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Don't Delay In Managing IRS Tax Debt

Debt Resolution, IRS Settlements Offer Help for Serious Tax Problems

San Mateo, Calif., - With tax day behind us, consumers and business owners who owe the IRS are not out of the woods. But while death and taxes are the big two inevitabilities, those with serious tax problems should know that it is possible to negotiate with the IRS to reduce past-due tax penalties and payments, according to Bradford G. Stroh, co-founder and CEO of Freedom Financial Network, LLC.

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irs debt,freedom tax relief,tax debt,irs,tax

Debt Resolution, IRS Settlements Offer Help for Serious Tax Problems

San Mateo, Calif., - With tax day behind us, consumers and business owners who owe the IRS are not out of the woods. But while death and taxes are the big two inevitabilities, those with serious tax problems should know that it is possible to negotiate with the IRS to reduce past-due tax penalties and payments, according to Bradford G. Stroh, co-founder and CEO of Freedom Financial Network, LLC.

Americans, carrying more debt than ever, are also more likely to have tax problems than in the past. In 2004, the total of uncollected IRS taxes reached upwards of $250 billion. The number of levies (a key enforcement tool in which the IRS takes possession of assets to collect on unpaid taxes) topped 2 million during fiscal year 2004 - a 21 percent increase from 2003 and triple the 2001 number.

According to Stroh, taxpayers with tax debts under $10,000 usually can manage the payment on their own or via an installment plan arranged with the IRS. "Tax problems merit professional help when individuals cannot pay tax liabilities of $10,000 or more," Stroh says. "At that point, specialists can negotiate directly with the IRS on behalf of these consumers, helping them obtain settlements."

Tax relief specialists usually are attorneys or certified public accountants with special training and experience. Stroh explains that these experts can navigate the intricacies of IRS forms and calculations, help consumers understand the criteria the IRS imposes, and then help them get back into good standing with the IRS.

Depending on the severity of an individual's situation, two types of IRS settlement are available:

An offer in compromise reduces the principal amount owed to the IRS.

An installment agreement is a payment plan for the amount due and often includes reduced penalties.

"Remember that you cannot let overdue taxes languish," Stroh warns. "The IRS is serious -- and increasingly aggressive -- about tax collection and evasion. Tax debt can result in a lien on a house or garnished wages."

Advisors can help consumers with the following steps:

Evaluate the situation and determine the amount of taxes owed to the IRS.

Ascertain whether the situation meets IRS standards for "doubt as to collectability" (i.e., unable to pay the full tax burden), "doubt as to liability" (i.e., consumer might not owe the tax), or "economic hardship."

Establish the full amount owed, including taxes, penalties and accumulated interest, and understand whether collection limitations or penalty cancellations are possible.

Determine the best method for managing and eliminating the tax debt.

Negotiate with the IRS to settle on an agreed course of action and resolve the debt.

While facing and handling tax debt can be painful, last year's bankruptcy reform legislation made it even more crucial for consumers to act. Historically, consumers in severe IRS debt might file for Chapter 7 bankruptcy protection or wait for the 10-year statute of limitations on tax liability to expire. Now, people are much more limited in the ability to obtain Chapter 7 filings. The bill's new "means test" leads many consumers instead to file Chapter 13 bankruptcy, which establishes a repayment plan, rather than wiping out all debt. Consumers with tax debt may find it much less costly and simpler to work with a debt resolution firm's tax relief service, which allows individuals to set up tax payment plans while avoiding court fees, attorney fees and bankruptcy judgments on their records.

"Whatever means you choose, tax season means it's time to face the inevitable and manage your tax burdens," Stroh says. "Fortunately, experts are available to help you along the way."

Freedom Tax Relief, LLC (http://www.freedomtaxrelief.com) provides consumer debt resolution services through its Freedom Debt Relief and Freedom Tax Relief divisions. The company works for the consumer, negotiating with creditors to lower principal balances due that can often result in savings of up to half the amount owed. Based in San Mateo, Calif., Freedom Financial Network serves more than 5,000 clients nationwide and manages more than $200 million in consumer debt, offering an alternative to bankruptcy, credit counseling, and debt consolidation.

