Tax Debt Solutions Blog

Act On Back Taxes

Actions To Take If You Cant Settle a Tax Bill

There are many taxpayers who are unable to pay their taxes.  If you missed the April 15^th deadline there is still hope.  An article by MarketWatch advises you to file a return anyway.  Do this whether you have the cash or not.  The IRS is aware of who doesn’t file.  The penalties will be harsher if you disregard the IRS.

Ask for extra payment time.  You can request up to one hundred twenty days to get your cash sorted out.  Utilize the IRS’ website, “online payment plan” or call 1-800-829-1040.  You will pay interest and a “failure to pay penalty” until the full amount is settled.  No fee is involved.

Ask for an Installment Plan. If you can’t come up with all the cash in one hundred and twenty days, there is a monthly payment plan option if you owe $25,000 or less.  Regular monthly payments mean you won’t suddenly vacate your bank account.

A loan from a family member or friend may avoid trouble with the IRS.  You must have a loan agreement that shows your payment schedule-- amount loaned and interest owed.  This agreement must be signed.  In the event of the lender not getting their money back, they can take off the loss on their tax return.

You can either utilize a current home-equity route of credit or ask for a new one.  Five to six percent is the interest rate for those with a good credit history.  If you pay the other lesser tax interest won’t be deductible.

A pricier option is useyour credit card.  It incurs a flat fee or a ‘convenience’ fee of two to four percent of a tax bill.  If you can’t pay the balance immediately you must pay the interest rate.    

You may be eligible for an Offer in Compromise; however, the IRS may refuse because the taxpayer settles back taxes for less than the outstanding amount.

You can phone the IRS hotline.  Queries have risen by thirty four percent compared to the previous tax year.  Not all queries can be sorted out by using the IRS hotline number.     

IRS Installment Plan: Benefiting the Rich and Famous

Zsa Zsa Gabor

A lot of money separates regular taxpayers from those with lots of money.  Having a lot of fame and money does not mean taxes get paid.  In fact, it is generally ordinary citizens who get their taxes paid and not the wealthy.  Even though there are those with the advantage of great wealth they are still entitled to the same solutions available to taxpayers who don’t.  No matter how much or how little money you have the IRS allows you to have an installment payment plan.

It is highly likely that getting into trouble with the IRS would lead to a tax lien.  A famous personality who did get into trouble is the Hungarian born actress, Zsa Zsa Gabor.  Her tax trouble amounted to more than $118,000 that resulted in a tax lien.  The reason for the lien was because the actress did not pay in full in the years 2001 and 2002.

Ms Gabor has let it be known there is a third party involved.  As far as her advisers are concerned Bernie Madhoff and his Ponzi scheme are to blame for Zsa Zsa Gabor losing $7 million and therefore her tax problem is a direct spin-off.  Ms Gabor and her spouse are joining their funds and devising an installment plan with the IRS.

As soon as you realize you owe the IRS money take action to avoid a tax lien.  Negotiate a payment plan (also known as installment plans or payment options) with the IRS.  The IRS is amenable to such a plan.  There preference is to get the money quickly but, if you can’t, a payment plan is the best solution.  A payment plan means they don’t have to keep track of you.  However, be aware. Such a plan does accumulate interest charges and a penalty for payments later than 15 April. 

Escape Tax Debt Through Tax Evasion?

To The IRS A Tax Evader Is A Tax Evader

It has been noticed that over the years many well known personalities don’t pay or even report their taxes.  This is, of course, against Uncle Sam’s law.  These personalities are brought to book and one such example of this type of circumstance is Tsen Toma.  Towards the end of the nineties, this person operated his own business called Tomo Painting Construction.  It was this business that caused Tsen Tomo to be indicted for tax evasion.

Tsen Toma was indicted because when he got checks from customers as payment for services rendered by Tomo Painting Construction, he cashed them.  However, that cash was for private use.  The checks were cashed at various check cashing establishments.  The checks he cashed came to over a million dollars but Tsen Toma did not keep any verification in the form of receipts.

He continued to do this over a period of three years but his business records didn’t show the check payments and nor did he not notify the IRS on his tax return.  In the 1998 tax year, Tsen Tomo did report a taxable amount of $29,901.  However, the IRS discovered the amount should have been $452,244.  This adjustment by the IRS resulted in extra tax of $168,718.

According to media releases Tsen Toma departed from the United States while under investigation by the IRS.  This action led him to be placed under arrest.  The arrest was carried out at Kennedy Airport on his return from the country of Taiwan.  This happened on 24 November.  The consequences of Toma’s actions could result in a prison sentence of five years and also a $25,000 or two times the gross gain emanating from the offense of tax evasion.  This shows taxpayers that Uncle Sam does not tolerate tax evasion by any person in the United States.

Don't evade your taxes. Tax debt is no laughing matter.

Tax Penalties Gone Wrong

Aware or Unaware Uncle Sam Comes Calling

Could there be anything more unexpected than one or more IRS agents making a call at your place of business?  This was played out at a Sacramento car wash.  The amount in question was a four cents payback in 2006.  Two IRS agents informed the offender four cents x four years totaled $202.35 including penalties and interest.

