IRS Penalties: Defaulting on your Installment Agreement

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Don't break your deal with the IRS!

When you set up an installment agreement, you are making a deal with the IRS by which you are telling them you will be making monthly payments towards paying off your tax debt within a certain time period. However, if you do not fulfill your agreement, you will end up with an IA (Installment Agreement) default.

When the IA default occurs, you will receive a notice of default from the IRS (entitled as a ‘Notice of Levy’). Once you have received this, you are given exactly 30 days to make an appeal against it so you can negotiate with the IRS about an installment agreement. Otherwise, the IA default will be enforced and your installment agreement with the IRS will end after the 30-day period and they will try to collect what you owe!

So long as you file the appeal within the 30-day period, your installment agreement will be valid until your case has been heard and a decision has been made, in accordance with the law.

If you win your case, your negotiations with the IRS will protect your assets, your income, and your bank account from being levied while they are taking place. During this time, you should ensure you give the IRS up-to-date information about your financial situation, which hopefully will stop the IA default from being enforced.

If you have no ability to pay the IRS back and your appeal is rejected, you should consider other options, such as an offer in compromise, filing for uncollectible status or declaring yourself bankrupt. These can be effective alternatives however; the best option depends entirely on your personal situation.

Tax Liens on Real Estate

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The ins and outs of getting a tax lien on your real estate

If you have property in one county but live in another, receiving a tax lien on your real estate can be a little confusing. Many people find themselves in this situation and wonder whether the tax lien will affect their real estate in the other county or not.

The fact is that a tax lien on real estate is only effective if it is filed in the right place. In other words, to affect your property in the other county, the IRS would have to file the tax lien there, rather than where you currently live.

Of course, it is entirely possible that they could file the tax lien where the property is located rather than where you live, however this one would not affect the property in the county you live in, should you have any. It is possible that the IRS has no idea you actually have this other property! How much they know will depend on how far they have investigated you and your assets. If the IRS knows about your other property, it is much more likely they would file the tax lien in the right place.

You should beware of what you do with your property. If you sell it, the IRS could say it is a dissipated asset, meaning it is an asset you have sold to avoid paying them. This depends on whether you are selling the property to have a nice sum of money in your account or if you are selling it to meet a basic standard of living.

If a tax lien on your real estate has been filed in the wrong place, it can benefit you, but you should always make sure you are extremely careful about the moves you make to avoid future problems. 

IRS Bank Levy Release Relief

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Circumstances That Qualify You For An IRS Bank Levy Release

To get IRS bank levy release relief, you should first note that there are two main ways to be released from a bank levy: if the levy has been paid off – meaning you are no longer in debt to the IRS or if the statutory collection period for the levy has expired. In the later case, if the issue of levy has been served before the end of this expiration period, you will still have to pay – you will only be released from paying the bank levy if you are not served the levy within the statutory collection period.

However, you can get relief from a bank levy in certain other circumstances. IRS bank levy release help can be accomplished if paying off the levy will result in some kind of economic hardship. “Economic hardship” is defined based on the minimum income an individual needs for their basic needs of food, shelter, bill payments etc. If it is determined by the IRS that you will be unable to provide for your basic needs, the levy will be cancelled.

One of the most common methods of getting IRS bank levy release is by making an installment agreement with the IRS. You may wish to do this if you owe a lot, i.e. if you owe more than you have or if you don’t have sufficient amount of income. The amount you will have to pay per installment can vary, but installment agreements are a very good way to get a bank levy release as they can really take the strain off your finances.

Wage Garnishment Release

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How To Get A Wage Garnishment Release

One of the most common types of enforcement the IRS uses to collect back taxes from you is a wage garnishment.  You'll first receive a letter in the mail that shows you how much will be garnished per paycheck.  The average amount is a whopping 25%.  With the price of renting a home, utilities, paying for a car, and other needed expenses, you may need a wage garnishment release to be able to continue your life as usual without having to make major changes or get yourself into debt in some other area such as your credit.

A wage garnishment release can happen in quite a few ways.  Naturally, when you pay it off, it will stop but you can also have a wage garnishment release by:

• Proving the garnishment is giving you financial difficulties.
• Showing the IRS you can pay off your debt in a more efficient way.
• Already having an installment agreement with the IRS.

These are the most common ways to get a wage garnishment release but it can be quite difficult to get some of them going by yourself.  Talking to the IRS can be difficult and intimidating for a lot of people so your best bet is to find a tax attorney who can handle things for you.

