How Far Back Can the IRS Go for Unfiled Taxes?

How far back can the IRS go

How far back can the IRS go for unfiled taxes?

And what can you do to resolve the problem, should you find yourself behind on your tax filings (or tax payments)?

First, the good news. Federal law protects taxpayers who are in trouble with the Internal Revenue Service by setting a statute of limitations for the collection of unpaid taxes.  Title 26 of the United States Code, Section 6502, sets a 10 year time limit for collection of back taxes.

Now the bad news.  Many taxpayers misinterpret this law. They assume that any balance due on a return that should have been filed 10 years ago is now outside the statute, and that the IRS can no longer continue collection efforts. This interpretation is incorrect.

There is a 10 year statute of limitations on collections. But that 10 year period does not begin until taxes are actually assessed. And taxes are not actually assessed until a return is filed—either filed by you, or prepared and filed for you by the IRS.

The IRS May Have Filed a Substitute Return

If you do not file your return for a particular year, the IRS could prepare a substitute for return (or “SFR”), and then assess your tax due. Congress authorizes the IRS to do this. (IRC 6020),

How do you know whether a substitute return has been prepared? Usually you’ll find out when you receive an Assessment Letter in the mail from the IRS. Here’s an example of what the standard Assessment Letter (IRS Notice CP2566) looks like.

The letter tells you that

(a.) the IRS has not received your tax return, and

(b.) you have 30 days to file, or

(c.) the IRS will prepare a return for you and assess tax due.,

Typically the IRS will mail out this letter when it notices that a person hasn’t filed for a few years, but at the same time the agency has received income documents such as W-2 and 1099 forms for that person. In other words, your employer or someone who has paid you for services was required to report that income to the IRS via Form(s) W-2 and/or 1099-Misc.

A Substitute Return is Prepared in the Best Interests of Uncle Sam

The Internal Revenue Service knows that you earned income, and knows you haven’t filed a return. So they prepared a return for you, but when they did, they didn’t do you any favors. They didn’t give you any of the normal deductions or credits that you would have included, had you prepared the return. The SFR assumes you are a single person (or married filing separately) with no dependents, no business expenses, no itemized deductions, and so on.

So if you receive an Assessment Letter (CP2566), your best course of action is to file an amended return, including any legal exemptions, deductions and tax credits you are entitled to, within 30 days. You’ll likely find your tax bill is significantly reduced by filing a return.

You may even discover that the IRS owes you a refund! Note however, there’s a statute of limitations on refunds. The IRS doesn’t have to refund you any overpayment of tax if the return is not filed within 3 years of the filing deadline.

What if you do nothing?

If you don’t file an amended return, or you simply don’t respond to the assessment letter within 30 days, then IRS mails out a second letter, called the Statutory Notice of Deficiency. This one comes by certified mail, which requires that you sign to receive the letter. Here’s an example of what the Notice of Deficiency (IRS Notice CP 3219N) looks like.

 At this point the IRS is prepared to move forward as if their proposed tax assessment (detailed in the first Assessment Letter) is correct, and is ready to initiate collection action for any unpaid tax, penalties, and interest.

 The Deficiency Notice gives you 90 days to respond; be sure to read it carefully. You’ve got two choices at this point:

  • If you agree with the notice, respond by filing a Consent to Assessment and Collection
  • If you disagree, you either (a.) go ahead and get that missing return prepared and filed, or (b.) dispute the assessment and/or filing requirement through Tax Court.

What if you have not received either of these two notices?

Let’s assume that you haven’t filed your personal 1040 tax returns for say 2, 5, or even 10  years. But after all this time, you now find yourself in the position where you really need to address the issue. It could be a new marriage, a new job, or the threat of having your passport revoked, for example.

Whatever the case, waiting or doing nothing can only make the matter worse, for several reasons:

  1. Not filing your tax returns is a crime that can put you in jail. While the IRS doesn’t take this action often, they do so—as they did with Wesley Snipes. Not paying taxes can bring civil charges, but not filing can bring criminal charges, which makes not filing worse than not paying!
  2. If you don’t file, the IRS can prepare a Substitute for Return, without exemptions or deductions, resulting in an inflated tax obligation.
  3. Not filing means you lose possible refunds due to the 3 year statute of limitations. This means you lose money, or you lose the ability to use any refund amounts to offset the tax due on other un-filed years.
  4. The IRS may have sent notices, but you’ve not received them  because your address has changed over the years. But they still can locate your bank account, or your employment, and should they levy your account or garnish your wages, it will be very difficult to stop the collection action until you get your returns filed.

Bottom line, waiting for the IRS can backfire on you.

It really is possible to put your tax problem behind you, but first you have to decide that you’re going to start.

What if you file, but can’t afford to pay the tax?

Even if you find that you owe the IRS, you should still file the returns for the reasons stated above.

You may not have the money to pay the tax right now—but you do have options. This could actually be the best time to work out a settlement with the IRS, and not in the future, whenever you “get back on your feet” and actually have money.

The only way to settle your debt is by first filing a tax return, so that the IRS can make an assessment of tax due.   

What if you don’t have past year’s records; how can you file a return?

Many taxpayers misplace prior year tax records, even lose them in a flood or a fire. Maybe record-keeping isn’t your strong suit to begin with, and now that you’ve behind with the IRS, the thought of organizing your paperwork and preparing a return is simply overwhelming.

But there is hope. W-2s, 1099s, 1098s, K-1s, etc. are all going to be on your IRS records; you can access all of this info by requesting a report from the IRS called a Wage and Income Transcript. Obtain a transcript for each year you’ve not filed — up to 6 years.

In most cases, because of limited manpower, the IRS requires you to only go back and file your last 6 years of returns, and then work out a payment arrangement or settlement for any tax due. This is the general rule, and there are exceptions, but working to prepare and file 6 years of returns can certainly be more manageable than you’ve feared.

Bottom line, you do not have to be in a state of fear and inaction due to un-filed returns and back taxes. If you just start moving forward, you’ll find it really is possible to put your IRS problem behind you, permanently. 

But the single most important step you can take to resolving your back tax problem is to act immediately.

Are you ready to get started?  Click here to set up your personalized Tax Debt Relief Consult. Bu please don’t wait; the IRS acts fast when they think you have their money!

