Are you terrified of opening your mailbox because of the fear that the Internal Revenue Service has sent you another letter? A tax debt, a wage garnishment, a levy, an impending audit, penalties, and interests; all these things cause shivers. Your first reaction would be panic; not entirely your fault as we are all human. Should you call the IRS to try to negotiate your tax resolution? In this article, we shall discuss the options available to you and the advantages that you gain when you involve True Resolve Tax as your tax resolution partner.
Federal and state liens, tax levies, tax penalties, and tax debts are common problems that millions of taxpayers face every day. Tax resolution includes all efforts involved in the solution of tax problems. There are many avenues available in tax resolution. IRS installment agreements, the Offer in Compromise, Innocent Spouse Relief, and Penalty Abatement are some of the tax resolution options available to all taxpayers. At True Resolve Tax, we are not new, and in our years of service, we have guided countless clients to complete tax resolution.
1. The IRS Installment Agreements
The IRS installment agreement is a payment plan that enables taxpayers to clear their outstanding tax liabilities through a series of monthly installments. Each installment agreement is unique and governed with special terms and conditions. There are four installment agreements offered by the IRS. Below is a short description of each.
a) Partial Pay Agreement: According to the law, the IRS has a maximum of 10 years to collect a specific tax debt. As the ten-year period expires and your tax liability is far from completion, you can enter into a Partial Payment Plan with the IRS. If you are only left with two years in your collection statute to clear a $50,000 tax debt, the IRS will assess your ability to pay. If they find out that your monthly disposable income is $100, you can clear the $50,000 tax liability with only $2,400 (24 monthly installments of $100 each). Amazing, right?
b) Streamline Installment Agreement: For taxpayers who owe less than $50,000; the IRS may let you break down your tax debt into equal monthly installments payable over 72 months or six years. The application process is simple. For tax liabilities below $25,000; you can apply for your streamline agreement through an online process. For tax liabilities ranging from above $25,000 but less than $50,000; you will have to go through a Q&A session before you enter into the Streamline Installment Agreement with the IRS.
c) Tiered Installment Agreement: Similar to the Streamline Installment Agreement except that the monthly installments are not equal throughout the payment period. When you are committed to repaying other debts, the IRS may let you start your payment plans with smaller installments. As soon as you complete your non-tax obligations, the IRS will increase the number of your monthly installments.
d) Full Pay Agreement: Tax debts below $50,000 are supposed to be paid within six years. Should you find difficulty with this, the IRS can allow you to clear your tax debt in full over a ten-year period. There is a catch; you need to prove that you are unable to pay off the debt in 72 months. The IRS will expect a full financial disclosure.
2. The Offer in Compromise
There are circumstances when the IRS will let you settle your debt with a small portion of the total amount. The Offer in Compromise is arguably the best deal in tax resolution. Why would the IRS settle for less? The Offer in Compromise is not just a random figure selected from thin air. It is the most realistic amount that the IRS can collect in the shortest time possible. There are three types of offers. Below is a brief description of each.
a) Doubt as to Collectability Offer: When the IRS agrees that you are unable to clear the tax liability labeled against you, they will give you the opportunity to quote an offer. The offer, however, is determined by an equation. The sum of your assets’ value and your total annual disposable income determines your Doubt as to Collectability Offer.
b) Doubt as to liability Offer: When you can prove that you are not responsible for the debt against you, you can apply for the Doubt as to Liability. The terms of this offer are strict so you should get in touch with True Resolve Tax to discuss your options.
c) Effective Tax Administration: When you are financially able to pay your tax debt, but it would cause a significant financial hardship to force you to pay, you can apply for the Effective Tax Administration Offer. For example, a senior citizen with assets may not be forced to pay as he/she probably needs the money for medical care and other expenses on a fixed income.
3. Innocent Spouse Relief
Our tax system allows married couples to file their income tax together. What happens, when one spouse starts to have tax problems? Is the other partner stuck with his or her spouse’s tax bill? Is it fair? These situations occur more often than not. Sometimes couples get into weird tax situations. For example, if a man is a business owner and he knows that he has to keep up with the profits of his business but for some reason, he doesn’t comply. Maybe the wife has told him over and over again to keep his business in order. Because of this, the couple is audited, and as a result, more taxes are imposed. The wife is also financially obligated to pay as much as the husband.
If on your joint tax return, your spouse or ex-spouse incorrectly reported something that led to more tax, the Innocent Spouse Protection can relieve you of the burden. All you need to do is prove that your spouse is responsible for the errors and that you had no knowledge of them. At True Resolve Tax we help spouses file for the innocent spouse relief. We review our clients’ eligibility before we give them the go-ahead to fill the form 8857. For this, our success rate is high.
4. Penalty Abatement
Penalties and interests can inflate your tax bill significantly. Penalty abatement is the reduction or removal of penalties from your tax bill. If you can get your penalties decreased, then the interests associated with the penalties also get reduced. Your penalties can be abated only if you provide a good reason for not filing your income tax on time or paying in time. A divorce, drug addiction, physical and natural inhibitions could support your claim for penalty abatement.
Tax resolution is a specialized field. You need a partner that is dedicated and committed to tax resolution. At True Resolve Tax, we offer tax resolution and tax preparation for individuals, couples, and corporations. Unlike many attorneys and CPA’s, we specialize in helping our clients with their tax obligations. True Resolve Tax is A+ rated by the Better Business Bureau. We have a staff of licensed Enrolled Agents, and we will serve you in truth.