 

Irs Debt Help: 5 Options To Getting Rid Of Tax Debt

IRS Debt Help:

Do you owe the IRS? Are you struggling with IRS debts and cannot figure out what to do? Don’t despair, you are not alone. Many Americans owe back taxes, or cannot afford to pay their IRS debts. If you want to get IRS debt help, it’s important to understand the different IRS tax debt strategies.

There are five strategies for getting out of IRS tax debt.

1.Offer in Compromise: a program where you can settle your tax debts for less than what you owe. Req...

IRS Debt, tax debt, offer in compromise, irs tax, installment agreement, tax liability, irs collecti

IRS Debt Help:

Do you owe the IRS? Are you struggling with IRS debts and cannot figure out what to do? Don’t despair, you are not alone. Many Americans owe back taxes, or cannot afford to pay their IRS debts. If you want to get IRS debt help, it’s important to understand the different IRS tax debt strategies.

There are five strategies for getting out of IRS tax debt.

1.Offer in Compromise: a program where you can settle your tax debts for less than what you owe. Requires making a lump sum or short term payment plan to pay off the IRS at a reduced dollar amount.

2.Installment agreement: a monthly payment plan for paying off the IRS.

3.Partial payment installment agreement: a somewhat new debt management program where you have a long term payment plan to pay off the IRS at a reduced dollar amount.

4.Not currently collectible: a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.

5.Filing bankruptcy: discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition.

Offer in Compromise

Many people who find themselves in debt to the IRS might focus on the first option above – the Offer in Compromise (“OIC”). For those who qualify it can be the optimal solution, however, it is important to note that not everyone qualifies for the Offer in Compromise solution. Only about 15% of applicants succeed in reducing their debts through the OIC program. For this reason and because of the complexity of filing an Offer in Compromise many people enlist the services of a Tax Professional who has a track record of success negotiating with the IRS. This Tax Professional will not only be able to determine if you are eligible to reduce your IRS debts via an OIC but they will also assist you in navigating the complicated IRS bureaucracy to achieve the desired outcome.
An Offer in Compromise is a lengthy and time-consuming process. It takes most individuals anywhere from 12 months to 24 months to achieve a successful resolution on your offer application. Through an Offer in Compromise, taxpayers agree to pay the IRS only the reasonable collection potential instead of the full amount of taxes owed. For some people the "reasonable collection potential" will be less than the full amount of taxes owed – sometimes as little as 10%.

Installment Agreement

Many taxpayers cannot qualify for an Offer in Compromise, Statute of Limitations expiration, or bankruptcy relief but still seek resolution for their IRS liability. In these cases, it may be possible to negotiate long term IRS payment arrangements. The IRS allows “structuring” five primary types of payment plans, or Installment Agreements: Guaranteed Installment Agreements, Streamlined Installment Agreements, In-Business Trust Fund Agreements, Long-Term Installment Agreements, and Installment Agreements on Specified Balance Due Accounts.

Currently Not Collectible

If a taxpayer does not qualify for an offer in compromise and cannot afford to pay an Installment Agreement, Currently not Collectible (CNC) status may be an option. If a client is placed in CNC status, the statute of limitations continues to run and the IRS will not pursue collection actions. However, if a taxpayer’s financial status improves, the IRS can remove the file from CNC status and return to active collection status.

Reasons for attempting CNC status:

1. Taxpayer has income below allowable expenses and there is no indication that the financial situation will improve in the future;

2. Due to high equity, the taxpayer does not qualify for an OIC and has more allowable expenses than income so an Installment Agreement is not an option; and,

3. Taxpayer has more allowable expenses than income and the statute of limitations is getting close to expiring.

Statute of Limitation for IRS Tax Debt

The IRS has 10 years to collect outstanding tax liabilities. This is measured from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn't collect the full amount in the 10-year period, then the remaining balance on the account disappears forever. The statute of limitations on collecting the tax has expired.

