Monday, April 26, 2021

Federal Tax Liens Ensure Collection of Tax Debt

 So, you owe the Internal Revenue Service (IRS) money for taxes. You do not have the money so you decide not to pay any amount toward the debt. After all, it you do not have money, the IRS cannot collect, right? WRONG! The IRS has the power to place a Federal Tax Lien against all of your assets and properties, whether they are financial, personal, business and/or real estate. This is the government’s way of protecting their interest in the event you fail to pay your tax debt in a timely manner. 

Federal tax liens vary depending upon each individual case and situation. If you fail to pay the IRS timely, a lien will be attached to all of your current and future assets until the offending tax issue is resolved. Furthermore, if you do not address a tax debt in a timely manner, the lien can develop into a levy which empowers the IRS to seize any of your assets to pay your tax debt. Assets include cars, personal properties, real estate properties, stocks, bonds, cash, monies in your bank accounts, even bitcoin. 

Since April 2018 all three credit reporting bureaus (Equifax, Experian and TransUnion) stopped reporting liens on their credit reports. This means that Federal Tax Liens should not affect your credit scores regardless of whether or not the lien has been satisfied. However, this does not mean that no one can determine if you have any liens against you. There are other consumer reports on which tax liens may appear since liens are public records. Moreover, the IRS must follow a procedure for collections of a tax debt before mailing out a notice informing you that a tax lien has been filed against you. They will: 1) assess the amount of taxes owed by examining a filed tax return and 2) send a tax bill to your last known address. If you do not respond to the bill notice, the IRS will send out a lien notice. 

The best way to avoid a federal tax lien is to pay your amount of taxes in full. If you have trouble paying the entire amount due to financial stress, the IRS offers a multitude of payment options to avoid liens, levies, and other forms of collections. Some options are:

  • File an Offer In Compromise (OIC).
  • File for Currently Non-Collectable (CNC).
  • Apply for an Installment Agreement (IA).
  • Apply for a Partial Payment Installment Agreement (PPIA).

However, if you have already received a Notice for imposing a Federal Tax Lien against you from the IRS, do not panic. Aside from paying the entire tax debt to the IRS, there are other options:

  • Apply for an Installment Agreement (IA).
  • Apply for a Partial Payment Installment Agreement (PPIA).
  • Apply for Lien Discharge if you pay the tax debt in full.
  • Apply for Lien Subordination.
  • Request a Lien Withdrawal.

Whether you have already received a Lien Notice from the IRS or you believe you may receive one shortly, DO NOT IGNORE IT! Call us immediately to review your options before a bad situation becomes worse. Continue to visit our website to learn more about tax problem resolutions.

Pay a Portion of What You Owe with a Partial Payment Installment Agreement

 The Internal Revenue Service (IRS) allows you, the taxpayer, to pay your tax debt in affordable monthly installments in which you determine the amount. These are called Installment Agreements. They are extremely helpful in affording the taxpayer time to pay their tax debt without the IRS forcing payment through liens, levies, wage garnishments and other collection tools. 

Of all the installment agreements available, the Partial Payment Installment Agreement (PPIA) affords the best of both worlds to the taxpayer. The taxpayer 1) makes affordable installment payments of his/her own choosing over a set period against the tax debt and 2) after that set period of time, the IRS considers the tax debt paid even if the full amount of the tax debt has not been paid. The IRS usually sets a time period of two years. You must provide full financial disclosure indicating your wages, assets, and expenses to the IRS. If you cannot afford a regular installment agreement and it is unlikely that you can pay the full amount of your tax debt, then the PPIA may be the most beneficial course of action for either you or your business.

The eligibility requirements for the Partial Payment Installment Agreement are similar to the Offer in Compromise. The IRS must determine that:

  • You do not have enough assets worth liquidating to pay off your tax debt.
  • Your wages do not cover the full payment of your tax debt without you incurring financial hardship and therefore you are unable to cover your basic living expenses.
  • You do not have the earning potential to pay your tax debt in full in the upcoming years.
  • You are unable to cover the minimum payment requirement of a regular installment agreement.
  • You owe more than $10,000 in tax debt.
  • You have not filed for bankruptcy.
  • You can pay off some of your tax debt, but not all of it, before the statute of limitations expires.

So, if an Offer in Compromise and PPIA are similar, why are they both available? Due to its lack of finality, the IRS is more likely to accept a PPIA because they can review your ability to pay off your tax debt annually. If your ability to pay your tax debt in full increases, then the IRS can collect the full amount before the statute of limitations expires. This is a better outcome for the IRS since it can possibly collect a larger amount than it can with an Offer in Compromise which is final once negotiated and agreed upon. With an Offer in Compromise, the IRS can only collect what it negotiated to collect even if your financial situation improves. 

