IRS TAX RELIEF

April 4, 2016 by James Grennen Leave a Comment

Offer In Compromise (OIC): Tips To Getting Yours Accepted

Settling an entire tax debt for an amount that is less than full value should interest any taxpayer.

In a program known as Offer in Compromise (OIC), the IRS will accept less than the amount a taxpayer owes on a tax bill.

The taxpayer does not have a right to have a tax due amount reduced; the IRS has full discretion. However, the IRS must consider a properly presented OIC.

For many years the acceptance levels of OIC offer amounts were low. Acceptance levels in recent years have risen as high as 40{bf3da7fb6a4d0e0e3790d09a79b980fc065e33e2f3a2d49280f7e95b82f4982b}.

Long Island New York Offer In Compromise

As our name implies, most Long Island Tax Resolution Services clients live in either Long Island or the New York City metropolitan area. Therefore, the Offer In Compromise cases which we handle are either IRS or New York State Department of Taxation oriented. We are experts in the forms, procedures, requirements and calculations of both.

Long Island Tax Resolution Services manages IRS and New York State Offer In Compromise cases extensively. This distinguishes us from the tax resolution firms who have a national business model. These national firms simply do not have the same experience in New York State specific Offer In Compromise as Long Island Tax Resolution Services does. An important part of this experience is knowing how a New York State case integrates with an IRS case.

The Three Offer in Compromise (OIC) Programs

Clearly any taxpayer would like to have their tax bill reduced. A taxpayer can present an OIC under one of the following programs:

If doubt exists as to the taxpayer’s ablility to pay back the tax debt. The IRS calls this “doubt as to IRS to collectability”.
“Doubt as to liability” exists when the IRS has assessed the tax wrongly. This is the least common alternative and hard to prove.
Because of exceptional circumstances, payment of the tax bill would cause an “economic hardship” or would be “unfair” or “inequitable.” This is the effective tax administration (ETA) exception to the OIC guidelines. Here, the OIC offer amount is greater than the taxpayer’s ability to pay. The taxpayer should still consider presenting an OIC. Some examples of special circumstances are:
- People with psychological difficulties or disabilities.
- People with a bleak financial future and older. People close to and over the 60 years old is an influence.
- People with HIV or drug and/or alcohol related problems.
- People whose financial outlook is impacted by a family member’s problem.

The taxpayer should explain any special circumstances to the IRS in a summary letter. The taxpayer should present supporting doctors’ statements and medical records as well. Often the taxpayer needs to further explain the presented medical information in their letter.

The Offer in Compromise (OIC) Submission Process

Many taxpayers believe that they can call the IRS and say “Let’s make a deal”. The process is much more formal. Here are some of the steps involved:

Provide detailed financial information on the Collection Information Statement.
Form 433-A Offer In Compromise (OIC) is for individuals and Form 433-B Offer In Compromise (OIC) is for businesses.
Married taxpayers, who have tax debt in their name alone, must still include at least some of the spouse’s financial data.
The IRS closely examines the financial disclosures made when considering an OIC.
Complete IRS Offer in Compromise Form 656.
There is a $186,- application fee for filing an OIC, which the taxpayer must attach to Form 656. The taxpayer might be free from the fee if their monthly income is below the poverty guidelines.
The taxpayer also needs to present significant amounts of financial documentation. These include pay stubs, bank records, real estate appraisals, mortgage statements, auto leases and many other items.

Final Offer in Compromise (OIC) Offer Amount Formula

A formula calculation of the information provided on the 433 form determines the minimum offer amount. The IRS tries to assess the taxpayer’s “reasonable collection potential”.

The three necessary steps to arrive at the final offer amount are:

Decide “net realizable value” of all eligible assets
Decide net monthly income by subtracting monthly expenses from gross monthly income.
Decide the total offer amount by first adding together the two amounts in steps 1 and 2. Then multiply this result by either 12 or 24. The 12 or 24 number is selected based on whether the taxpayer intends to pay the offer amount in 5 months or 24 months.

