Reduce IRS Tax Debt by Applying for a Debt Settlement

Posted on August 3, 2011 by admin

People who have found themselves owing a substantial amount in back taxes need to attempt a debt settlement as soon as possible. The IRS does not want to send agents out looking for people if they do not have to, as it is a costly venture. They do not have the goal of further populating federal prisons either, so people who owe taxes can rest assured that if they come forward to the IRS about their situation they will be able to negotiate a deal the majority of the time. The IRS will work with people who show that they are trying to be honest by paying their taxes. When dealing with this situation, the IRS has a few tax relief plans they can implement for people in nearly any scenario.

For people who owe less than $10,000 in back taxes, have never evaded taxes or filed late and are in back tax problems for the first time an installment plan will typically be the first offer. Under this plan the person is typically entitled to making monthly payments over a three year time frame. This allows them to keep track of what they owe on a monthly basis, rather than continuing to stress out over never getting out of back taxes. The plan is also nice, because the person will know that they are completely free from tax debt once the money has been paid over the allotted frame.

For people who have a slightly stiffer financial picture, a partial payment plan may be offered. This only applies if the IRS truly believes the person cannot pay off the full amount, nor do they have a substantial portion of this amount readily available today or in the near future. They will audit the person’s financial and expense records to determine their specific situation and to find any issues that may look suspicious. If the person is being truly honest about their situation they will have nothing to worry about. However, if the person has evaded taxes and has a lot of expensive possessions the IRS is not going to be very happy about it. Too many people sacrifice their entertainment money to save for taxes, to let someone who wants to live a millionaire life style on a portion of the income skate away with a partial payment.

The third option is known as an offer in compromise. A professional debt relief agency is usually best if this is the deal the person wants to negotiate. The professional will be able to look at the financial and expenses for the individual over a several year time frame. They will especially look at the years before the debt began to rack up. Did the person’s income significantly drop off, or did they simply increase their spending? The results will be presented to an IRS representative in an attempt to strike a deal for a substantial amount today. The IRS will usually accept this if the person owes a substantial amount, but has a good portion of it available today.

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Steps You Need to Take if You Can’t Pay your Taxes

Posted on August 1, 2011 by admin

People who owe back taxes need to follow a few steps to get the debt resolved. These steps are vital, as the IRS needs to be informed that the individual is honestly attempting to pay the amount owed, but is simply unable to come up with the necessary funds. The IRS is really not trying to throw people in federal prison for owing back taxes, they are just simply given the task of collecting what they can from individuals in order to fund a successfully run country.

The first step the individual needs to take is informing the IRS that they want to pay their taxes, but do not have the funds currently available. This step is important because if the organization sees that the person owes taxes, but have not seen the money sent in they will be in immediate contact. They are just like any other business where they prefer to eliminate any unnecessary expenses. They will be happy to work with people who come forward and inform them of their situation, as it is a costly venture to assign employees to the task of going out to make contact with the person. They will basically assume the person is playing the tax evasion game if they do not see money coming in.

The next step is to either setup a plan with the IRS to pay the back taxes or visit a tax relief specialists. The best option is probably to visit with a professional before attempting to setup a deal with the IRS. The reason is simple in that the person is probably going to be under a great deal of stress and may not completely understand the instructions given to them by the IRS. A tax debt professional will be able to calmly explain what the stipulations are for the different options and review the client’s records to determine which one is best for them. An individual might be eligible to get off with paying a portion of the taxes owed if a professional is able to find proof to back the proposal. For instance, if someone has a large family, but their income has been substantially reduced over the last year or so to where they are basically living month to month to provide food and clothes for their family. The IRS will take this into consideration as they do not want to see anyone living on the streets begging for food and water simply to make ends meet with the taxes they owe.

The final step is to see what option the IRS agrees to. Typically they will work off a few different plans; including installment plan, partial payment plan or an offer in compromise. The plans apply for people who have honestly attempted to pay their taxes and have not filed for assistance in previous years. The person must agree to pay off the entire amount agreed upon in the time frame established by the IRS, which is typically around three years.

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Five Tips for Getting Through an IRS Tax Audit

Posted on July 29, 2011 by admin

It can happen to anyone – suddenly you are being audited by the IRS. You may owe back taxes or not, and an IRS audit will help clear that up. Whether you are handling the IRS audit yourself, or are hiring a professional to help you with it, the issue here is that this process may be a bit daunting, confusing, and stressful. There are two types of audits, the correspondence audit – through the mail, and the in-person audit, where the IRS representative will visit you or you will have to go to the nearest IRS office. This type of audit is more complete and time-consuming.

