The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis. These monthly payments will continue until your outstanding tax liabilities are paid in full.
WARNING! The IRS continues to add penalties and interest while you are making monthly payments. This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest. The IRS will not explain this to you!
Collections / Bank Levies
An IRS levy is the action taken by the IRS to collect taxes. For example, the IRS can issue a bank levy to obtain your cash in savings and checking accounts. Or the IRS can levy your wages or accounts receivable. The person, company, or institution that is served the levy must comply or face their own IRS problems. The additional paperwork this person, company or institution is faced with to comply with the levy, usually causes the taxpayer's relationship to suffer with the person being levied. Levies should be avoided at all costs and are usually the result of poor or no communication with the IRS. When the IRS levies a bank account, the levy is only for the particular day the levy is received by the bank. The bank is required to remove whatever amount is available in your account that day (up to the amount of the IRS's levy ) and send it to the IRS in 21 days unless notified otherwise by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Account Levy.
Our significant investment in computerized tax preparation and research software enables us to accurately and efficiently prepare returns for various types of entities including individuals, corporations, partnerships, trusts, estates, and not-for-profit organizations.
There is hope! Taxpayers that are hit with IRS penalties can request the penalties to be abated. Abated means to completely or partially remove. In many cases where a taxpayer requests abatement, the IRS removes 100% of the penalty. The IRS requires that you have a good reason to request penalty abatement.
What qualifies as a good reason?
It depends on the circumstances involved with your particular situation. The IRS procedures for deciding who qualifies for penalty abatement and for what reason seem to differ in each case. The best thing you can do is to request that the IRS abate your penalties by providing the circumstances surrounding your situation.
Currently Non Collectible is a program offered by the IRS for taxpayers experiencing economic hardship. This status means that the IRS will, for the time being, stop any collection action until the taxpayer’s situation improves. In such a situation, Currently Non Collectible status can provide much needed "breathing room". This is time that the taxpayer can use to get back on their feet and figure out a way to pay off the IRS without the immediate threat of collections activity. The Currently Non Collectible program does not prevent a Federal Tax Lien from being filed by the IRS, as well as it does not extend the Statute of Limitations a taxpayer has to pay the federal tax debt. Please contact our office to find out if you qualify.
The IRS wage garnishment is a very powerful tool used to collect taxes owed through your employer. Once a wage garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The paycheck that would have otherwise been paid to the employee will now be paid to the IRS. The wage garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment. We can assist with getting the garnishment released so your paycheck goes to you and not to the IRS!
Taxpayers often find themselves in trouble with the IRS because of their spouses or ex-spouse's actions. The IRS realizes that these situations do occur. In order to help taxpayers that are being subjected to IRS problems because of their spouse's actions, the IRS has come up with guidelines where a person may qualify as an Innocent Spouse. This means that if a taxpayer can prove they fit those guidelines, then they may not be subject to the taxes caused by their spouses or ex-spouses. The IRS is currently considering new regulations, which would make it even easier to qualify as an Innocent Spouse.
The IRS can audit you by mail, in their offices, or in your office or home. The location of your audit is a good indication of the severity of the audit.
Typically, correspondence audits are for missing documents in your tax return that IRS computers have attempted to find. These usually include W-2's and 1099 income items or interest expense items. This type of audit can be handled through the mail with the correct documentation.
The IRS office audit is usually with a Tax Examiner who will request numerous documents and explanations of various deductions. This type of audit may also require you to produce all bank records for a period of time so that the IRS can check for unreported income. The IRS audit schedule for your home or office should be taken more seriously due to the fact that the IRS Auditor is a Revenue Agent. Revenue Agents receive more training and auditing techniques than a typical Tax Examiner.
All IRS audits should be taken seriously because they often lead to other tax years and other tax deductions not originally stated in the audit letter. It is best to have a tax professional represent you at our offices rather than coming to you!
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"When I first came to IRS Problem Solvers, my debt with the IRS was over $100,000. By the time everything was completed, I paid nothing." - Nancy