Offer in Compromise qualification- Will I qualify for an offer in compromise?

Offer in Compromise qualification – Will I Qualify for an Offer in Compromise?

If you are contemplating settling your tax debt with the IRS, it is definitely a good time to look into it.  However, not everyone will qualify despite what the barrage of TV ads say from these unethical tax relief companies.  They will take anyone as a client so beware and know the offer in compromise qualification the IRS uses!

Many taxpayers come to the conclusion that they will qualify based upon having nothing left over at the end of each month.  But, that’s not how the IRS sees it.  It really depends upon what you are spending that leaves you with no money.

IRS collection financial standards

To figure out whether you qualify for an offer in compromise (“OIC”), the IRS goes by their Collection Financial Standards to assess your financial condition.  If you go over their standards for certain expenses, they will generally disallow the amount over the standard.

For example, the national food and clothing standard for a family of two is $1,132.  They will only allow this amount, instead of the $1,500 of what you really spend.  This dis allowance unfortunately will show the IRS that you can pay them more than you actually can.  This in turn raises the settlement offer of your OIC or may disqualify you altogether.

Below are IRS links to the Collection Financial Standards to assist you in whether you qualify for an offer in compromise:

• National Standards: Food, Clothing and other Items
• National Standards: Out-of-Pocket Health Care Expenses
• Local Standards: Housing and Utilities
• Local Standards: Transportation

IRS considerations of your offer in compromise qualification

The IRS will consider expenses over the allowable amount depending upon the facts and circumstances of a taxpayer’s situation.  A good example is that of child care expenses.  If this is the case, documentation of proof of this expense (receipts, check copies) must be provided.

It is important to understand that when doing an offer in compromise, the IRS really sticks to the standards.  Unfortunately, the standards are generally not enough to live on for most families and is certainly not the real world.  For example, families have kids in college, these college-aged kids are living at home, but the IRS does not see college expenses or the expense of that extra kid at home as allowable.  This seems oppressive and downright unfair to most.

Basically, the IRS is looking to exclude taxpayers with excessive lifestyles when determining whether an offer in compromise should be accepted or not.  The IRS offer in compromise program is a very viable option for the right taxpayer(s) and it does work.  You just have to position yourself properly and know the IRS guidelines.

Lastly, be aware that all taxpayers must be in compliance and have full documentation for an offer in compromise to even be considered.  Refer to this OIC article for a summary checklist.

Taxpayers needing assistance in dealing with an offer in compromise and IRS tax problems should seek the advice of a knowledgeable tax attorney.  The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution at (310) 494-0100. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

 

Keywords:  Offer in Compromise, IRS problems, IRS Collection Financial Standards

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Tax Debt Relief – 3 Dangers of Using a Tax Relief Company

Tax Debt Relief – 3 Dangers of Using a Tax Relief Company

You’ve heard them advertising all over the TV and radio.  IRS Tax debt relief companies claiming that they can help you resolve your debt for next to nothing.  But don’t be fooled!

Most tax  debt relief or tax resolution companies are not even run by professionals.  Their goal is to make money off of you and run, leaving you with an even worse tax problem than when you first started.

Be aware of the following 3 dangers when dealing with a tax settlement firm:

1. Outlandish and hidden fees

It is all too common that huge fees well over $4,000 are charged by a tax relief company, where the client doesn’t even have full access to a tax attorney as commonly promised.  Clients are treated poorly, rarely get timely responses and fall prey to additional fees that were hidden in their original contract.

To make matters worse, tax relief company representatives rarely know what they are doing and certainly don’t know how to deal with IRS representatives or tax law.  Due to the tax debt relief company’s inexperience, taxpayers that have hired tax relief companies have longer resolution times (and many times, no resolution), thus incurring more fees.

Don’t get locked in to their schemes and avoid them at all costs.