Whether by mail or in person, you must know how to handle the audit. There are three ways in which you can handle an IRS audit – by yourself, by using form 8821, which authorizes a representative to receive information for you, but is not authorized to act, and by using IRS form 2848, an actual power of attorney in which you authorize your representative to act for you and handle the audit, without you necessarily being present – this could be your CPA, tax attorney, or an enrolled agent. Here are five tips for getting through an IRS tax audit feeling as if you just got a tax relief.

• It is best to hire the assistance of a professional to help you through this tough time, if you are not sure how to handle the situation. You may be looking to obtain tax relief or reducing the amount owed in back taxes, and the help of a professional that knows what he/she is doing is important here – whether that is your lawyer or your accountant.

• Know when to speak and speak the truth for legitimate tax deductions, even if your records might not be organized, and your receipts are a mess. For future reference, it is best to organize all your receipts by month in a file, and once you are done filing your taxes put everything together in a file and enveloped marked with the year. In the event that you are audited, you will find everything fast. This is a simple, but very effective tip.

• Know your rights. Study publication 1 – the taxpayer bill of rights. If you need more time, ask for it – it is under your taxpayer bill of rights, even if the audit is not going so well.

• Be straightforward and cooperate with your auditor – this gives a good impression since you don’t have anything to hide. Present the information they are asking for, no need to volunteer other information, just what they want to see. Respond promptly to the IRS, you do not want to play with communication in this matter.

• The best way to handle a possible IRS audit is by preventing it. You do this by:

Filing your taxes on time

Paying your taxes on time

Keeping records that are straightforward and organized

Hiring a reputable tax accountant

Reviewing your taxes before you send them

Educating yourself by reading the tax publications

Keeping personal finances separate from business

These are just five tips for getting through an IRS audit and protecting your taxpayer’s rights.

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IRS Tax Debt Information You Should Know

Posted on July 28, 2011 by admin

The IRS or “Internal Revenue Service” is a government agency within the United States that collects taxes from Americans in order to cover various costs within the country. Taxes pay for various services and projects within the United States, and this is why the IRS is so adamant about all citizens paying for their share of these costs. When people do not pay their taxes the IRS has a variety of ways to motivate people to do so, they can include wage garnishment and possibly jail time. This is why it is very important to stay on top of how much money is owed to the government, and when it needs to be paid by.

The IRS is not without a “heart” though, and will often work with those who have undergone financial hardship. The exemptions and other IRS assistance that can be found through accountants or other tax professionals can really help with having tax debt reduced. These exemptions and other useful tools are readily available for utilization, taxpayers just need to know where they are and how to use them. If someone is unable to hire an accountant there are IRS workers and other government employees who are employed just to help people manage their tax debt.

The road to recovery where IRS tax debt is concerned can be extremely rough for some who owe more money than they are able to pay back in a year or two. Stifling debt that will take several years to pay off can remove a family’s ability to function properly, and this is why when money is owed to the IRS it is important to work with them and not against them. With some simple financial planning and hard work there is no reason why paying back IRS tax debt has to be a horrible experience.

The IRS is concerned about one thing, the bottom line; additionally, the IRS is aware that the people who owe them money sometimes require some accommodation. It is these accommodations which are invaluable for many taxpayers with regard to being able to pay off their debt in a timely manner. As long as the IRS has a plan in place to receive their money at a date in the near future they are not very difficult to work with; however, there has to be concession on both sides. It is this willingness to work with the IRS that will ensure a taxpayer is able to pay their debt without debilitating levies being placed against their property and income by the IRS.

Everyone must pay their share of taxes in order to ensure that a stable government and the programs therein are in place to benefit society. There are many people who forget about these things, and they have to be reminded by the IRS that they too, must contribute to society. Taking initiative and coming up with a plan to pay back money owed to the IRS is something that will show initiative and encourage them to work with you.

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IRS Tax Debt Forgiveness

Posted on July 27, 2011 by admin

The IRS has many avenues to collect taxes, but there are some cases where they recognize that it will be almost impossible to collect, this is when tax debt forgiveness comes in.