The worst thing you can do is furthering your debt by using small loan services every few months to help keep your finances where they should be while this garnishment is in effect.  This is just a temporary “band-aid” for your finances and after a few months, the interest from these small loans may end up worse than the garnishment itself.  If you feel like you have the knowledge to do it yourself, you can visit your local IRS office and get all the proper forms but if you get denied, you will need additional help.

Tax Amnesty for Tax Evaders

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Offshore Tax Evasion May Be Brought in Via Tax Amnesty

Any individual implicated in the illegal practice of tax evasion through offshore accounts may take advantage of a limited amnesty sanctioned by the Internal Revenue Service.  Due to rising pressure to lower the tax gap they are putting together a program that will considerably bring down the failing to file a Report of Foreign Bank and Financial Account penalty.  The intention of the Internal Revenue Service to present this plan of action in the near future comes from The New York Times.

Fifty percent of the highest balance of every account going back three years is the present penalty taxpayers must deal with.  This sum has the capacity to destroy a depositor’s accounts in only two years.  However, the Internal Revenue Service is prepared to lower the penalty from 5 to 20 percent.  The percentage applied to an errant taxpayer is reliant on whether or not the money is hereditary.  A taxpayer is obliged to pay all interest and taxes billed over the six years.  There is also an evaluated standard accuracy-linked twenty percent penalty.  Amended returns must be filed for all of the six years.

Hypothetically, the Internal Revenue Service is in favor of the tax amnesty because they get to gather in tax money owed that may never be brought in.  However, this is an issue that is regarded as controversial within the departments of the state revenue.  It has been found that the greater number of tax amnesties made available, the more likely individuals are to attempt to avoid declaring their taxes because they prefer to wait for the next amnesty offered by the IRS.  The Internal Revenue Service wants to avoid this cycle of taxpayers waiting for amnesty rather than keeping up with their tax payments.  This is why the IRS will only offer tax amnesty after a great deal of thought.

Offer in Compromise vs. Installment Agreement

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Can an IRS Installment Plan or Offer in Compromise Resolve Back Taxes?

A taxpayer’s real fear of not having the money to settle back-taxes is thinking that they cannot do anything about their debt.  Most people are completely unaware that there are IRS sanctioned payment options available.  This means there is a high chance of them qualifying for an Internal Revenue Service tax settlement program.

As a taxpayer, you should always question which Internal Revenue Service tax settlement is best.  Is it the installment plan or the Offer in Compromise?  However, choosing the most suitable option of the two is not always clear cut because every taxpayer has a unique set of circumstances as to why there are back taxes.  Both programs work well depending on the particular situation in question.

There are many reasons why an individual may a large amount in back taxes.  The reasons could be personal hardship, legal judgments, a failed business or unexpected medical costs.  If you can’t pay your tax bill, the Internal Revenue Service makes it possible for you to make them an offer.  This is called an Offer in Compromise.  It is likely you will get a large discount if you apply for this program and so it is suitable for those who owe a large amount.  An added advantage is you get to pay the tax bill once and for all.  You make your offer at a meeting with the Internal Revenue Service.

However, if you do not have the cash means to pay your back taxes in one payment then you should consider an Installment Agreement (or Internal Revenue Service Payment Plan).  You do need to have the money to pay off your debt over a specified period of time.  This is exactly the same as paying off any expensive item by small amounts each month.  Once you agree to a program you have the responsibility of making your payments on time every month.

Tax Help: Taxable Earning Exclusions

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Student Loan, Credit Card and Car Debt Exclusion

Student Loan Debt:

When you make the important and necessary decision to further your education, there are unexpected complications that could arise in future; the most critical to students are study loans.  However, credit cards and cars are also daily necessities.

There are students who have to contend with the cancellation of their study loan.  It is helpful to know in certain instances a study loan that is cancelled won’t always end in taxable earnings.  This rule applies to those students who committed to a loan condition that required them to work within a specific profession for a certain length of time.  If you carried out this commitment in full then your cancelled study loan will not be taxable earnings.  In order to rule out the annulment of study debt there are other circumstances to consider:

It is expected that your study loan would have been made by one of the following:

• State or local government or sub-sectors or the federal government
• A school being guided by a charitable or educational institution or unit of the government in a program to encourage students to take up positions in careers or regions in need of service
• A public-benefit company that is exempt from tax and retains regulation over municipal, state or country hospitals where staff members are regarded as public servants

Credit Card Debt:

In certain instances it is possible to cancel credit card debt.  This debt can be disqualified as taxable earnings if the cancellation took place within a title 11 bankruptcy case. The debt may also be disqualified as earnings if became solvent prior to the cancellation.