2. Unprofessional, inexperienced and dishonest advice from TAX DEBT RELIEF companies.

Unfortunately, many tax relief company representatives give bad advice.  For example, they consistently lie about taxpayers qualifying for an offer in compromise or settlement of their tax debt.  Also, the way they advertise makes it seem that most taxpayers will qualify when many will not.  This is misleading and causes many vulnerable taxpayers to wrongly believe that they can help them.

Tax relief companies often get a taxpayer’s name from tax lien lists, which are of public county record.  They then harass and use scare tactics such as telling you that if you don’t hire them immediately, you will go to jail or be charged with tax evasion/fraud or that the IRS will take everything they own.   They often manipulate and bully to make the sale. If you start to feel this type of pressure, back away and find someone that is more honest and professional.

These dishonest and deceitful sales practices are common place when dealing with tax relief companies.  Do not be a victim and take your money elsewhere….to a professional tax attorney that can be held accountable.

3. High employee turnover often going out of business

Tax settlement firms are notorious for having high employee turnover.  The reason is pretty obvious.  Their sales people know how to sell, but know next to nothing about tax law and resolving tax problems.  They are continually replaced and the client-taxpayer suffers.

Due to poor credibility that starts to build up and horrible customer service, tax resolution companies go out of business pretty quickly.  When quantity, not quality is the focus, the result is catastrophic on a business.  Also, it is pretty tough to compete against tax attorneys and tax law firms who are the real tax attorneys best suited to resolve people’s IRS tax problems.

Taxpayers needing assistance in dealing with IRS tax problems should seek the advice of a knowledgeable tax attorney.  The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution at (310) 494-0100. We look forward to helping you.

This IRS tax relief blog post is not intended as legal advice and should be considered general information only.

 

Keywords:  Tax Relief Companies, Tax Resolution Companies, Tax Settlement Firm, IRS tax problems, tax debt

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IRS Tax Problems – Get Help Now -Don’t Wait

IRS Fresh Start Program –  get help now with your tax problems.

If you have tax debt and are having a hard time paying off your back taxes, take advantage of the IRS Fresh Start Program.  This program makes it easier for taxpayers to negotiate with the IRS and get out of IRS debt.  It is unknown for how long it will last, so it is a good idea to start the process of resolving your tax debt.

The three main changes to IRS tax laws introduced by the IRS Fresh Start Program include:

1. Higher thresholds for tax Liens and ability to withdraw tax liens

The IRS agreed to stop issuing tax liens to anyone with under $10,000 in back taxes.  Also, you can now request (through form 12277 Application for Withdrawal) that your tax lien be removed if you fit into one of two scenarios:   (1) you paid your tax lien in full or (2) you enter into a direct debit installment agreement.  See more about Tax Lien Withdrawal requirements on the IRS website.

2. Expanded access to streamlined installment agreements

Before the IRS Fresh Start Program initiative, the IRS would not allow you to qualify for the installment payment program until you provided detailed financial statements.  With these financials, you would have to show the IRS that you could not afford to pay them in full or that you needed a payment plan.  Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years) without submitting a financial statement.

There is also a new test program that was extended allowing individual taxpayers owing an assessed balance between $50,001 and $100,000.  The payment terms are over 84 months with financials not required if a direct debit or payroll deduction is put in place.  If not put in place, then a financial statement is required.  See Forms 433F and 433A.

If you owe more than $100,000 or need more than 72 or 84 months to pay off your tax debt, financial statements are required.

3. Expansion of the Offer in Compromise Program

This IRS Fresh Start program allows you to negotiate your debt with the IRS and offer a settlement amount of less than you actually owe.  The Fresh Start changes make it easier to qualify for an IRS Offer in Compromise giving the IRS additional flexibility in the way they determine whether a taxpayer is qualified.

For anyone struggling with large levels of IRS back taxes debt, it is highly advisable to hire a tax attorney to help you deal with your outstanding debt.  It is becoming increasingly difficult to negotiate with the IRS, even with the IRS Fresh Start Program.

