The IRS is a fair creditor and has provided several routes that taxpayers can utilize to assist with paying back taxes.
The IRS recognizes that each and every tax situation is different. In order to cast a wide net, the IRS has put several additional tax relief programs into place to assist taxpayers with paying their dues.
IRS FRESH START PROGRAMS
If you are struggling to pay your taxes, the IRS Fresh Start program for individual taxpayers and small businesses might be able to provide the help you need. Since 2011, the Fresh Start Program has helped thousands of taxpayers pay their outstanding amounts.
Now, in order to help a greater number of taxpayers, the IRS has expanded the program by adopting more flexible terms for Offer-in-Compromise (OIC) agreements. This expansion will allow some of the most financially distressed taxpayers to clear up their tax problems much more quickly than before.
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Here are a few of the changes:
Higher Tax Lien Thresholds.
Generally, the IRS will not issue a tax lien on a taxpayer’s home or other assets unless the total debt owed is $25,000 or more. Before the change, the threshold was set at $5,000 or more. Since the change, taxpayers may request the IRS to remove the lien from their property if the amount of tax due is $25,000 or less and they have a Direct Debit Installment Agreement (DDIA) in place. To request the withdrawal, the taxpayer must also agree to pay the entire amount due within sixty months or before the Collection Statute expires, whichever is earlier. Once a taxpayer meets all the requirements of a direct debit payment plan, the taxpayer may complete and submit to the IRS Form 12277, Application for Withdrawal Notice of Federal Tax Lien.
Tax Penalty Relief.
The IRS Fresh Start program opened the door to more relief from tax penalties. IRS penalties can sometimes be staggering and can make some tax debt seem impossible to pay. Having more opportunities for taxpayers to reduce or eliminate the penalties accrued on tax due may save taxpayers hundreds — if not thousands — of dollars.
Expansion of the IRS’s Offer in Compromise Program.
Generally, the IRS will accept an OIC when the amount offered represents the most the IRS can reasonably expect to collect within the Collection Expiration date. With the Fresh Start program, the IRS streamlined the complicated process of submitting an offer, making it easier for taxpayers to qualify.
Why is the IRS making this change?
The IRS recognizes that many taxpayers are still struggling to pay their bills. To help ease the process, they have put in place common-sense improvements to the OIC program that more closely reflect real-world situations.
This expansion focuses on the financial analysis used to determine which taxpayers qualify for an OIC. These changes can also enable some to resolve their tax problems in as little as two years— in the past, the process could take as long as four to five years.
In certain circumstances, the changes include:
Revising the calculation for the taxpayer’s future income.
Allowing taxpayers to repay their student loans.
Allowing taxpayers to pay state and local delinquent taxes.
Expanding the Allowable Living Expense allowance category and amount.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income-producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months — this is down from four years. For offers paid in six to 24 months, they will look at two years, down from five years. It is important to note that all offers must be fully paid within 24 months of the date the offer is accepted.
Information about the OIC program, including applicant qualifications, how to apply, and steps to complete the application process, Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, is available on IRS.gov.
What is an Offer in Compromise?
An Offer in Compromise, or OIC, is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. When entering an OIC, there are three options: a Lump Sum Payment, a Short-Term Periodic Payment, and a Deferred Periodic Payment. With a Lump Sum Payment, the agreed-upon amount of debt must be paid in five or fewer installments. With a Short-Term Periodic Payment, the agreed-upon debt must be paid within 24 months. And with a Deferred Periodic Payment, the agreed-upon debt must be paid within the 10-year statutory period in which the IRS can collect the debt.
Generally, the IRS does not accept an OIC if they believe the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance based on legal requirements.
If you are interested in obtaining an OIC with the IRS, take a look at the Offer in Compromise Pre-Qualifier. Then, you will need to use a Form 656 Booklet and Form 433-A. There is a non-refundable application fee of $205 unless you qualify as a low-income taxpayer as defined earlier.
Unfortunately, taxpayers undergoing open bankruptcy proceedings cannot enter an OIC. Additionally, if you are currently in an OIC, not filing a tax return can jeopardize the process — and the penalties for not filing a return are higher than those for not paying your taxes.
If applying for an Offer in Compromise agreement seems overwhelming, it may be best to enroll the help of tax professionals.
Partial Payment Tax Agreement
If your tax debt is just not affordable for you, potentially qualify for a partial payment installment agreement. While it can be fairly difficult to qualify for one, there is no set tax debt.
The IRS may allow you to pay part of your debt if you show you can’t afford the minimum payment for a Guaranteed or Streamlined Installment Agreement Payment Plan. A Partial Payment Agreement allows you to take longer to repay, — and the IRS will evaluate your financial position every two years to see if you are better off. They will include your equity in assets in their calculations.
Unfortunately, the IRS will also file a federal tax lien to guarantee debt collection and protect their interests. It’s possible you will have to sell your property in order to pay off your tax debt
Tax Resolution Services for Debt Relief
If you’re already busy juggling all of your other personal and financial responsibilities. The last thing you want is making time to interpret complex IRS tax code and processes to resolve your tax problems. And if your situation is uniquely complicated, you could be up against a brutal battle with the IRS. However, not taking action can result in much graver consequences, such as aggressive interest, collections measures, and even criminal charges.
With more than 2000 clients and over $15 million in tax debt resolved, the experts at Advance Tax are here to help:
Our team quickly identifies the best tax relief option for you, eliminating the need for hours of self-directed research and considering the pros and cons.
We resolve your tax issues in a timely manner without making you stay on hold with federal and state tax bureaus.
Together, we can expedite the process by helping you gather the documents you need to apply for the appropriate tax relief solution for your needs.
Thanks to our experience negotiating with the IRS, we’re confident in our ability to secure the best possible outcome for your situation.
Whether you need tax relief advice while preparing your taxes or need support finding the best tax debt relief solution for your needs, our team is well-equipped to apply the best strategy for your situation. Get your free consultation today.
Having the IRS file a lien against you or your property can make a stressful situation turn downright miserable. But if you keep your head up and work with the IRS towards a common solution, your future tax situation will only get better.
While each and every tax situation is unique, many taxpayers go through the same processes and procedures. You are not alone in your fight to regain good standing with the IRS and the experts at Advance Tax Relief are here to help.
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If you think that you may need help filing your 2018/2019 tax return or past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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