6 Ways to Release or Remove a Tax Lien

You go to the ATM but can’t get any money out. Your payroll manager calls and says your paycheck has been levied. What do you do next?

Here’s 6 ways to Release or Remove an IRS or State Tax Lien:

  1. Obtain a Properly Structured Monthly Payment Plan. You don’t have to ‘full pay’ your tax debt. Usually the tax collector will accept a payment plan. But too often troubled taxpayers make payment arrangements they can’t afford. It’s crucial you obtain a properly structured plan that will satisfy the tax agency without adversely impacting your family’s well-being. This requires a working knowledge of local and national collection standards.
  2. File for an Offer in Compromise. It really is possible to Settle with the IRS or the state forIRS Notice Less than you Owe, if you can document with the collectors that your reasonable collection potential is not sufficient to clear the debt. It can be a complex process, and take up to 12 months to complete, but a successful offer will permanently put your IRS problem behind you.
  3. Appeal the Lien Filed. There are times when a lien is filed in error. Perhaps you paid your bill late, but the tax agency personnel neglected to update your account record. Under the Taxpayers BIll of rights, you are entitled to a Certificate of Release when this happens. Deliver photocopies of this document to the three credit bureaus to minimize damage to your credit rating.
  4. Gain Currently Non-Collectible (CNC) Status. This IRS status is granted to taxpayers who are experiencing financial hardship, and puts collection activity on “hold”. Assuming you have filed all your tax returns, you’ll be required to submit a complete record of your financial assets, and proveSPENCER WISCONSIN Sept.28 2014: Payday Loans is a short term loan company. ** Note: Soft Focus at 100%, best at smaller sizesthat your income and expenses comply to local and national collection standards in order to document your inability to pay your back taxes. Once obtained, CNC status generally lasts 2 years, after which time you can re-apply by submitted updated financial information.
  5. Do Nothing. Try to live with the fact that the IRS will have 10 years from the date the tax is assessed to continue collection activity, freeze your bank accounts, garnish your pay, and seize property. This is normally not a good option.
  6. Get Professional Representation. Dealing with IRS collections and appeals processes is a very specialized area of practice, and one in which most taxpayers, lawyers, and accountants lack the expertise and experience to deal with successfully. That’s why the US Treasury has enrolled certain professionals, designated as Enrolled Agents, who specialize in dealing with IRS problem resolution. They know what to do and how to do it when it comes to removing a tax lien or releasing a tax levy.

ANCHOR ON THIS: Tax liens and levies are actions of last resort for federal and state tax collectors. You’ll generally have received multiple assessment letters and notices of intent to levy before your bank account or paycheck is hit. The bad news is that your own procrastination helped get you here. Tax problems can indeed be overwhelming. There’s good news however. It really is possible to get a fresh start, and the steps to resolving your tax matter are usually easier than you feared. Now it’s time to make a quality decision, decide you’re going to put your IRS problem behind you, and take that first step.

 

Three Simple Steps to Take NOW if You Still Haven’t Filed Your Tax Return

You didn’t file on April 15th because you didn’t have the money to pay. You got an extension, hoping somehow it would give you time you needed to get the money to pay your tax bill.

But business hasn’t picked up. You haven’t hit the lottery. And that old grey mare, well, she’s not the one that won the Triple Crown this summer.

You still don’t have the money to pay the IRS.  Now what?

Don’t let this thing snowball.stop-863665_1280 (1)

I help rescue taxpayers in trouble with the IRS. I’ve seen all kinds of problems and all kinds of cases, and resolved some absolutely HUGE tax debts. But all that work is AFTER THE FACT. It’s re-active. It fixes problems that could have been avoided if folks did the right things earlier in the game. Problems like having the IRS freeze your bank account, or levy your paycheck, or seize your property.

Don’t run and hide. It will only make matters worse. Take this pro-active advice to keep your current tax debt from growing into a HUGE problem later;

Be double-dog sure to file your return on time.

Even if you still don’t have the money, file your return by the September 15th (business) or October 15th (individual) tax deadline. File on time even if you can’t send in one single dollar with the return to pay the tax due. It’s insane not to file and then have the IRS pile up additional interest and late filing penalties on top of the actual tax you owe.

If you can, send in at least some money now.

pennies-15727_1280Even if you don’t have enough to pay the whole amount, but have some money today, pay it now even before you file the return. Unlike other creditors, the IRS is happy to take partial payments. So go ahead and pay some NOW. You can wait until the deadline to file — that will at least delay an assessment — but pay some now. What you probably don’t realize is this: the money was actually due on April 15th anyway, even if you got an automatic extension to file.  So if you’ve got some of the tax money now, go ahead and pay some now and stop wasting money on interest and penalties you don’t have to be paying. You can pay online via IRS Direct Pay, or mail in a check to the appropriate IRS office

The next step depends on how much you owe.

Once you’ve filed, it will take the IRS a few weeks to process the return. Then they’ll send you the IRS notice you’ve been dreading, with an assessment of the amount due. At that point, it’s important to act quickly. The action you should take will depend on how much you owe.

  • Less than $10,000. If your total debt, including this year’s tax together with any prior years tax still due, totals $10,000 or less, you can set up an automatic 36 month payment agreement online. Just go to the IRS website and do so. Once it’s set up, be sure to consistently make the payments, each and every month. And know that all future tax returns and tax debt must be paid on time, which means you’ll be paying past tax debt and next year’s tax bills all at the same time. It’s double for your trouble, but do it… or you will default the agreement.
  • $10,000 – $50,000. If you owe somewhere between these amounts, you can establish a Streamlined Installment Agreement. This allows you pay the amount due over 72 months. It’s not a quick fix, obviously, but let’s face it, you didn’t create this problem overnight either. Your tax problem is most likely the result of a number of poor quality decisions made over time. The solution may take some time as well. The important thing is to get started on a program to put IRS collection actions on ‘hold’ for now and, in time, put your tax problem behind you permanently.
  • If you owe $50,000 or more, my recommendation is to contact a tax relief professional immediately to sort out your options. There are four primary IRS programs you can use to get a Fresh Start. Bankruptcy is a fifth option, though it has it’s limitations when it comes to wiping out your tax debt. The best course is to get help determining which program is best-suited to your family’s financial situation. Most professionals offer a FREE consultation to help you; take advantage of this!