Car Debt:

If your car is repossessed and you received a 1099-C, the debt amount may be disqualified only if the cancellation took place in a title 11 bankruptcy case. And, like cancellation of credit card debt, the amount owed can be disqualified if you became insolvent prior to the cancellation.

For more articles and tips on Income Tax Help and much more visit our blog homepage.

Tax Relief: 5 Great Ways to Lower Your Offer in Compromise Cost

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5  Ways to Lower Your Offer in Compromise Cost

The key to lowering your offer in compromise cost is knowing how the IRS settlement guidelines work as well as being able to negotiate with the IRS. Here are 5 great ways to lower your offer in compromise cost:

1. Let the IRS know you are considering bankruptcy as another option. If you file as bankrupt, the IRS will get no money and they are fully aware of this, so they will likely listen more to your demands if they think they could get nothing from you if they don’t.
2. Ensure that the offer in compromise cost does not cover certain items of property that are exempt from being included in what you offer the IRS. Such objects include everyday objects you have around your house, as well as certain objects you may have related to your business.
3. You should know how to get to ‘quick’ sale value for your property. You are allowed to sell for 20% below the ‘fair market value’ of the property under the guidelines of the IRS. Such property you should do this for includes houses and cars.
4. The IRS has guidelines related to how much you are allowed for living expenses within the offer in compromise. They will allow you a certain monthly amount for certain things, and you should be aware of what your allowances are.
5. Make sure you know what income you have that the IRS has no right to take from you. Your offer in compromise cost does not include income such as unemployment benefits, social security benefits for those that are disabled or aged and worker’s compensation.

The more you know about the IRS guidelines for your offer in compromise cost, the more you can lower it. Make sure to be as thorough as possible in the settlement process.

Should I Marry My Tax Attorney?

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Tax Relief:

If I Marry My Tax Attorney, Will IRS Suspect Anything?

Chances are that if he’s currently representing you, and doing a good job of it, the IRS won’t ask, if you don’t tell!  Oh, that’s right, that’s not how the IRS deals with things is it?  Wrong Government agency!

Well, we all have to realize though that even tax attorneys are people too, and so even tax attorneys are liable to fall in love with their clients and at times vice versa, though it’s difficult to imagine, isn’t it?  Perhaps you should have considered marrying him before you got him to represent you with the IRS? Funny, how we never think about these things until it’s too late?

I guess, the next question that should be asked is did he give you a whopper of a ring? I mean, he is an attorney, right? Maybe too, he’s come up with a way to declare a huge diamond as a business expense, have you thought of that? You just never know when you are dealing with a tax attorney.

I am sure that you never intended to fall in love with your tax attorney, or else the IRS may suspect you of tax evasion if they can prove you did! I mean if that would work, lots of people would be proposing to their tax attorney, fer sure!  Figures, huh, that the IRS would do that? Now, you may want to ask your fiancée about all this, perhaps he has some thoughts about it, again he is an attorney, and they are really good at answering questions, though not as good as asking them, I always thought.

You always have to be careful about marrying attorneys too, you know?  I mean if you tell him you love him, chances are he’ll begin to cross-examine you. Of course that might present an interesting challenge to your relationship? 

Seriously, yes, there may be a problem with representing you, as there will probably be a conflict of interest arising.

Tax Relief- Donate to the IRS

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You Rub Uncle Sam’s Back and He’ll Rub Yours

Did you know voluntary payments to the US Treasury are tax deductible?  This practice is a boon to taxpayers and it also helps relieve community debt.  It is highly likely you won’t know much about this kind of tax payment.  If you do then you may shudder at the thought of giving in excess of what you currently paid to the federal government.  Voluntary payments don’t get much attention but some people are starting to point out this option due to the current national debt crisis.

There is little doubt Uncle Sam relishes this kind of gift from his taxpayers.  This was fleshed out by David Kestenbaum and Kay Fishburn.  Kay Fishburn from Wisconsin asked thousands of her fellow Americans to assist in lowering the level of the nation’s debt.  She wants you to do the same as her by putting more than your yearly tax amount into Uncle Sam’s coffers.  Kay from Wisconsin caught up in tax payments all the way from 1993.  The object is to increase those coffers as quickly and as much as possible.

If you are inclined to agree with such a patriotic gesture you can also contribute by using ordinary mail.  Other means of donating is online through Pay.gov, credit card or direct debit from a bank account.  If you opt to use your credit card you must pay the total personal fee the day you get your credit card bill.  This makes sense because then you won’t add to your personal debt by attempting to lower the national debt.

According to the IRS, when you donate extra dollars to your tax bill, you are entitled to claim the extra amount.  All you have to do is clearly detail it on your next tax return as a charitable deduction in order to ‘get it back’.