Some Reasons for Offer In Compromise (OIC) Rejection

The IRS requires the following for an OIC to be accepted:

All requested data be submitted
All prior year tax returns be filed
All current year taxes be paid. Self-employed people must pay all current year estimated tax payments.

When the IRS rejects an OIC, they issue a letter explaining why the offer was denied.

Some common reasons for rejection are:

Taxpayer’s offer amount was too low. The IRS letter will state an acceptable payment.
Taxpayer failed to prove financial hardship.
Taxpayer is guilty of a crime.

The IRS code allows the taxpayer to ask for the working papers or full report showing the list of reasons the IRS did not accept the offer.

The taxpayer can ask for the information under the Freedom of Information Act if the IRS refuses to comply.

What to Do If The IRS Rejects an Offer In Compromise (OIC)

If the IRS has rejected a taxpayer’s OIC, two alternative courses of action are still available:

Many times the IRS OIC case officer will be open to reconsidering the offer and open to further negotiation. The case officer might offer guidance on how to make the offer acceptable. The taxpayer may not need to start from scratch if their financial circumstances have not changed much. The case officer may ask the taxpayer to state a new offer amount in the form of a letter. Often the taxpayer will need to file a new offer and present new paperwork.
The taxpayer can formally appeal a rejected OIC. The taxpayer presents IRS Form 13711, Request for Appeal of Offer in Compromise. The taxpayer should file this form within 30 days of the date of the rejection letter.

The Dark Side of Offer In Compromise (OIC)

If the IRS rejects an OIC, they still have a set of financial documents and disclosures.

The IRS has all the information it needs to take aggressive and immediate collection action against the taxpayer. A taxpayer should submit an OIC only when it seems likely that the offer will be accepted.

Another con is that interest continues to accrue throughout the OIC negotiation. The OIC can take a year or longer. Interest amassing over a 12-month period could be great.

February 2, 2015 by James Grennen Leave a Comment

7 IRS Tax Debt Relief Secrets for Reducing Back Taxes

IRS tax relief help is something thousands of Americans seek every year. From back taxes to tax evasion, individuals looking for tax relief may be frustrated with the process and have a difficult time staying on top of all the correspondence and work needed to remedy tax problems.

The most important thing an individual may do to find relief is to engage the services of a tax resolution firm that employs accredited IRS enrolled agents, tax attorneys, certified tax specialists, and other financial experts. While it is possible for an individual to find tax relief on his or her own, the chances of securing the optimal resolution without professional guidance are greatly reduced.

Tax resolution experts can help you secure the documentation necessary to prove your circumstances to the IRS and bring your filing status up to date. They can also speak to the IRS on your behalf and help you work out a settlement plan that is customized for your situation rather than trying to make your circumstances fit into one preplanned solution.

Here are some tax relief strategies that effectively reduce tax liabilities.

Have a professional review your tax history – It is possible that a tax return is erroneous or that the amount that the IRS is holding you liable for is wrong. A tax expert can review your history, including all previously filed documents to determine if there are discrepancies between what you are being billed for and what you actually owe.
Installment agreements – Under this plan, the IRS will grant you a period of time during which you will be expected to pay a certain amount per month. The installment amount that you will pay on a regular basis will be equal to your debt divided by 30. You may pay more than the minimum per month to pay off the debt, but you must pay off the debt during the predetermined period of time. You can only have one installment agreement open with the IRS at a time, and you must have a good record for tax filing to qualify for an installment agreement.
Offers in compromise – These agreements provide taxpayers with a lower settlement than the total amount of debt that is owed. The IRS will look at your whole financial situation including income, expenses, and assets to determine if the arrangement will be a viable option for both the IRS and for you. You will be found ineligible for this arrangement if you are not current with your tax return filing or if you are currently filing for bankruptcy. You may pay off the remaining balance in a few short payments or over an installment plan.
Partial payment installment agreement – This debt relief is a cross between an installment agreement and an offer in compromise. You will be required to pay off the debt at a predetermined rate as you would in an installment agreement. At the end of that agreement, assuming you have paid the full amount on time, the rest of your debts will be forgiven.
Tax appeal – If an appeal is an approach that you can consider in your circumstances, you will likely be mailed a notice from the IRS about your right to appeal. You can appeal offers in compromise, liens, installment plans, and innocent spouse relief among other decisions with which you disagree.
Not currently collectible – If you can demonstrate financial hardship, your debt may be suspended for a period of time. This provision unfortunately won’t remove your debts, but they will give you enough time to find a way to pay.
Filing bankruptcy – This decision should never be made solely on your tax debts, but if you are going to file for bankruptcy anyway, you may be able to get some or all of your tax debts discharged. The laws regarding bankruptcy and tax debt discharge are very complex and you will likely need the assistance of a tax resolution expert and a bankruptcy attorney to determine the outcome of your tax discharge with this method.