ANCHOR ON THIS: If you haven’t filed because you can’t pay the tax, don’t let the problem snowball. Inaction will only make the situation worse. Make smart decisions: file on time, pay what you can today, and if you need to, make an installment agreement to pay your taxes over time. If you can’t afford a payment plan, you may qualify for other IRS Relief programs.

For more information, contact a tax professional who specializes in IRS Representation.

I’m Having Financial Hardship. Can I Get the IRS Collectors to Stop?

Hard-working, well-meaning taxpayers can fall into trouble with the IRS due to circumstances beyond their control. They suffer a serious illness, or lose their job, or a poor economy hits their business, leaving them without funds to pay their taxes on time.

If you’re experiencing financial hardship, it is possible to get the IRS to agree to stop it’s collection activities. A primary means to achieve this is known as “Currently Not Collectible” status. The tax term “currently not collectible” refers to the fact that a taxpayer simply does not have the ability to pay his or her taxes.

A Personal Story

Perhaps you can relate to the situation Stan and Jill faced. Stan worked for several years in IT, but lost his job during the family-829308_12802009 recession. He was out of work for months, falling behind on his mortgage, and using credit cards to put food on the table. The increased stress caused his rheumatoid arthritis to flare up, resulting in unpaid medical bills. He finally landed temporary work on a “1099” basis as an independent contractor, helping the family get caught up on some bills. But when tax time came, he was unprepared for the additional taxes of ‘self-employment’. He couldn’t pay it all on time, got hit with interest and penalties, and all this over a 5 year period has now grown to a total IRS debt of just under $30,000.

What does a taxpayer do to fix this situation?

In working with Stan and Jill, we determined that Currently Not Collectible (CNC) status is the most appropriate solution for their specific situation. CNC status puts IRS collection efforts on hold. It protects you from bank levies, wage garnishments, threatening letters and collection enforcement.

Where do you begin to obtain CNC status? You start by providing the IRS with personal financial information that documents your hardship. The Collection Information Statement includes your bank accounts, financial assets, monthly income and expenses.

In the case of expenses, the IRS has set standard amounts for monthly food, clothing, housing, and vehicle expenses. If you are above these amounts the IRS will not consider the extra expense and instead ask that you adjust your lifestyle to within the set standards.

For this reason, it can be to your advantage to seek professional IRS Representation from an Enrolled Agent who is (1.) familiar with IRS standards and (2.)  has been successful in obtaining CNC status for other taxpayers going through financial hardship.

Is this a permanent solution–or just temporary?

To the IRS, currently not collectible is “putting a debt on the shelf”. In other words, they take your case out of their active collection inventory (shelving it). But it’s not a permanent solution; you will typically be required to resubmit updated financial information every two years, at which time your status will be re-evaluated.

In many cases, however, taxpayers who have been granted non-collectible status remain there until the time frame the IRS has to collect (10 years) expires, after which the IRS debt is permanently removed and forgiven.

ANCHOR ON THIS: Currently Not Collectible status puts IRS collection activity temporarily on “hold”, and allows you to live your life without IRS intrusions into your bank accounts, wages and property.  But when combined with the expiration of the 10 year statute of limitations on collection, it can become a legitimate action plan toward put your IRS problem behind you, permanently.

For more information, see irs.gov, or contact a tax relief professional.

 

Delinquent Tax Returns? Here’s 3 Reasons You Shouldn’t Rush to File

Do you have delinquent tax returns? Have you received an IRS Notice instructing you to file an overdue or un-filed return immediately?

Don’t do it. Not just yet, anyway.

Don’t get me wrong–I believe Americans should render unto Uncle Sam what is Uncle Sam’s (but not a penny more).

It’s very important to file and pay your taxes a timely manner. If you don’t, you will have to deal with the various attempts the IRS makes to get you to file. If you still don’t file, they’ll go ahead and file for you. And then turn you over to the world’s best collection agency to obtain the tax money you owe. (Now with that disclaimer out of the way, let’s proceed…)

Here’s three simple reasons (you probably haven’t thought about) why you shouldn’t rush to file delinquent tax returns:

  1. If you have a refund coming to you, and you file more than 3 years past the due date (including validprocrastinationextensions), most of the time the IRS will keep the refund. The IRS will not even offset the refund against an old tax liability from another year.
  2. If you are in an Installment Agreement to pay a prior tax liability, or in an Non-Collectible Status, the filing of any return or the paying of any tax late will void the agreement.  This will cause all money to become due immediately.  Often when an agreement is in default, taxpayers find out via a levy on their bank account, their spouse’s paycheck, a lien on their house or seizure of other property.
  3. You’ll likely regret not giving yourself sufficient time to reflect on the accuracy of the return. Don’t let the IRS, bully you into filing a return so quickly that it is full of errors. This may increase your tax debt or cause an examination.

ANCHOR ON THIS: IRS Notices can be intimidating, in both format and tone. But don’t let their deadlines and strong language mislead you. Don’t operate out of fear by letting the IRS dictate how and when to proceed. A knee-jerk reaction can adversely affect your IRS tax matter in the long-term. For more information on how to deal with the IRS to resolve your tax matter, permanently, contact a tax pro who specializes in IRS Representation.

4 Reasons Not to Hit the Panic Button After You Get An IRS Notice

You filed your return. You paid your tax. But now, just when you thought this year’s taxes were wrapped up and put away, you find an IRS Notice in your mailbox.

Don’t hit panic panic button!

Here’s 4 reasons why:

1. You’re not alone.

The IRS sends millions of notices and letters out each year. Many are computer-generated, because these days the IRS relies less on employees to get directly involved in issues including collections.

2. Many notices are simply routine.mums-219436_1280

These can be resolved with a few simple steps. For example, you may need to file an additional tax form. The IRS may have been unable to make a direct deposit for your refund and, instead, is sending a refund check. Or you might have missed a small amount of interest from a bank account. With more than 100 types of federal tax notices (see “Common IRS Notices,” below), the possibilities for IRS inquiry are endless.

3. Focus only on the issue at hand.

The envelope may be thick, and the letter itself several pages long, but look for the key sentence (usually right there on the first page) that states the problem at hand. The IRS has redesigned their standard notices to look less like legal documents. The language is generally easier to understand than in the past. Identify the problem, then follow the instructions to resolve the issue.