Taxpayers needing assistance in dealing with IRS tax problems should seek the advice of a knowledgeable tax attorney.  The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS.  Please call for a no-cost tax attorney consultation for tax resolution at (310) 494-0100. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

 

Keywords:  IRS problems, IRS Fresh Start Program, tax lien withdrawal, back taxes, IRS debt, offer in compromise

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IRS Collection Notices: What do they mean?

IRS Collection Notices: What do they mean?

When an IRS letter or IRS collection notice arrives, many people are unsure what it means and what to do to respond. IRS letters all look the same, and can be intimidating because of what is at stake.

If a person has tax debt due to the IRS, and does nothing about it, then eventually the person’s account will go into IRS collections.The collection process may take some time, up to several months. Each collection notice usually comes five weeks apart.

Different types of IRS Collection letters – What are the different types of IRS Tax Collection letters?

CP14 This notice is for when a person has a balance due

CP501 First reminder notice for the overdue balance due

CP503 2nd notice to remind a person of their balance due

CP504 Final Notice of Intent to Levy. This is when the IRS gets really serious. This notice says if the amount is not paid in full after this 3rd and final notice, then the IRS will levy the person’s state income tax refund.

CP90 This notice represents the IRS intent to seize assets and gives notification of the person’s right to a hearing. Retirement benefits, real estate, salaries, automobiles, bank accounts etc can be included in the levy

CP91/CP298 This notice represents the IRS intent to seize 15% of social security benefits to pay the unpaid balance that is due.

CP297 This notice represents the IRS intent to seize assets and is sent to the subjects business. The IRS will levy assets if no action is taken.

LT11/LT1058 This letter is the Final Notice of Intent to Levy and Notice of Your Right to Hearing. This indicates that the IRS has made numerous attempts to collect the balance. If no further action is taken within 30 days, the IRS has the right to levy or seize assets. The IRS may also place a Federal tax lien on your property.

The most important and serious IRS collection letters

CP90/297 Final Notice of Intent to Levy and Notice of Your Rights to a Hearing

CP91/298 Final Notice Before Levy on Social Security Benefits

These two notices are the only notices that allow the IRS to start proceedings in order to seize your assets, vehicles, bank accounts, real estate and business assets. The other notices can be important and urgent, but they are not threatening any action. Only these final notices gives the IRS these legal rights to start the proceedings.

When a person receives a Final Notice, he/she must realize that it provides important legal rights. These rights include the ability to file an appeal to have a hearing to settle the case and take the results to a U.S. Tax Court if it is not acceptable. The IRS collection action is halted while the appeal is pending, provided it is filed within 30 days from the issuance of the notice.

Actions to take when a person receives an IRS collection letter

Taxpayers are generally extremely anxious when they receive these types of IRS notices. The best thing to do is to stay calm, read the letter and check if it is a Final Notice. Taxpayer assets are in danger if it is a Final Notice.

If a person agrees with the balance due, look to the tax resolution with a payment plan, currently not collectible status or offer in compromise. This decision must be made quickly as active collections are taking place. The best way to get tax help is from a tax attorney who will work to get a resolution that is most favorable to you and your financial situation.

If you do not agree with the balance due, submit the required information to validate your claim.

Remember, when you submit any information to the IRS, to always keep copies for your records.  Please call for a no-cost tax attorney consultation for a tax resolution.  We look forward to helping you.  This blog post is not intended as legal advice and should be considered general information only

Keywords:  IRS collection notices, IRS Collection Problems, IRS Collections, IRS Final Notice, IRS levies and property seizures, IRS Seizures

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TAX COMPLIANCE WITH THE IRS FOR TAX RESOLUTION

TAX COMPLIANCE WITH THE IRS FOR TAX RESOLUTION

Ever wondered if you could sole your tax problems with the IRS? Or maybe you don’t know how to go about it? The first and most important thing you need to do if you want the IRS to favor you in stipulated tax resolutions is; Tax compliancy. You must be tax compliant. The next question that should come to your mind is; what is tax compliance?