Don’t Miss: IRS Tax Relief Strategies

Ultimately, there is no magical secret that will help you erase your tax debt. For most individuals, the process requires hard work and a number of strategies put together by a tax resolution service. The solution that is right for you will depend largely on the amount of debt you owe and your financial circumstances. Long Island Tax Resolution Services offers personalized IRS tax relief help developed by a team of tax experts for your unique situation.

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December 23, 2014 by James Grennen Leave a Comment

Help! How do I File for Innocent Spouse Relief?

When filing a joint income tax return, there is always the risk of the unknown. Regardless of whether you believe your spouse is filing an honest return, it’s important to remember that your signature connects your name to the document. If something is later found to be illegal, misleading, or wrong, the IRS has the ability to come after both people on the jointly filed tax return. However, there is an option to escape liability if you truly had nothing to do with it.

Innocent Spouse Relief

Under the Innocent Spouse Relief program, the IRS grants exemption to innocent spouses whose names are on jointly filed taxed returns that are deemed to be illegal, wrong, or erroneous. If qualified, the innocent spouse may not have to pay any of the taxes, interest, or penalties owed.

Qualifying for Innocent Spouse Relief

In the tax world, innocent tax relief is the closest thing there is to a “get out of jail free” card. But because it is so valuable – and tax evasion is such a serious issue – the IRS does not grant relief without first checking to make sure the “innocent spouse” is actually free of guilt. Here are some of the steps you’ll have to go through to qualify for innocent spouse relief:

Satisfy IRS requirements – The first step is to satisfy all IRS guidelines and rules. What the IRS wants to make sure of is that you knew nothing about the financial activity of your spouse.

This means you never shared bank account access or had a means of reviewing activity, your spouse had a separate business that operated independently, and you did not knowingly benefit from the surplus income that was available as a result of the manipulation. Ultimately, it comes down to whether you can prove you signed the return without knowing it was wrong and that it would be unfair to hold you responsible.

Seek timely relief – In addition to the above circumstances, you must file your request within two years after the date on which the IRS began collection efforts. A failure to take action within two years will void your ability to claim innocence. To file, you must fill out a Form 8857.
Answer the questionnaire – After notifying the IRS of your innocence, they will want to officially record your story to verify its validity. They typically do this by sending a questionnaire. While many of the questions are straightforward, it’s best to have a professional review your answers before submitting. You should always be careful when sharing financial information.

Filing an Innocent Spouse Claim

To file an innocent spouse claim, the IRS asks that you mail or fax the Form 8857. They ask that you do not file it with your tax return or local Tax Court. If using the U.S. Postal Service, it can be mailed to Internal Revenue Service, P.O. Box 120053, Covington, KY 41012. If using a private delivery service, it can be mailed to Internal Revenue Service, 201 W. Rivercenter Blvd., Stop 840F, Covington, KY 41011. If being faxed, it can be sent directly to 855-233-8558.

After the initial Form 8857 filing, it could take up to six months for the IRS to make a determination. They will immediately contact your spouse and notify them of the investigation and will ask for stories from both sides. Even in cases of domestic violence and abuse, the IRS is required to notify the spouse of the investigation. As such, it’s important to weigh all options before filling and seek out appropriate help and protection if needed.

Your spouse will also have the opportunity to file for Innocent Spouse Relief – and it frequently happens. In these situations, the amount of time it takes to reach a verdict may extend beyond the typical six month timetable. Because both spouses often file, it’s important to gather all the facts and details before making a decision. In the end, all of the facts will be uncovered, and the truth is almost always found.