As we look a little deeper into this subject you will discover a few ways you can qualify for tax debt forgiveness, of course the IRS is going to check your situation out, but once qualified you will be able to use these options.

Uncollectable Status

The first step in this process is to file an application, for individuals the form is called a 433A, for businesses the form is called a 433B. What this will do for you, if you qualify, is stop all collection procedures, protects your bank account and wages from being levied, and gives you breathing room to get back on your feet. This does not get you off the hook for all of the taxes you owe, but it will buy you a fair amount of time to assess your situation, get help and keep things in order.

This also gives you time to contemplate your next step which might be an offer in compromise.

Offer in Compromise

As we will talk about in a minute, filing for bankruptcy is a way to force a type of tax debt forgiveness, but take a look at the offer in compromise option first.

As mentioned above the IRS will at some point see that it is impossible to collect taxes owed in certain situations, this opens the door for a compromise. An offer in compromise is a negotiated settlement process where you generally end up paying pennies on the dollar for what taxes you owe. The other aspect of this option is you are generally required to pay the amount agreed upon in a lump sum.

Bankruptcy

If you refer to the IRS publication 904 you will find that there are provisions for people filing chapter 13 bankruptcy. This form of bankruptcy stops the IRS from seizing your property or assets, the tax debt becomes part of the 60 month payment process (provision of chapter 13) and at the end of this time period all outstanding debt is discharged.

Financial Disaster

There is one other approach for tax debt forgiveness, there are a few names for it but they all fall under the category of a financial disaster. You generally will want the help of a tax professional, but once all the evidence is presented and the IRS sees you are in a financial nightmare, you can ask for a fresh start. Needless to say you have to be broke with debt way over your head and no way to recover. In this case the IRS will forgive your debt so you can start fresh.

There are some good reasons the IRS extends tax debt forgiveness, playing cat and mouse with a taxpayer is costly. You see, the quicker they can get you back in the system paying taxes at a level you can afford, the more cost effective it is for them. It’s really that simple, so if you are in a situation like this keep these options in mind, you could be in line for a fresh start.

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Tax Debt Settlement Could Solve Your Tax Problems

Posted on July 26, 2011 by admin

In this article we want to look at a couple of options when it comes to tax debt settlement, these options could solve your tax problems. The IRS does offer a repayment plan, but the department that handles these requests doesn’t normally have the authority to negotiate a tax settlement plan. Let’s take a look at a couple of options that do.

Offer in Compromise

The IRS has one option that is called offer in compromise (OIC), this option , if you qualify, can greatly reduce what you owe by as much as 70 percent, this is all hashed out in the settlement process.

If you provide proof that you cannot make payments utilizing the IRS repayment plan, then your next option is to negotiate a settlement that will satisfy your tax debt issues. For many people the whole process of dealing with the IRS can be stressful and intimidating, this means you may need to hire a tax professional to negotiate for you.

The OIC option is one you want to use sparingly because you cannot use this option every time you have a tax debt, if you have accumulated back taxes that have become unmanageable, then this is a good time to use the OIC option. As mentioned, you will generally reduce your tax debt by at least 50 percent or more, the trade off is the IRS wants a lump sum payment for the settlement amount, make sure you can pay this or have a means to get the money when it is due.

Bankruptcy

Most people don’t think of bankruptcy as a tax debt settlement plan, but it really is because the court will take over your situation and dictate a reduced payment option.

Another benefit of bankruptcy, if you qualify, is protection from any liens or levies that the IRS might have been thinking to attach to your assets. The most common assets the IRS goes after are bank accounts, wages and property; bankruptcy puts a halt to any attempt to do this. When the court takes over they will assess your financial situation and calculate a payment that you will pay them monthly. Chances are you will include other debt in this bankruptcy along with your tax debt, the repayment term is 60 months and you will make one payment to the court.

The court will distribute your payment among the creditors and when the 60 months is complete all outstanding debt will be discharged. The reason this is considered a tax debt settlement is because the IRS will get less than owed, plus after 60 months when the debt is discharged your tax problem will be solved.

Bankruptcy is not the first option you want to consider because there are long term negative credit implications, but in some cases it becomes the only option that will give you a fresh start. You do not want to ignore your tax debt problem, this will only make it worse, tax debt settlement is a viable way to solve your tax problems, use it and get a fresh start.

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