Many taxpayers are facing the crippling effects the IRS can have on you once you get a tax debt. They can begin collection activity on any tax year with an unpaid tax balance. Collection activity can include levies, liens, and wage garnishments. It can be a scary process as your $10,000 balance can turn into a $20,000 balance quickly with interest and penalties continuing to accrue until the balances owed are fully paid off. Tax relief services can give you the peace of mind to get back to your daily life. Tax relief services generally include a wide array of services including the Offer in Compromise, Installment Agreement, Currently Non-Collectible, and even Bankruptcy in certain cases.
OFFER IN COMPROMISE
The Offer in Compromise is the best form of resolution available to taxpayers who qualify. This option does not have the negative effect on your credit rating a bankruptcy will have. This tax relief service also allows a taxpayer to eliminate their total tax debt for generally much less than the total amount owed by the taxpayer. Based on your income and expense information and all of your asset information, the IRS may allow you to negotiate a settlement amount to compromise your entire tax debt. This program was designed by the IRS to allow taxpayers a chance to get back on track with their tax filings and once again start paying their taxes timely. This tax relief service also allows the IRS to collect some of their total back tax burden while also helping taxpayers get back on track without causing an undue hardship. The IRS has online programs available to determine if you qualify for this program. Just because you qualify, does not mean an Offer in Compromise is a guaranteed or easy program to get accepted for. You should contact a resolution firm to see if you qualify before this program is gone or removed from law.
An installment agreement is an IRS program most taxpayers qualify for regardless of the amount of tax debt or amount of income you make annually. The only thing a taxpayer needs to accomplish prior to setting up an installment agreement is to get into compliance with IRS standards. In order to get into compliance, you will need to file all back-tax returns and start making estimated tax payments or adjust your withholding allowances if a W-2 employee.
The IRS has several different installment agreement options depending on how much you owe in back taxes. The most common type of installment agreement is a 72-month streamlined installment agreement for taxpayer with a tax debt of less than $50,000. For example, if you owe $30,000 to the IRS, they would be able to establish an installment agreement of about $417 per month, barring any other collection issues or statutes. The IRS also recently created a test installment agreement for taxpayers with a tax debt of between $50,000 and $100,000. This installment agreement is an 84-month streamlined installment agreement.
Another common installment agreement is based on collectability. If you do not have enough money to make a streamlined installment agreement payment or you do not qualify because your tax debt is too high; you can get an installment agreement established based on your collectability. When determining your collectability, the IRS will take your monthly income and subtract all allowable expenses to arrive at your monthly collection potential. They will also take into account any equity in your assets. This tax relief service could be exactly what you need if you have the ability to full pay or partially pay of your tax debt, but cannot come up with enough money to do so all in one big lump sum.
This IRS program is for taxpayers without the ability to make any payment on their tax debt. It gives a taxpayer temporary tax relief so they do not incur an undue hardship while trying to get back on track with their finances and work. This program is set up essentially the same as the installment agreement based on collectability described above. You will be required to provide all of your asset information along with your financials to the IRS. This information will then be evaluated by the IRS to determine if you actually have some collection potential or if you have no ability to make any payment.
It you are determined to be uncollectable by IRS standards, they will place your account into a Currently Non-Collectable Status. While in this account status, the IRS will not attempt to collect the tax debt you owe. They will however continue to evaluate your account for collection potential and may request additional financial information at any time. This program is a temporary tax relief service as it only places a hold on your account and does not resolve the balance owed. To eliminate your tax debt, you should seek one of the other resolution options.
Most people do not know taxes are dischargeable. In certain circumstances, they can be discharged in a Chapter 7 bankruptcy. There are usually 2 key elements to a tax debt being discharged through bankruptcy. They are time and type of tax.
The element of time comes into effect in reference to when the taxpayer filed the tax return and the year in question. Each individual tax year with a tax debt owed must be separately evaluated to determine which ones qualify. For a tax debt to qualify for bankruptcy the tax return period in question must either be the later of filed 2 years ago or due 3 years ago. The later of the two periods will qualify a tax period. (There are many other factors that come in to play when determining if a tax debt can be discharged. See a professional for review if you are considering bankruptcy.)
The second element to be aware of is the type of tax you are trying to discharge. Individual taxes are usually dischargeable with the exception of a substitute for return (SFR). A SFR is a return which was prepared on your behalf by the IRS because you failed to file a return for that year. SFR returns are generally not dischargeable in bankruptcy. Also, most business taxes and civil penalties are not dischargeable in a bankruptcy.
With all of these programs out there, it is very important to evaluate your individual tax debt scenario to determine which one is the best for you. For this reason, a resolution expert can get you the tax help you need to start resolving your back taxes by evaluating which program your best suited for. Attempting resolution on your own or choosing the wrong firm to represent you could cost you thousands along with a lot of wasted time. Contact our firm to get your taxes back under control and take care of your back-tax debt today.