Say the IRS proposes a correction to your return. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree. Include any information and documents you want the IRS to consider with your response. Mail your reply with the bottom tear-off portion of the IRS letter to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

4. There are times when the IRS is wrong.

black-40636_150Remember, many notices are computer generated, meaning no one at the IRS has reviewed it before you received it. Which can lead to simple mistakes. Say you claimed interest income from Bayview Savings on your return. But the 1099 filed with the IRS reads “Bayview Federal Savings Bank”. The computer doesn’t match up the names, so you receive a standard CP 2000 notice stating you didn’t claim the income, proposing additional tax, and charging you interest and a penalty to boot. It’s a simple mistake. Follow the instructions. It’s a simple fix.

ANCHOR ON THIS: No one likes to find an IRS Notice in their mailbox. But no one needs to hit the panic button. It’s a first notice. Should you take it seriously? Yes! Never ignore an IRS letter! Never set it aside with a stack of bills you’ll get to sometime later. But there’s no need to freak out. Breathe. Open the letter. Identify the problem. Resolve it (which you should be able to without calling or visiting an IRS office). For more information, visit IRS.gov, or contact a tax relief professional who specializes in IRS representation.

The Top 4 Reasons We Miss Deadlines… (like April 15th)

Why do we allow ourselves to miss important deadlines (like April 15th)?  The first syllable (“dead”) on it’s own is hard enough to swallow. And then when you put another word like “tax” in front of it (“tax deadline”!!!), it can be overwhelming.
When it comes to April 15th, these are the four reasons I hear most often from my clients:
  1. I don’t have the time
  2. I don’t have the money
  3. I don’t know how to file (my tax situation has changed)
  4. I just can’t handle it right now
I don’t have the time
smart-watch-821567_640Let’s face it. You don’t have any more or less time than anyone else.
Sure you’re busy. But you’re not the only one with a job, children, church and/or other responsibilities. We all get 24 hours in a day; nobody else gets “bonus time”. In this light, you don’t really “manage” time; your challenge is simply to manage priorities.
Make the IRS a priority on April 15 so they don’t make you a priority later
I don’t have the money
Many people file an extension with the IRS, thinking it gets them more time to pay their taxes. It doesn’t. Even if you are granted a six-month extension to file, it doesn’t extend the deadline to pay which will still be April 15
In my experience, many people fear that they’re going to owe when they actually are going to get a refund. But they delay filing, only to learn later that their refund is reduced because of IRS penalties. Some delay more than three years and forfeit their refund altogether.
File now even if you don’t have the money. It doesn’t save you anything to delay.
I don’t have the know-how 
This reason is usually associated with a major life change. For example,
  • People get married and then don’t know whether to file jointly or separately.
  • People start a new business and then don’t know how to file their business taxes
  • People get an inheritance, or sell stock, or liquidate some 401(k) money, or buy rental property, and so on.
Any of these events can dramatically change how you file your taxes but it shouldn’t be so overwhelming, or your need for perfection so great, that you can’t get help or find the information you need to get the return filed
If you need to hire a tax professional, do it. Their fees will usually be more than paid for by the amount of taxes you save.
I just can’t handle it right now!
When it comes to the IRS, income taxes, finances, deadlines…  people can implode emotionally, shut down, melt down… lie down. We tend to do nothing, because the job seems too big to handle in light of everything else we’re dealing with in life.
 watches-842410_640
The good news is you don’t have to get it all done today. Give yourself a few days, that is, choose to set your own deadline rather than someone else do that for you.
Maybe it will take a few hours to get your records together, gain knowledge on some tax laws, navigate tax software, or meet with an accountant. Break the tasks down into bite-size pieces and then take 20 minutes each day until you cross the finish line.
ANCHOR ON THIS: Meeting the April 15th tax deadline can feel like an overwhelming task. It’s easy to make excuses, or rebel against the outside pressure that an IRS deadline imposes on our lives. But if you choose to set your own deadline, and break down the task into small daily steps, you’ll gain confidence as you move forward, complete the project, meet the deadline, and ultimately save yourself time, money and stress.
Can you share other reasons you miss deadlines, tax or otherwise? Please feel free to add your thoughts via your comments below.

How to Develop a Winning Strategy in Dealing with the IRS

When I talk about the need to develop a winning strategy in dealing with the IRS — a ‘kick-ass’ strategy, if you will — what I’m referring to is your absolute need to go into it with a strong game plan.

No NFL team is going to take the field on Sunday without first studying the other team’s strengths and weaknesses, and develop a solid game plan based on that knowledge.

Yet every business day, taxpayers engage Internal Revenue Service personnel with little to no knowledge of how the IRS operates, what their true objectives are, what programs are available to settle IRS debt, what your collector can and can’t do (per published standards in the Internal Revenue Manual), and so on.

A ‘kick-ass’ strategy is all about working with IRS employees and standards to yield a positive outcome (a ‘win’). It isn’t a mindset where you set out to conquer the IRS or take the attitude that you’re going to kick the collector’s you-know-what.

Let’s face it, if anyone needs a kick in the keyster… it’s you.

  • You’re the one with unpaid taxes and/or un-filed returns.
  • You’re the one who’s tried to ignore your tax problem.
  • You’re the one who’s let the whole situation steamroll into such a big mess.

If you want things to change, you must change.

It’s time to take charge of your situation, have the courage to face your fears, gain some wisdom on your tax matter, develop a game plan, and move forward. This is what I mean by taking a ‘kick-ass’ approach to dealing with things.

A winning strategy seeks to collaborate rather than conquer.

Think about this for a moment. Have you ever thought about what it’s like to be an IRS collector? Being an IRS agent can be very frustrating, very negative, very difficult. Taxpayers lie to you, yell at you, disrespect you. You probably didn’t grow up thinking that working for the IRS would be your dream job or career. But right now it is your job, it’s what you go to the office and do everyday to feed your children.

Troubled taxpayers will get a lot further by being patient with IRS personnel on the phone, no matter how they might initially respond to you. Take the approach that you’re not dealing with the IRS; your dealing with a person who works at the IRS. Try to collaborate with them to gain a favorable outcome for both of you.

A winning mindset is focused

Forget about politics. It’s not about you being a conservative Republican, or a liberal Democrat, or where in the world Lois Lerner’s emails went. It’s not about whether you think the tax laws are fair or unfair to poor folks, to business owners, to gays, to members of the Tea Party, or to non-profits. It’s about how much you owe, how much you earn, how much you can reasonably pay the IRS without negatively affecting the health and well-being of your family.