Peter Pappas, a tax lawyer, explains how four cents turned into $202.35.  The IRS used the offender’s original tax bill to start calculating.

Even after being visited by two IRS agents the offender retained his good nature, paid his dues and offered clients a basic car wash for four cents on 15 April.  Anything more went to a Sacramento charity.

Tax penalties keep increasing on any overdue bill no matter how small.  Be aware:

• Missing a file deadline may incur a penalty for failure-to-file.
• Non-payment by due date may incur penalty for failure-to-pay.
• Usually failure-to-pay is less than failure-to-file penalty.  You must still file a tax return.
• Every month or portion of a month of late return gets 5% of taxes not paid in penalties but not higher than 25%.
• If return is recorded in excess of 60 days following due or extended due date, smallest penalty is least of 100% tax unpaid or $135.
• ½ of 1% taxes unpaid every month or portion of month following due date of taxes unpaid can be penalized up to 25% of taxes unpaid.
• If minimum of 90% of real tax bill by due date is paid and extension recorded no failure-to-pay penalty if balance paid by extended due date.
• If in any month there are failure-to-file and failure-to-pay penalties the failure-to-pay penalty lessens the failure-to-file penalty by 5% but a return filed in excess of 60 days following due or extended due date the smallest penalty is least of 100% of tax unpaid or $135.
• If you can prove failure to file or settle on time wasn’t due to neglect but for a realistic reason, no failure-to-file or failure-to-pay penalty required.  

Tax Debt Relief | Don’t Live In Fear of a Tax Audit

All taxpayers have the same fear- tax audit.  However, it is far more realistic for all of us to assume we will be audited at some stage in our lives.  No matter how careful we are there is always the chance our name will come up.  The good news is that chance is a small one.  However, rather than always worrying about an audit, it is far more productive to be as organized as you can every tax year.  

If the IRS informs you they wish to ask questions, you can take action so panic is an unnecessary reaction.  It is always helpful to have a tax professional to guide and advise you through an IRS audit experience.  Professionals who have the credentials to argue your case are Enrolled Agents, tax attorneys and CPAs.  These professionals have the background and knowledge to represent you.

It is very important that you work with your tax professional.  This means being completely transparent by handing over all documents and records.  It does help if you already maintain a system of tax related records and files.  Having actual records is the best way to prove a point to the IRS.  If you can’t show them proof then you are regarded as being in the wrong.

Just because you have a tax professional to guide you doesn’t mean you are completely out of the IRS audit loop.  Be sensible and be prepared.  It will help you to know what is expected of you and from you.  It can only help to read through a general guide on audits.

One of your greatest assets during an IRS audit is the appropriate attitude.  Always maintain a professional yet polite manner.  Always be accommodating and helpful by answering all questions as best you can.  However, it is advisable not to give more information than is requested.  Allow your tax professional to take charge and follow his or her lead.    

Tax Debt: Oil Spill

Oil Spill Trust Fund Money Raised but Oil Company Taxes Lose Out

The recent signing of The Oil Spill Liability Trust Fund law by President Obama has done away with a spending limit for cleanup expenditure.  A Federal Trust Fund has given the US Coast Guard in excess of $100 million to deal with the emergency caused by the BP Deepwater Horizon oil spill.

The money that supports The Oil Spill Liability Trust Fund is derived from the oil companies’ tax of eight cents per gallon.  However, when Capitol Hill wanted votes in order to hike up taxes on Big Oil it couldn’t muster enough.    

An industry tax repeal of $35 billion in oil and gas breaks was presented by Bernie Sanders the senator for Vermont Independent.  This offer of repeal did not get a simple majority within that legislative body.  There were thirty five votes in favor.  In order to pass the tax repeal the Senate regulations demand sixty votes for a super majority.  This means that even fifty one positives would not be good enough.

There is an ongoing argument about the extenders for comprehensive tax and unemployment benefits persistent assessment.  Senator Sander’s offer was a measure of that debate.  Even though Democrats promise to make another attempt it is not likely to work.  The argument is the proposal by Sanders would negatively affect Big Oil and also the smaller producers.

The chairmen of Shell, Chevron, ConocoPhillips and ExxonMobil criticized BP thereby doing Big Oil a certain amount of good.  They also informed Congress things would have been carried out differently if they had been holding the reigns.  No mercy was shown to BP and it was business at its ruthless best.

 

Tax Relief: Forgetting To File Is NOT Good Enough For The IRS

It’s not unheard of for taxpayers to fail to remember to file for their taxes.  There are individuals who genuinely find the filing of their taxes slips their mind.  If this does happen it is advisable to take action as soon as you can.  The sooner you make it right with the Internal Revenue Service, the sooner your outstanding tax bill will stop increasing in both interest and penalties.