The statute of limitations is the time frame in which the IRS can lawfully seek payment for your tax debt. Usually, the statute of limitations for the IRS to collect a tax debt is 10 years for the date the debt was originally assessed. Once the statute of limitations expires, the IRS cannot collect the tax debt, interest, and penalties from you, even if you can afford to pay the tax debt.

Although you can negotiate a Partial Payment Installment Agreement on your own with the IRS, the question is: why would you? The application process involves the submission of many forms, is complicated and you can be out negotiated by the IRS agent. If you are not eligible for an Offer in Compromise and you cannot afford a regular installment agreement, then a PPIA may be best for you. Let a tax professional from Bullseye Tax Relief assist you. We will discuss all your options and direct you to your best option. Our following blogs will continue discussing other tax relief resolution options.

Tuesday, April 20, 2021

How Installment Agreements Can Help

 Even the best of intentions does not always materialize. You completed and filed your federal income tax return, but suddenly you realize that you do not have the money to pay the tax amount due. Now what?! Do you not file the tax return? Do you send the tax return without money? Lucky for you, the Internal Revenue Service (IRS) has several options for you to pay the tax amount owed and file your tax return on time. 

One of these options is the Installment Agreement. If you cannot pay the full tax amount owed to the IRS in less than 120 days, the IRS allows you to pay your debt down into monthly installments. This allows you to pay down your tax debt while incurring less penalties and interest since the amount owed would be smaller. It also allows you to avoid wage garnishments, bank levies, tax liens and collections. Furthermore, paying against your tax debt will demonstrate your “good faith” to the IRS.

The IRS allows you to determine the amount your minimum monthly payment will be based upon what you can afford. However, they do encourage you to pay as much as possible to avoid additional fees, penalties, and interest. If you offer the IRS an offer that they believe is too low or if you neglect to inform them of the amount you wish to pay monthly, they will simply take the total amount of tax due and divide it into 72 monthly payment installments. 

If you meet certain IRS criteria for an installment agreement, you or your business may be guaranteed eligibility for an installment plan. Even better, the IRS does not require you to complete a financial statement or verification for a Guaranteed Installment Agreement.

Here are some of the criteria you must meet for a guaranteed installment agreement:

  • You have filed all required tax returns.
  • You agree to file and pay all future tax returns on time.
  • You owe $10,000 or less in tax debt.
  • You agree to allow the IRS to use all future tax return refunds to pay down your tax debt.
  • You agree to pay off your installment agreement within 72 months or less.

If you owe $50,000 in tax debt or less and do not qualify for a Guaranteed Installment Agreement, you may be eligible for a Streamlined Installment Agreement. Typically, this type of plan does not require you to complete financial statements or submit verification. The criteria for this type of plan are:

  • You have filed all required tax returns.
  • You owe $25,000 to $50,000 in tax debt.
  • You agree to file and pay all future tax returns on time.
  • You agree to pay off your installment agreement within 72 months or less.

The IRS has installment agreements for small businesses too. An In-Business Trust Fund Installment Agreement is best for small businesses that owe $25,000 or less in tax debt. Typically, this type of plan does not require you to complete financial statements or submit verification. The criteria for this type of plan are:

  • You have a small business with employees.
  • You have filed all required tax returns.
  • You agree to allow the IRS to use all future tax return refunds to pay down your tax debt.
  • You owe $25,000 or less in tax debt.
  • You agree to file and pay all future tax returns on time.
  • You agree to pay off your installment agreement within 24 months or less.

Each installment agreement discussed here have certain requirements, so it is best to consult a tax professional. Call today so that we can help you navigate the complex criteria. Our next blogs will further discuss options for dealing with the IRS and your tax debt so please visit us again.

Sunday, April 18, 2021

Penalty Abatement Relief

Sometimes life just gets the best of you. Your taxes are withheld from every paycheck, but you do not file your tax returns. Sometimes you forget to pay your taxes on time as a self-employed worker. Sometimes you withhold payroll taxes but forget to deposit these monies with the Internal Revenue Service (IRS) on time … or you “borrowed” from those monies to pay important business expenses. It is not that you are deliberately “dogging” your tax obligation. It is just … life gets in the way.

The IRS can add interest and penalties to your tax obligation, making life a little rougher. The above situations are real life but can cause a lot of tax problems. Fortunately, the IRS has some helpful solutions. One such tax resolution is Penalty Abatement Relief. In the case of businesses, it is called Trust Fund Recovery Penalty Abatement or TFRP Abatement. The IRS offers this concession when life gets in the way of fulfilling tax obligations. They allow the penalties to be waived using three different types of penalty relief: 

  1. Reasonable Cause
  2. First-Time Penalty Abatement
  3. Statutory Exception

So, what are these relief options and how do they help with payroll tax and/or my tax debt? Let us discuss them one by one.