A winning mindset accepts the fact that your tax problem is ‘business’, not ‘personal’. Don’t be offended because you ignored IRS notices and finally your bank account was levied. Don’t take it personally if your monthly housing costs or food budget don’t line up with established local or national standards.

Denial is not a successful resolution strategy

It’s amazing to me how unaware delinquent taxpayers are about the specifics of their tax matter. How well do you really know your situation? You can’t fix a problem if you don’t understand what it is. If you don’t know the answer, ask the IRS employee to help you understand the problem, and what the best possible solution is! Here’s some important things to know:

  • What’s the total dollar amount that you owe? How much of that total is tax debt, and how much is interest and penalties? Is penalty abatement possible? Is a payment plan an option for you?
  • How old is the tax debt? When does the assessment statute expire? When does the statute of limitations on collecting the debt expire?
  • Is the case in Automated Collection, or has it been assigned to a local IRS agent? Is a bank levy possible? How soon? How can it be avoided (or removed).
  • Do you have un-filed returns? Has the IRS filed “substitute for” returns? How much could you reduce your tax by actually filing in those years?
  • Could your case qualify for an Offer in Compromise? Is a Partial Pay Installment Agreement a possible solution?

Search for a ‘win-win’ outcome.

A ‘win’ for you is to sleep better at night knowing you’ve shown the courage to face your IRS problem and resolve it, either by being able to reduce your overall tax bill, have a levy released, a penalty removed, or an affordable payment agreement approved.

A ‘win’ for the IRS employee, is to resolve your tax issue in a manner that meets the demands of their boss and IRS collection standards, get your case file off their desk, and move on to the next one.

ANCHOR ON THIS: The IRS has been kicking your tail long enough. The stress and fear can take over your life. But don’t let your emotions keep you from developing a winning strategy in dealing with the IRS. A collaborative strategy will be more successful than a combative approach in putting your IRS problems behind you.

Is it Really Possible to Settle With the IRS for Pennies on the Dollar?

Taxpayers in trouble with the IRS often ask me if it is really possible to settle with the IRS for pennies on the dollar.

It depends!

Are you a glass half-empty type of person, or a glass half-full?

It’s hard to miss all those late-night TV commercials that offer to get you off the hook with the IRS for just a fraction of what you owe. National tax resolution companies advertise heavily.

cardiac-217140_1280My favorite ad used to feature a handsome young actor in a white doctor’s lab coat holding up a sign that read “$20,000”, while the voice-over talent claimed that his $1,000,000 IRS debt was settled for–you guessed it–pennies on the dollar. (The company running the ad is no longer in business.)

The glass half-empty perspective

What the commercials are talking about is getting the IRS to accept an Offer in Compromise (OIC). The reality is 60% of the time the IRS rejects such an offer. That’s the glass half-empty perspective.

Of course, the glass half-full perspective affirms that 40% of the offers are accepted. And the truth is properly structured Offers are accepted when they demonstrate that a taxpayer’s “Reasonable Collection Potential” is low.

A handsome, healthy young doctor with 30 years-plus of extremely high income potential is not likely to have an Offer in Compromise accepted by the IRS.

At the other extreme…

A taxpayer with the same IRS debt, but with health problems, less education, less assets, and lower income potential than the handsome young doctor will have a higher likelihood of having an OIC accepted.

money-235586_150Unfortunately, the people targeted by the TV ads do not know this. They’re stressed out, running scared, and hooked by the promise of an quick and easy solution. So they call the toll-free number and are connected with a high-pressure salesperson. They’re assured the firm will do miracles and make their IRS problem disappear, just as soon as they pay an up-front retainer of $5,000-$10,000.

In too many cases, it’s the tax resolution firm that disappeared, not the tax problem.

It doesn’t pay treat your tax problem like a game of high-stakes poker.  

If you have the money to pay the IRS–or will likely have it in the future–then you can be sure IRS collectors have figured that out. No amount of bluffing, no amount of negotiating will get them to settle for less than you owe. That being said, there are cases where an Offer in Compromise is indeed an appropriate solution to your IRS problem.

It all depends on the specifics of your particular situation. Even if an OIC is the perfect solution for you, it’s not a quick and easy one. The IRS Collection Division will typically take 6-12 months to thoroughly review your Form 656 Offer in Compromise and all the supporting documentation required to go along with it.

It also doesn’t pay to handle your tax problem  like a weekend “do-it-yourselfer” 

Many taxpayers start out trying to handle their IRS Offer in Compromise themselves (or with their current CPA or attorney) but end up with negative results, or no results at all. It’s a very specialized area of practice, and you could benefit from the assistance of an Enrolled Agent or tax attorney experienced in Offers in Compromise, and who has the expertise to complete the IRS forms and represent your case before the IRS in the strongest possible manner.

ANCHOR ON THIS: It really is possible to put your IRS problem behind you, permanently. But it’s not always possible to do it with an Offer in Compromise. The program best-suited to resolve your tax matter will depend on a number of factors. Your best move is to consult with a professional who specializes in IRS Representation to determine what’s possible–and what’s not–for your particular situation.

The First Step To Solve Your IRS Problem is Surprisingly Simple

Solve Tax Problem

The first step in resolving your IRS Problem is a surprisingly simple one.

I’m betting it’s not what you think it is.

I know what it is, because I’ve been there. The stress from an IRS problem can be overwhelming, affecting your finances, your relationships, your emotions…  tax problems can take over your life.

What I learned is that it really is possible to put your IRS problem behind you. I’ve seen it happen time and time again, for myself and for my clients. You might say I’ve “been there, done that.tailors-chalk-517029_1280.. fixed that!”

There are a number of programs available to fix your tax problem. A tax resolution professional (such as an Enrolled Agent, or a tax attorney) can take their experience and expertise to custom-tailor an IRS “Fresh Start” program that’s best suited to your particular situation.

But first you have to absolutely decide that you’re going to take your life back from the IRS. You have to decide that you aren’t going to take this anymore, and that you’re going to fix it. That’s the first step. Once you make the decision that you want help, and you no longer want to live in fear, or hide from those dreaded IRS notices, phone calls and visits–you will have taken the biggest step in getting your life back on track.