WHAT IS TAX COMPLIANCE?

Tax compliance simply means paying your tax as well as providing and submitting accurate information to tax authorities in required formats and on time. IRS tax liabilities aren’t aimed at a set of people, it can happen to anyone. So, don’t think you’re the only one in this situation. Taxpayers on so many occasions call their tax lawyers for help when they are in tax crisis. Tax liabilities can happen for so many reasons such as; economic meltdown, family issues, poor finance management, sickness, inadvertent oversight, etc.

TAX RETURN COMPLIANCE

Getting tax resolution with offer in compromise and installment agreement isn’t quite difficult. All the IRS requires of you is to be tax compliant. You must fill all required fields in the unfiled tax returns. This is actually not difficult, but most taxpayers find it very difficult to do so. In some cases, they are fraudulent in filing their tax returns.

If you decide to do the right thing by filing the tax return properly; all you need do is place a call through to the IRS requesting for a ‘compliance check’. You will get a list of the years that need to be filed from a representative. Make sure you ask if IRS has filed some returns for those years. You will also need the following to assist you in filing; wage and income transcript, and account transcript. You will need these if you don’t have any record of your own for those non-compliant years.

TAX DEPOSIT AND ESTIMATED TAX PAYMENTS

Tax compliance for all federal tax deposits and quarterly estimated deposits applies to self-employed or business men. Wrong calculation or simple deposit error of the above named deposits which can be caused by a bunch of business and personal reasons make taxpayers run into problems. Most taxpayers use the money for these deposits for something else, hoping to make it back within the year, but they always end up with tax debt and damages.

Even if you fall out of compliance, don’t try to run away from it. Face the problem head-on, many people fall victim of this. School yourself on the rules of tax compliance or get the assistance of a tax attorney. This would prove very helpful.

Estimated Tax Payments for Individuals

If you want to get back on track with your tax compliance, you need to update all your estimated quarterly tax. Their due dates are; April 15^th, June 15^th, and September 15^th of the corresponding year and 15^th January of the next year. You can easily calculate how much your estimated tax payment should be. Simply check your previous tax return and divide your tax liability by four.

Your CPA can also help in calculating your estimates if you believe your next return to be more than the present one. You can also use the IRS estimated tax payment information at www.IRS.gov to get your estimated payments. This would be very helpful in eliminating liability reoccurrence on your returns to come.

Estimated Tax Deposits for Business

Every business man or taxpayer also needs to be up-to-date with their required 941 employment tax deposits and 940 unemployment tax deposits. This should be in addition to your quarterly tax payment. It can also be of an advantage to make quarterly estimated payments for future return years. This doesn’t really change anything, but you can still do it.

You can pay your 941 employment tax deposits either; semi-weekly, monthly, or quarterly. It all depends on the wage allocated to each quarter. You can check-out the IRS Notice 931 for assistance in filing and payments.

You ca easily avoid tax problems resulting to; wage garnishments, bank levies, and tax liens by simple tax compliance. The IRS uses tax return and estimated tax compliance to checkmate taxpayers, to make sure they don’t incur tax debt at tax times.

Feel free to contact the Los Angeles Tax Attorney at Delia Law for a no-cost tax attorney consultation. The Los Angeles Attorneys have years of experience in tax preparation and tax resolution experience. We are sure of perfectly representing your interest before the IRS. You can reach us on (310) 494-0100. We look forward to hearing from you, and also help you become tax compliant.

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IRS TAX AUDIT TRIGGERS – Top 5 red flags for IRS searches.

IRS TAX AUDIT TRIGGERS – top 5 triggers.

Tax season has just finished but many are starting to think about the upcoming tax season. Some just think about a fat refund coming their way, but others strategize and worry about how to avoid the top IRS audit triggers.