First, there is reasonable cause. As defined by the IRS, reasonable cause is based on circumstances and facts particular to your situation. You must establish that you followed all procedures to meet your tax obligations but were unable to meet them due to certain circumstances. According to the IRS, financial hardship does not make you eligible for a reasonable cause waiver; however, the circumstances leading to that financial hardship may. Some examples are natural disaster, fire, death, the inability to obtain records, serious illness or an unavoidable absence of a taxpayer or immediate family member.

Second, First-Time Penalty Abatement (FTA) rewards those who have typically met their tax obligations in the past but for whatever reason did not meet their tax obligations this time around. This type of abatement relief is offered to those who did not meet their tax obligation on a single return. The only other criteria are that you must not have received a penalty within the past three years on a specific type of tax return. So, to recap the eligibility for First-Time Abatement:

  • You have filed all current tax returns or have filed an extension of time to file a tax return.
  • You did not previously have to file a return.
  • You have arranged to pay all taxes due.
  • You have no penalties for the three tax years prior to the tax return in question that you received a penalty for.

Third, a statutory exception places the fault of your dilemma on the IRS itself. You asked the IRS advice and your received incorrect information which you acted upon and thereby received a penalty. You will have to prove this so have the following information at the ready:

  • Your written correspondence from the IRS for advice
  • The incorrect advice the IRS gave you.
  • The report of the penalty along with items related to this incorrect advice.

If indeed you are eligible for any of these waivers, the IRS will reduce or remove the penalties and therefore the interest charged will be reduced.

Before contacting the IRS on your own, consult a tax professional. A tax professional will determine what option applies to your situation and how to approach it. Our following blogs will continue to discuss tax resolutions. Stay tuned!

Friday, April 16, 2021

What is Currently Non-Collectable?

 As stated in previous blogs, there are several tax resolutions options available to taxpayers that are unable to pay an outstanding tax debt. Besides an Offer in Compromise discussed earlier, there is another tool to help alleviate the stress in resolving a tax debt that is being pursued by the Internal Revenue Service (IRS). It is called “currently non-collectable” or CNC. Just what is a currently non-collectable and how does it help me? 

Well, first of all, there are two requirements:

  • You agree that you owe the IRS money
  • Your financial situation makes it impossible to pay this money to the IRS without causing financial hardship or paying the tax debt results in your inability to pay for the basic living expenses

What are the benefits of having “currently non-collectable” status?

  • The IRS cannot collect on tax debts against you
  • The IRS cannot impose liens on your property to collect the tax monies owed
  • All communications from the IRS by phone or letter stop

This does NOT mean that the IRS will not assess the account with interest and penalties or withhold any refunds. Those actions continue. If the IRS determines that at any point from 10 years to the date that your account was assessed as Currently Non-Collectable and that your financial situation had improved, then the IRS can collect that tax debt. However, if your financial situation never improved within those 10 years, then the IRS will likely write off the tax debt, interest, and penalties. 

So, who is eligible for Currently Non-Collectable status? Any taxpayer that can demonstrate that he or she is unable to pay off his/her tax debt without causing either financial hardship or resulting in the inability to cover basic living expenses will qualify for Currently Non-Collectable status. Proof must be given through bank statements or other documentation that wages and/or assets cannot be collected without triggering financial hardships. Basic living expenses include healthcare, housing, transportation, utilities, food and clothing. 

Furthermore, the IRS must determine eligibility for CNC status using the following criteria:

  • All tax returns, including those for past years, must be filed, otherwise the IRS will require you to do so
  • Your wages cover no more than your basic living expenses
  • You have no assets worth levying
  • The IRS will calculate your basic living expenses and subtract them from your wages. If there is nothing left over or if the amount left over will not sustain you or will place you at a financial disadvantage so that you cannot cover basic living expense, then the IRS will consider your account as Currently Non-Collectable. 

The Currently Non-Collectable status is one of the tools that the IRS uses to help those with tax problems for which no other option, such as an Installment Agreement, is available. Once on a Currently Non-Collectable status, taxpayers must continue being up-to-date with their tax filings, otherwise they will lose their CNC status. This will result in a bad situation becoming worse. Filing tax returns and paying any amounts owed on time is extremely important. Do not hesitate calling us for assistance with your tax resolution problems. We are happy to help!

Tuesday, April 13, 2021

Eligibility for an Offer in Compromise

It sounds great. Make an offer to the Internal Revenue Service (IRS) to erase your entire tax bill! It is not that simple. If you can afford to pay the tax debt, you will be required to do so. By not paying the tax bill, you can incur a larger tax bill: one that includes penalties and interest! Not to mention, the IRS can place a tax lien or levy on any or all of your properties or bank accounts to collect the entire tax bill.