Resolving yway-389792_1280our IRS problem is often simpler than you think. Not always easy; but simple. (There is a difference.) Making a quality decision to resolve your tax matter is your first step. Learning what options might be available to fix your problem is the second step. Many Enrolled Agents or tax attorneys offer a free initial consultation. It may be a phone call, it may be an in-person meeting.

Either way, you can benefit from this part of the process…

  •  You can use it to tell rather quickly whether you think and feel that particular EA or attorney is trustworthy, is qualified to fix your IRS problem, and is a good ‘fit’ for you personally.
  • On the other side, the Enrolled Agent is determining the overall scope of your problem, how important it really is to you to get it behind you, and how much time and effort it will take to resolve it.

If you’re ready for the next step, please take it sooner rather than later. Trust me: IRS collectors act surprisingly fast when they think you have their money!

ANCHOR ON THIS: It really is possible to resolve your IRS problem. The sure-fire first step is to make a quality decision.

Don’t be fooled thinking Bankruptcy will wipe out all your IRS tax debt

Read this before you meet with a Bankruptcy attorney

If you have an IRS tax problem, don’t be fooled into thinking bankruptcy will permanently wipe out all of your IRS tax debt.

Bankruptcy relief is immediate. It puts creditors, including the IRS, on immediate hold. They can’t can’t levy your bank account, can’t garnish your paycheck, can’t seize your property.  At least for awhile.

Bankruptcy also discharges some of your IRS debt completely. But it will totally cleanup all your IRS tax matter only if the following four conditions are met:Bankruptcy and IRS tax debt

  1. the return’s filing deadline was due at least three years ago, and
  2. you actually filed the return over two years ago, and
  3. the IRS assessed the tax at least 240 days (or 8 months) ago, and
  4. you did not commit any fraud or tax evasion along the way.

If the total tax you owe–or any part of the balance due–does not meet the criteria above, it’s considered a ‘priority’ debt. Priority tax debt cannot be discharged in bankruptcy.

A  Chapter 7 bankruptcy case will usually be completed after 5 or 6 months. After that, the IRS is free to pursue you again on the priority tax debt. Then it starts all over again. The IRS can resume their collection activity, levy your bank account, take part of your paycheck, and so on, on priority tax debt that you owe.

The sad tale of Joe and Martha
Perhaps it’s best to illustrate this with the sample tale of Joe and Martha. They prepared their 2009 tax return back in 2010, and filed it without paying the $3,000 balance due. The next year, on their 2010 tax return, the tax due would have been another $3,000, but they decided to ‘stay low’ and not file the return in fear of IRS collection actions that might result.

Then their financial hardship snowballed, and they did not file returns for either 2011 or 2012. However, the IRS took action in May of 2013 and filed ‘substitute for returns”, assessing $9,000 in additional tax due liability for those two years, based solely on Joe’s reported W-2 income, married filing single status, and no deductions. (Ouch!)

By October of 2013, Joe and Martha owed the IRS nearly $20,000 in taxes, interest and penalties. They also owed roughly $7,000 to other creditors, mainly doctors, but their primary concern was the IRS. They met with an attorney, and decided to file for Chapter 7 bankruptcy protection. By doing so, they obtained an immediate “hold” on IRS collection efforts. Unfortunately, the bankruptcy protection was short-lived. Their 2009 return qualified for discharge, however, their 2010 return (never filed) did not, nor did the 2011 and 2012 returns due to their recent assessment dates.

By early 2014, an IRS revenue officer resumed his efforts to collect $12,000 in back taxes plus interest and non-filing penalties in excess of $4,000. When they contacted their bankruptcy attorney, he stated “that is the IRS’s decision; I had nothing to do with it.”

ANCHOR ON THIS: Bankruptcy laws can provide powerful protection for consumers who fall behind on IRS and other debts. However, when considering bankruptcy, require your attorney to obtain transcripts from the IRS and perform a thorough Bankruptcy Discharge Analysis before proceeding. Knowing in advance whether bankruptcy will discharge your income tax debt is important in helping you make an informed decision regarding the tax aspect of your bankruptcy case.

Virginia Beach Realtors Refer Clients with Tax Problems to ATR

I regularly talk with Virginia Beach Realtors who are seeking help for their clients with tax problems. They need help for homeowners who can’t close the sale of their home due to IRS problems, such as a federal tax lien on their property resulting from unpaid taxes or unfiled returns.

Hampton Roads Realtors need ethical and professional tax resolution allies to refer clients to. As a former Realtor and current business owner who has served the Virginia Beach, Chesapeake, Norfolk, Portsmouth and Suffolk area for over 20 years, I know how seriously Realtors are about referrals.

Virginia Beach Realtors Refer Tax Problem Clients

Many homeowners start out trying to handle their IRS and Virginia tax debt problems themselves (or with their current CPA or attorney) but end up with negative results, or no results at all. Tax debt resolution is our specialty. Dealing with IRS collections and appeals processes is a very specialized area of practice, and one in which most tax professionals lack the expertise, experience, and interest to deal with successfully.

If you’re a Virginia Beach Realtor and have a client that needs tax help, the best solution is to refer them personally to me. I offer a variety of IRS Representation services that can resolve their tax matter, remove the lien, and give your client his or her peace of mind back. Some of the services we provide include:

Offers-in-Compromise
Delinquent Tax Returns
Innocent Spouse Relief
Partial-Pay Installment Agreements
IRS Appeals
Penalty Abatement

Those are just a few of the many tax resolution services we provide that can benefit your client and help close the sale of their property. We deal with the IRS on a daily basis, which is the reason why we successfully settle these types of matters for clients.

We offer a free confidential consultation. I can speak with you first or with you and your client, or with them directly, your preference. During that time we will discuss how we can help them, the options available, as well as how much it will cost to represent them. We generally work on a flat fee basis when representing taxpayers before the IRS, so your client won’t have to worry about open-ended hourly billing charges.

I invite you to book a time to meet with me. You can learn more about my firm at AnchorTaxRelief.com. I look forward to speaking with you and answering any questions you have.

Sincerely,
Jim Flauaus, E.A.
Founder, Anchor Tax Relief

Can Bankruptcy Wipe Out IRS Tax Debt?