In actuality, a very small number of tax returns are selected for IRS tax audit. In 2015, less than 1% were audited. The IRS does not really tell us exactly what may trigger an audit, however, there are definitely a number of items to be aware.

1. You earned more than one million.

If you make more than one million, you will have a target on your back. According to the Internal Revenue Service Data Book 2015, returns with income of $100k to $199k were audited at a rate of .64% versus returns with income of $1 million to $5 million being audited at a much higher rate of 8.42%.

2. You had large business deductions or have been operating at a loss.

The IRS will certainly investigate if a certain business deduction is disproportionately large compared to your income from the business. Make sure you keep all substantiation to back your deduction taken. Similarly, operating at a loss, especially for more than three years will certainly trigger an IRS tax audit.

Unfortunately, taxpayers that file a Schedule C are already suspect because it is all too easy to abuse certain tax deductions. A common mistake is taking a business tax deduction that is actually for personal use and taking it as, for example, a vehicle expense, business travel expense or home office deduction.

3. You took large charitable deductions.

Again, if these deductions are disproportionately large as compared to your income, they will be suspect. Just be sure to keep detailed records of your cash and property contributions.

4. You did not report all income.

If you receive a W-2 or 1099 reporting income from a business, this information is sent to the IRS. If you do not report the income from these sources on your tax return, an audit will be triggered.

Be sure to keep all forms and keep your address updated with your previous employers to make sure you receive all forms at tax time. Not having these forms is not an excuse to not report it.

Also, if an error is found on an income form, be sure to correct it with the business who will then correct it with the IRS. If it is not corrected, the IRS will only go off of the information that was reported to them.

5. IRS Tax audit Trigger – Rental property tax losses

If you took rental property losses on your tax return, you may face an audit.  These types of losses are heavily scrutinized by the IRS, and the rules to take them are quite strict. In order to fully deduct these losses, you must be a real estate professional or actively participate in the renting of your property. Real estate professionals must materially participate in real estate with over 750 hours each year and spend more than 50% of their working hours in real estate.

The IRS is toughest on taxpayers claiming to be a real estate professional.  If you are not a real estate professional, you may deduct up to $25,000 of property loss, which starts to phase out once your income reaches $100,000.

6. Will foreign bank accounts trigger an IRS tax audit?

If you did not report your foreign accounts, it may trigger an IRS audit. If you have any accounts overseas, you need to report them or face an audit which may lead to severe IRS penalties.

FinCEN Form 114 (“FBAR”) must be filed by April 15th to report any foreign accounts with an extension available to October 15. The general rule is the following: Any U.S. person, whether an individual or an entity, with a financial interest in or signature authority over one or more foreign bank or financial accounts must file an FBAR when the aggregate value of the accounts exceeds $10,000 at any time during the year.

If you do have to face an IRS audit, protect yourself and hire a tax attorney. Having a tax lawyer by your side gives immense reassurance that you have a professional that has the knowledge and ability to analyze the many complexities in the tax law. If resolution is needed, there are several options to consider, including a payment plan or an offer in compromise.

Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS. Please call for a no-cost tax attorney consultation at (310) 494-0100. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only

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Missed the tax deadline and can’t pay? 3 ways to reduce or avoid IRS tax debt and IRS tax problems

Missed the tax deadline and can’t pay what is due?  This can have disastrous consequences and must be taken care of quickly to avoid IRS tax debt.  It can quickly ruin your life for as long as you let it.