A common situation for certain individuals is they discover they are without a W-2s or 1099s relating to the years that are unrecorded.  This is a situation that is the start of a number of problems if not sorted out in the correct manner.  The reason it will be picked up by the Internal Revenue Service is because there is a procedure for corresponding the earnings in the IRS account with the earnings on the tax return.  One effective method of making sure your return is correct is to take the data straight from the Internal Revenue Service.  Use the IRS data to put together your tax return.      

If you want to achieve an amicable relationship with the Internal Revenue Service in order to bring about a favorable outcome regarding an unresolved tax problem, you may want to consider the services of a tax professional.  This is most important because if you don’t go about correcting your tax problem in an appropriate manner you could be faced with prison.

If you are one of the taxpayers who forgot to file the only way to get out of this serious situation is to make contact with the Internal Revenue Service and convince them you are doing everything that is expected of you.  Make sure they understand you take your oversight very seriously.  The Internal Revenue Service would prefer to work with you to get the money owed as soon as possible.                

Tax Relief: Offer In Compromise

Offer In Compromise: What Amount Should You Offer?

Your offer must be the same as your realistic value of assets and the sum of money that could be taken from potential earnings.  Possible value of assets is what could be collected if the IRS levy assets immediately and sell them same day after debts, such as mortgage.  The IRS concedes a QSV (Quick Sale Value) i.e. twenty percent beneath fair market value.

Most domestic property, appliances, furniture and clothing aren’t regarded as luxuries.  Items such as valuable antiques or mink coats must be separately listed.   Include retirement plans balances with assets.  Penalties and income tax for premature allocation subsequent to cashing in may be discounted.  Certain property can’t be levied or seized.

Deduct essential living costs from total monthly income to get an approximate future income.  The outcome is disposable income and the minimum must be about the same as your monthly payment if granted by the IRS.  Disposable Income number must be multiplied by a number dependent on type of payment plan.  There are three plans: Cash Offer, Short Term Deferred and Deferred Offer.

Unique Conditions:  Efficient Tax Administration

You may have too many assets even with a minimum total.  If selling those assets were to instigate economic hardship, the IRS may take less than asked for under normal regulations.  Selling a home or cashing in retirement plans could cause hardship.

The IRS favors certain individuals:

• Older than sixty in dire financial straits
• With psychological or physical conditions
• With HIV
• With drug addiction or alcoholism
• Those related to addicts or alcoholics causing financial hardship

The above must be proved by financial or medical records and information.  With Forms 656 and 433, include a letter detailing your problems.

Tax Relief: Installment Agreement- Getting Declined

When the IRS Declines an Installment Agreement

There are three reasons for the IRS to turn down an Installment Agreement (IA):

• Not all living costs are deemed essential i.e., private schooling fees, high credit card purchases, charitable donations.

• Information on Forms 433-A and -B are inaccurate or deceptive e.g., public records prove you own assets that you didn't reveal or your income is higher than disclosed.

• You failed to complete a previous Installment Agreement causing the IRS to regard you as unreliable.

If an IA is turned down, continue your request with the tax officer/manager, RS Appeals Office, and tax advocate.

Revoking an Installment Agreement

Once an IA is approved, you and the IRS are bound to it. However, there are exceptions to revoking your payment plan:

• You don't file tax returns or settle taxes subsequent to the IA; the IRS monitors your returns and payments.

• Revocation is caused by non-payment or late payment; the IRS gives thirty to sixty days before sending a warning regarding revocation.

• There's a noticeable (positive or negative) change in your finances. If you keep silent they may not see it but, if the IRS notices, you must complete a new Form 433-A or -B.

• If the IRS learns you didn't fully disclose all assets and/or additional income(s) during your IA negotiations.

A Form 523 notifies you of the IRS' intention to revoke your IA. You can appeal it by using Form 9423.

Tax Relief: Arguing Keeps the Constitution Healthy

There is an argument taking place that the federal government’s requirement for every person to purchase insurance for health is unconstitutional.  This point of view is being put across by eleven GOP State Attorney Generals.  This has been taken to the extreme by the state of Virginia.  In this state, it is illegal to expect any person to purchase insurance for health.

 

In a nutshell, does the government have the right to force citizens to purchase insurance for health purposes?  If we don’t want to - can they make us pay in the form of taxes?  This depends on whether you believe health care is your right.  According to the Conservatives it’s not but Federal Law demands the majority of health care facilities to accept emergency patients with or without insurance.  This does not mean that you don’t have to pay the bill.  Those who can’t make payment have their costs spread.  Patients who have insurance do pay.  Spreading costs is the only way for the medical industry to keep going.

 

States that prohibit individual choice, like Virginia, should likewise allow hospitals and doctors to be exempt from treating patients who have no insurance if they can’t provide proof of sufficient funds to cover costs.  We are all going to suffer if those who are healthy and youthful do not purchase health insurance.  If they prolong it until they need insurance the premiums are going to be higher than necessary.  If that happens then those who have will be taxed for those who don’t.

 

Health insurance companies will sell insurance to all citizens.  However, if it is only purchased by the ill then coverage will eventually be out of the reach for the majority of people.  This will in turn lead to the decline and possibly the demise of the health insurance industry.