If you’ve fallen behind with the IRS, declaring bankruptcy may or may not wipe out your IRS tax debt.

First, the good news. The moment you file bankruptcy, an automatic stay is created to stop most creditors–including the IRS–from continuing any collection activities against you. This means that the IRS can’t levy your bank account, can’t garnish your paycheck, etc, until the bankruptcy case is completed.

Now the bad news. This automatic stay only provides temporary relief. Usually a Chapter 7 bankruptcy case will be completed after a few months. After that, the IRS is free to pursue you again,and resume their collection activity, including levying your bank account or paycheck.

4 Requirements to wipe out your IRS Tax Debt via bankruptcy
There are cases where your income tax debt can be discharged permanentlyBankruptcy and IRS tax debt via bankruptcy, specifically where these conditions are met:
(a) the return’s filing deadline was due at least three years ago, and
(b) you actually filed the return over two years ago, and
(c) the IRS assessed the tax at least 240 days (or 8 months) ago, and
(d) you did not commit any fraud or tax evasion along the way.

If the total tax you owe–or any part of the balance due–does not meet the criteria above, it’s considered a ‘priority’ debt. Priority tax debt cannot be discharged in bankruptcy.

The sad tale of Jim and Mary
Jim and Mary Jenkins (not their real names) prepared their 2009 tax return back in 2010, and filed it without paying the $3,000 balance due. The next year, on their 2010 tax return, the tax due would have been another $3,000, but they decided to ‘stay low’ and not file the return in fear of IRS collection actions that might result. Then their financial hardship snowballed, and they did not file returns for either 2011 or 2012. However, the IRS took action in May of 2013 and filed ‘substitute for returns”, assessing $9,000 in additional tax due liability for those two years, based solely on Jim’s reported W-2 income, married filing single status, and no deductions. (Ouch!)

The Jenkins filed for Chapter 7 bankruptcy protection in October 2013, gaining peace of mind in knowing they would benefit from an automatic stay on IRS collection efforts. Unfortunately, that ‘protection’ was short-lived. Their 2009 return qualified for discharge, however, their 2010 return (never filed) did not, nor did the 2011 and 2012 returns due to their recent assessment dates. By early 2014, an IRS revenue officer resumed his efforts to collect $12,000 in back taxes plus interest and non-filing penalties in excess of $4,000. When they contacted their attorney, he stated “that is the IRS’s decision; I had nothing to do with it.”

The Jenkins subsequently sued their bankruptcy attorney for malpractice.

ANCHOR ON THIS: Bankruptcy laws can provide powerful protection for consumers who fall behind on IRS and other debts. However, when considering bankruptcy, ask your attorney to obtain transcripts from the IRS and perform a thorough Bankruptcy Discharge Analysis before proceeding. Knowing in advance whether bankruptcy will discharge your income tax debt is important in helping you make an informed decision regarding the tax aspect of your bankruptcy case.

1 in 6 Virginia Residents Has a Tax Problem

One in six Virginia residents has a tax problem of one sort or another.

Of these, half owe more than $10,000 in taxes.

It’s easy for problem-98377_150good, hard-working Americans to fall behind. That’s why we’re here. An IRS or Virginia problem has a way of affecting every aspect of your life; your finances, your credit rating, your family relationships, even your health. If you’re losing sleep over unpaid taxes, delinquent returns, or other tax matters, we can help you get tax relief now.

Some Virginia Department of Taxation and/or IRS problems can be easy to fix. But if…

  • you owe $10,000 or more in back taxes, or
  • have fallen behind a couple years in your tax filings, or
  • own a business with unpaid payroll taxes,

…then your situation is more complex. We’ve come across many people in these situations who have tried to handle their IRS situation themselves, or through a tax attorney or CPA, but didn’t receive the tax relief help they were seeking. That’s when it pays to seek professional representation.

virginia irs tax problem
virginia irs tax problem

IRS representation involves dealing with IRS collection procedures from a place of power and authority. An Enrolled Agent is a specialist in this area; he or she is authorized to represent taxpayers in all 50 states before all levels of the Internal Revenue Service. It’s a very specialized area of practice, and one in which most Attorneys, CPAs or Tax Preparers lack the know-how, and quite frankly the interest, to deal with.

A professional can help you find the best solution for your particular situation, including any of the following Tax Resolution Services:

  • Offers in Compromise
  • Installment Agreements
  • IRS Appeals
  • Financial Hardship Plans
  • Bank Levy/Paycheck Releases
  • Innocent Spouse Relief
  • Penalty Abatement
  • Delinquent Returns
  • Payroll Tax Relief
  • Trust Fund Recovery
  • Currently Not Collectible Status

Now is the time to get the info you need to gain relief from your IRS problem. You really can solve your tax matter permanently. You deserve a fresh start, so contact us today, and learn how.

 

 

5 ‘kick-ass’ strategies to get IRS tax relief now

The “7 Ps” is acenturian-tank-354717_150n old British army adage for “Proper Planning and Preparation Prevents Piss Poor Performance”.

When it comes to owing the IRS, “poor performance” can mean $10,000 + in unpaid taxes, frozen bank accounts, sleepless nights, damaged relationships.

The good news? Just because you’ve planned poorly in dealing with the IRS in the past doesn’t mean you can’t get a fresh start today. Your IRS situation is what it is. They’ve put you in a tough spot.  Now it’s your turn to make a quality decision to deal with it. How?

Here are 5 possible ‘kick-ass’ strategies you can use to get IRS tax relief now:

  1. Offer in Compromise: Settle your tax debt for less than the total amount you owe.
  2. Installment Agreement: Set up a monthly payment plan for paying off the total amount due
  3. Not Currently Collectible: a program where the IRS agrees not to collect on the tax debt for a period of time
  4. Partial Pay Install Agreement: an arrangement with the IRS where you have a long term payment plan to pay off the IRS at a reduced dollar amount
  5. Bankruptcy: you agree to discharge your tax debts using the strict rules of a Chapter 7 or Chapter 13 bankruptcy petition.

There is no “one size fits all” solution to your tax problem. The best course of action for you is to study the alternatives, get the information you need to make a wise decision, and then select the IRS program that is most appropriate to your financial situation.