So, why would the IRS accept an offer that is less than the taxes owed? In a previous blog, we discussed that eligibility for an Offer in Compromise is determined by being able to pay the tax bill, with or without placing a financial hardship on the taxpayer. There is also the question of doubt of whether the taxpayer owes the tax bill. There might have been an error on the IRS part, or an error in reporting income, or …?

Before you can apply for an Offer in Compromise, you must meet a certain set of IRS requirements. You must make sure that all your tax documents have been filed on time in addition to these requirements. Furthermore, you should not have any past due penalties remaining on any previous tax debt.

Here are some additional requirements that must be met or your application for an Offer in Compromise will be denied:

- All tax returns you are legally required to file have been filed. (Your Offer in Compromise will be immediately rejected otherwise.)
- All required estimated tax payments have been made for the current year.
- You must have received a bill for at least one tax debt that you include in your Offer in Compromise.
- If you are a business owner with employees, all required federal tax deposits for the current quarter have been made.
- You must not be able to pay the full tax debt through a payment installment plan with any current or future assets.
- You must not have any open bankruptcy cases.

Before the Process:

1. To apply for an Offer in Compromise, you will complete IRS Form 656.
2. It is important to consider your “reasonable collecting potential” when setting up an offer. Do not overestimate or underestimate the offer.
3. For the IRS, “reasonable collecting potential” means your offer must be at least equivalent to not only your current assets but your anticipated assets and income with your basic living expenses deducted from that amount.

The Process Itself:

1. Both the IRS and you must agree that there is no possible way that you can pay the tax debt amount in full without potentially experiencing financial hardship.
2. Even if the amount offered is significantly less than the full amount owed, you must offer the maximum amount you can afford without experiencing financial hardship.
3. The IRS accepts the offer as the most you can reasonably pay without incurring financial hardship.
4. You must decide whether you want to pay the full amount at once or make payment installments.
5. The debt is considered “paid in full” once you pay the entire amount agreed to with the IRS.

Although anyone can apply for an Offer in Compromise, the question is: should they? The application process is complicated, involving a lot of math and completing forms, not to mention corresponding with the IRS. This is best left to an expert. Call us today. We can advise you as to whether an Offer in Compromise is in your best interests. There may be a better option that fit your needs. Call us now.

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Saturday, April 10, 2021

What is an Offer in Compromise?

 Scenario: you receive a tax bill from the Internal Revenue Service (IRS) for a staggering amount. You think to yourself: how am I ever going to be able to pay this AND all my other bills? Do I have to sell my car … my house …?

Several people have had to tackle this struggle. You are not the only one. That may bring some comfort … for a moment at least. Fortunately, there are some other alternatives available for people in your situation. These are known as tax resolution options. This is what Bullseye Tax Relief specializes in. We will discuss each of them, one at a time. The first one we will discuss in an Offer in Compromise. So, what is it?

An Offer in Compromise (also known as OIC) allows you the option to settle your tax debt for less than the amount you owe the IRS. It was created for those taxpayers who could not pay their tax debt in full without experiencing a resulting financial hardship. Depending upon your financial situation, it may be impossible for you to pay your tax debt in full, even with the aid of an installment plan or other tax resolution option. An Offer in Compromise is extremely helpful to those with the severe inability to pay off a tax debt. You can pay your tax debt off completely by negotiating an amount with the IRS. This amount can be exponentially smaller, and your slate is “wiped clean” by the IRS, giving you a fresh start. 

To qualify for an Offer in Compromise, you must first submit the proper forms to the IRS. The amount you offer them must meet their specific set of rules and considerations. There are three different situations that make you eligible for an Offer in Compromise:

  1. Doubt as to Collectability: This is the most commonly used OIC. The full amount of the tax debt may not be collectable for people whose assets and income are less than the amount of tax debt owed to the IRS. For this reason, these taxpayers can settle their account for an amount that is less than the full amount due. The IRS must approve any offer first.
  2. Doubt as to Liability: Here, taxpayers are questioning the amount of tax debt in part or in full. Perhaps, they feel that an error is to blame for the larger amount. 
  3. Effective Tax Administration: With this type, the full amount of the tax debt is not in question. They owe the amount, period. They can also pay the full amount. However, by paying the full amount of the tax debt, a financial hardship results for the taxpayer.

As you can see, an Offer in Compromise is definitely a tax resolution tool. This tool can be used for employment tax resolution for businesses. If you receive a tax bill that you cannot afford, please contact us immediately so that we can help with your tax problem. Consultation is free!

Our following blogs will discuss the eligibility and process of an Offer in Compromise so please visit us again.

#4180interview #employmenttaxresolution #helpwithemploymenttax #capitalgainstax #taxreturn #payrolltax

Employment Taxes Amid COVID – Part 3

  Parts 1 and 2 of previous blogs on this topic discussed the deferral of   employment tax   deposits and payments for the year 2020 and the...