These types of problems do not only happen to you so do not feel alone. Generally, taxpayers who miss the tax deadline date either ran out of time or did not have the money to pay the tax owed. The worst thing you can do is to do nothing. Below are three ways you can avoid or reduce a costly tax bill:

1. Missed the tax deadline and can’t pay?:  Be sure to file your tax return even if you owe

“I will owe on my tax return and don’t have the money to pay, so there is no point in filing.” Sadly, many non-filers have these thoughts, but their thinking is completely wrong. It is best to always file on time or get an extension, even if you will owe the IRS. The IRS assesses penalties for non-filers (called the failure to file penalty). This is 5% of the amount of unpaid taxes each month, up to a maximum of 25%. In some cases, the late filing penalty can be higher than the late payment penalty so be sure to file as soon as possible if you have missed the deadline.

If this is your first failure to timely file penalty, be sure to request a penalty abatement from the IRS after you have filed. Don’t’ do it again as they will not be so forgiving the next time.

Luckily there is no late filing penalty for taxpayers that are due a refund. Taxpayers due a refund for the 2016 tax year have until April 18, 2020 (October 16, 2020 with an extension) to file before the statute of limitations on the refund runs out. Unfortunately, the U.S. Treasury keeps your refund if you do not file by these dates.

2. Pay as much as you can or pay it all off

If possible, pay your tax debt in full or pay what you can to reduce IRS tax debt. The failure to pay penalty is 0.5% of the amount you owe each month up to a maximum of 25%. If both the failure to file penalty (discussed above) and failure to pay penalty are due in the same month, the failure to file penalty is reduced to 0.5%.

You will have an extra six months to file if you were granted an extension. Make sure to estimate and pay what you think you owe for the year by the April deadline or as soon as you can. As mentioned above, the IRS will assess a failure to pay penalty equal to 5% of the tax you owe per month, up to a maximum of 25%.

And remember the IRS charges interest on the principal amount owed. The IRS charges interest at 3% plus the federal short-term rate, compounded each day (see also Rev. Rul 2017-6 Determination of Rate of Interest). This can add up to an enormous tax bill making it increasingly difficult to pay it all off.

Another concern to be aware is that if you never pay, you may be assigned to an IRS revenue officer.  A revenue officer can show up at your house to investigate what assets and income you may have to pay off IRS tax debt. They are very aggressive and have been given broad collection powers. And of course, the worst-case scenario is that you can be charged with a crime, such as tax evasion.

To make matters worse, your travel plans may be cancelled. In late 2015, Congress passed a law that allows the U.S. State Department to revoke taxpayers’ passports or deny passports to those who owe more than $50,000 to the IRS and are not in an agreement to pay.

Do not miss the tax return deadline.  The best thing you can do is avoid late filing next time or file an extension…and pay off your IRS tax debt quickly. To make a payment go to the IRS website at IRS.gov and choose an electronic payment option.

3. Enter into an IRS installment agreement (“IA”) to avoid IRS tax problems

If you missed the tax deadline and can’t pay in full, apply for an IRS installment agreement online or attach IRS Form 9465 Installment Agreement Request to the front of your tax return. In order to qualify and apply online, you must owe $50,000 or less, which includes all interest and penalties. Check out IA specific instructions when filling out and applying for an installment agreement.

And remember, to stay in an installment agreement and avoid a default, you must:

• Understand all future tax refunds will be applied to your tax debt until it is paid in full;
• Pay at least the minimum monthly payment when it is due;
• Include your name, address, SSN, daytime phone number, tax year and return type (generally 1040) on your payment;
• File all required tax returns on time and pay all taxes in-full and on time (contact the IRS to change your existing agreement if you cannot);
• Make all scheduled payments; and
• Ensure your statement is sent to the correct address. Contact the IRS if you move or complete and mail Form 8822, Change of Address.

If you owe more than $50,000 or cannot pay an adequate amount under an installment agreement, consider getting help from a tax attorney specializing in IRS tax debt resolution and strategy. If you missed the tax deadline and can’t pay, a skilled attorney will review your financial situation and strategize to assist you in resolving your IRS tax problems.

The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS. Please call for a no-cost tax attorney consultation at (310) 494-01011. We look forward to helping you.

This blog post is not intended as legal advice and should be considered general information only.

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