You may wish to consult with an Enrolled Agent who specializes in resolving tax debt, and has the experience and expertise to help you make an informed decision and provide professional IRS representation. Or, depending your particular situation, you may be comfortable with a ‘do-it-yourself’ approach in dealing with the IRS. Either way, don’t let poor planning prevent you from gaining tax relief that’s appropriate to your financial situation.

 

 

 

“Currently Not Collectible” Status with the IRS

” Currently Not Collectible” is a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.

The IRS can declare a taxpayer “currently not collectible,” after the IRS receives evidence that a taxpayer has no ability to pay. Such evidence is usually obtained from the taxpayer on IRS Form 433-F, Collection Information Statement. A taxpayer can request “currently not collectible” status by submitting Form 433-F to an IRS Revenue Officer or the IRS Automated Collection System unit.

What this means to you is once you’ve submitted the form, and the IRS evaluates your financial situation and declares you to be a taxpayer currently not collectible, then Internal Revenue Service must stop all collection activities, including levies and garnishments. In addition, as long as you are in not collectible status, the 10-year statute of limitations on tax debt collection is still running. The reason this is significant is, if the IRS cannot collect the tax within the 10-year statutory period, then your tax debts will expire… (which is a good thing).

Depending on how you look at it, Currently Not Collectible is a glass half-empty, half-full kind of status. On  the one hand, the IRS must stop collection activities. On the other hand, that situation can change doglass-300558_150wn the road. Don’t run past that first word, ‘currently’. Currently Not Collectible is not a permanent fix. The IRS will continue to monitor your financial situation, and send an annual statement to the you each year stating the amount of tax still owed. It’s not a bill-just a statement. However, if your financial situation improves in subsequent years, IRS collectors reserve the right to re-assess your status, and potentially remove your “not collectible” status.

Can an Offer In Compromise Work for You?

The Offer In Compromise (or “OIC”) is an IRS program which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed. If accepted, you are able to pay your full tax bill in one small, final payment.

If you’ve evstreet-363265_150er seen a TV ad where a national tax relief firm talks about settling your debt for ‘pennies on the dollar’, the OIC program is what they’re referring to. And who wouldn’t get excited about such a possibility? The good news it IS possible; the bad news is many taxpayers have been burned by nationally advertised tax relief companies. Many have simply failed to deliver on their promises.

That doesn’t mean you can’t get a fresh start with an OIC. It really is possible. It depends on the professional your’re working with. It also depends on your individual situation.

At least one of three conditions must be met to qualify a taxpayer for consideration of an Offer In Compromise settlement:

  • Doubt as to Liability — Debtor can show reason for doubt that the assessed tax liability is correct
  • Doubt as to Collectibility — Debtor can show that the debt is likely uncollectable in full by the IRS under any circumstances
  • Effective Tax Administration — Debtor does not contest liability or collectibility, but can demonstrate extenuating or special circumstances that the collection of the debt would create an economic hardship or would be unfair and inequitable.

A taxpayer uses the checklist in the IRS Form 656, Offer in Compromise, package to determine if the taxpayer is qualified for the offer in compromise program. You have to be able to prove that you have no reasonable way to pay the full amount. You could be much better off engaging an Enrolled Agent to help work this strategy for you because taxpayers who try this on their own, without knowing the current guidelines and enforcement standards, often put themselves at risk of not qualifying for a settlement or paying more than the lowest amount allowed by law.

How Long Can I Go Without Filing a Tax Return?

Federal law sets out time limits, or statutes of limitations, for the IRS can pursue taxpayers who fail to file their tax return.

The govecalendar-151591_150rnment can only bring criminal charges against a nonfiler within 6 years of the date the tax return was due. For example, after April 15, 2014, you can’t be prosecuted for failing to file a 2007 tax return that was due on April 15, 2008.

But there is NO deadline on the IRS for going after nonfilers and imposing civil penalties, in addiition to any taxes owed. In other words, while you can’t be put in jail for not filing a 2007 tax return, you will forever owe the IRS a return, assuming you earned enough income to meet the minimum filing requirements for that year. And penalties and interest on unfiled tax returns run forever.

If I can’t pay my taxes, should I file my tax return anyway?

black-40636_150Taxpayers often hold off filing their returns when they can’t afford to pay the taxes due. Even if you expect cash flow to improve in the next 30 days or so, it’s best to not delay and go ahead and file the return right away. It’s going to take several weeks for the IRS machinery to process your return and send you a tax due notice anyway.  In the meantime, filing saves you the possibility of being criminally charged, or more likely, from being hit with a fine for failing to file, or a penalty for late filing.

Eventually, filing without paying will bring an assessment letter. And if the tax remains unpaid for an extended period of time, IRS collection activity will ensue. But an IRS collector will be friendlier if your return has been filed and he/she doesn’t have to hunt you down.

Bottom line, the sooner you file, the better.  Not filing won’t make a potential IRS problem disappear. Man up, file the return!

Final Notice of Intent to Levy

You’ve received a Final Notice of Intent to Levy. You owe the IRS and Virginia, you’ve ignored their requests for payment, and now it’s getting serious. What does it mean? Where do you turn?

A tax levy is not the same as a tax lien. Both are four letter words. Both start with “L”. But a levy is much more serious.

  • A tax lien is a notice to the world that an individual or a business owes the IRS. But no money or property is taken by filing a federal tax lien.
  • On the other hand, through a tax levy the IRS or state of Virginia collects on your tax debt by seizing your real or personal propertytax levy irs virginia
While you may receive the Final Notice of Intent to Levy, it’s usually your bank or employer who receives the actual levy. The property you own—wholly, partially, or jointly with others—may be seized and sold to satisfy your debt to the IRS.
Retirement plans and homes are generally off limits to IRS seizure, as are vehicles needed for work. Most other assets, however, including bank accounts and a portion of your paychecks,  can be subject to seizure.
  • A tax lien can be the kiss of death to your credit rating—which is bad.
  • A tax levy takes money right out of your bank account—which is worse.
The IRS usually files a lien before they initiate the levy process, but they don’t have to. They file about 100 times more liens each year than seize property through the levy process.
ANCHOR ON THIS —>   If need tax levy help, and have received a Final Notice of Intent to Levy, contact Anchor Tax Relief today. We’re IRS and Virginia Tax Problem Experts. We deal with the IRS and the Virginia Department of Taxation on a daily basis, obtain relief from liens and levies, and solve your tax problem, permanently.
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