Selecting a Tax Professional to handle your IRS Tax Debts

Because of the complexity of the Offer in Compromise and other IRS tax debt processes, many taxpayers hire a tax professional to prepare their IRS documentation and to negotiate directly with the IRS. Tax professionals charge anywhere from $1,500 to $6,000 or more for accurate and thorough IRS representation. Because most of the IRS tax debt solutions involve negotiating with the IRS, your tax professional should be admitted to practice before the IRS. You should be looking for a Tax Attorney, an Enrolled Agent (EA), or a Certified Public Accountant (CPA) to handle your Offer in Compromise. The tax professional must know about the laws governing IRS collection of tax debts, how the IRS evaluates offers, and what all the options are for resolving tax debt problems. “Taxpayers should be looking for a tax professional with years of experience in IRS collection matters, especially experience in dealing with revenue officers, the Automated Collection Systems division, and the complex IRS process” according to Jim Brown, the managing tax attorney with Freedom Tax Relief.

Please be aware that even the most successful tax professionals have lost Offer in Compromise cases, so not every consumer looking for IRS debt help is guaranteed the most savings. It is important to know that your Offer in Compromise will be decided based on your unique financial situation. If you do need IRS debt help, having a tax professional represent you before the IRS will help ensure that all letters and phone calls from the IRS are handled quickly and professionally. But in the end, it is up to the IRS to make a decision about your case.

It is important to know that like death and taxes, your IRS tax debt issue will not simply vanish, so you should seek help before the IRS escalates collection efforts and/or you accrue additional penalties and interest.

 

New Procedure for Settling Tax Debts with the IRS

The Tax Increase Prevention and Reconciliation Act of 2005 has ushered in new rules for settling tax debts with the IRS. Here is the scoop on the compromise procedures.

irs, tax, taxes, debt, debts, owe, compromise, back, forms, rules, settling, settlements, deposit

The Tax Increase Prevention and Reconciliation Act of 2005 has ushered in new rules for settling tax debts with the IRS. Here is the scoop on the compromise procedures.

New Procedure for Settling Tax Debts with the IRS

If you owe the federal government back taxes, there are two approaches you can take to resolve the issue. The first is to file an installment agreement wherein you agree to pay off the debt by making monthly payments. The second is to try to settle the bill with a one time payment, which is often relatively low given your position you will not reasonably have the money to pay back the total bill. This rules and procedures related to this second approach have changed dramatically.

The settlement process, often called an offer in compromise, underwent a massive change with the passage of the Tax Increase Prevention and Reconciliation Act of 2005. Starting July 16, 2006, the new rules go into affect and they are a bear. The biggest issue is you now must pay 20 percent of your offer amount to even have the settlement offer considered!

The procedure now works as follows. To file an offer in compromise, you must prepare and file Form 656. This form essentially lays out your assets, income, debt amount and the offer you are making given these figures. You must pay $150 when submitting the bill. You must also now pay 20 percent of your offer amount. Neither of these amounts is refundable.

It may take the IRS up to two years to get around to making a decision. If the agency accepts your offer, it will send you acknowledgement and the terms thereof. If the agency does not accept the offer, it keeps your deposit and comes after you. Welcome to the wonderful world of taxes!

There are two exceptions to the 20 percent deposit rule. If you are a low income taxpayer under IRS rules, you need not make the deposit. Further, if you are contesting the taxes due because you believe there has been an error and you are not reasonably responsible for them, you need not file the deposit. Keep in mind the reason must be reasonable, not one of the arguments that nobody has to ever pay taxes.

The new procedures for filing for tax debt settlement are odd given the new 20 percent deposit amount. However, this still represents the best way for dealing with tax debts.

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