Finding Help

If you believe your spouse has cheated on your jointly filed tax return, you may want to consider filing for innocent spouse relief. However, if you choose to do so, make sure you are prepared by seeking out the help of a tax professional. A tax professional can guide you through the process, protect your interests, and ensure you are given fair treatment. It’s never a good idea to go through the tax relief process on your own.

December 8, 2014 by James Grennen Leave a Comment

Helpful Tips and Strategies to Reduce Your Taxes

While you work hard to make money, you sometimes have to work even harder to keep it. Taxes are unavoidable, but don’t settle for paying outrageous amounts each year. By learning about proven legal strategies, tips, and tricks, you can significantly reduce tax requirement this year.

Gross vs. Taxable Income

The problem many people have is they don’t understand the difference between gross and taxable income. Instead, they wrongly believe that everything they make is automatically subject to taxation by the IRS. Thankfully this isn’t true. While your gross income refers to the total dollar amount you earn in a given year, your taxable income refers to a reduced amount that is calculated after deductions and write-offs. As the name suggest, only the taxable income can be taxed.

Strategies for Reducing Taxes

While your career goals probably revolve around increasing your gross income, you should also put some focus on reducing your taxable income. Here are some tips, tricks, and strategies to get you started:

Put money in your IRA:

One of the most popular strategies recommended by financial advisors is contributing money to a retirement plan. When you contribute to a traditional pre-tax IRA, you are able to quickly lower your taxable income – regardless of whether you take the standard deduction or itemize. It’s also important to note, though, that traditional IRAs are not tax-exempt – but rather tax-deferred. The taxes must eventually be paid, but can provide tax relief in the present.

Donate to charity:

One of the favorite ways to reduce taxes is to make charitable contributions. Consider finding a charity related to a favorite cause and donate items as a way of reducing your tax bill. In some situations, it is possible to avoid capital gains taxes on appreciated securities by donating those securities to a charity. This could potentially save you more on taxes than you actually donated.

Earn tax-free income:

There is no better way to avoid taxes than to earn money that can’t be taxed. Tax-free income can be accumulated by selling your home, investing in bonds, saving money for a child’s education, spending a portion of your salary on uncovered health costs, giving investments to your children, contributing to a health savings account, and more.

Defer taxes:

This strategy doesn’t technically reduce your taxes in the big picture, but it does provide temporary relief. By deferring taxes to a future year, you can essentially receive a free loan from the government.

Share your wealth:

While it is much more difficult to do than it once was, shifting some of your income to your children or someone in a lower tax bracket can substantially reduce your taxable income to very reasonable levels. This is particularly helpful for individuals with large gross incomes.

Shift income:

Similar to the previous strategy, shifting income can be a major help. You can do this at the end of the calendar year by allowing customers an extra-long grace period or extending a deadline. This means payments arrive at the beginning of the New Year as opposed to the current taxable year. It’s essentially a method of deferring taxes to the next year without taking out a loan.

Self-employed strategies:

Self-employed individuals are eligible for all kinds of tax deductions. These include business expenses related to shipping, advertising, vehicle mileage, website fees, home internet charges, membership dues, office supplies, and more. Additionally, if you work from home, you can take the home office deduction. This allows you to deduct a percentage of your rent and utility fees based on how much square footage your office takes up.

Avoid owing:

If you can’t stand owing money at the end of the year, consider increasing your withholdings. While more money will be taken out of your paycheck throughout the year, you will get a large refund when you file.

Understand your bracket:

It’s important to understand which tax bracket you fall under. Depending on how close you are to another bracket, you may need to make some changes to avoid going up a level or to intentionally drop down.

Use a tax professional:

While there are plenty of self-help guides out there telling you how to save thousands of dollars when filing, it isn’t always the smartest idea to handle things on your own. A tax professional understands the intricacies involved with filing taxes and can point out areas that would have otherwise been looked over. Every dollar spent on a tax professional is well worth it. By educating yourself on the various strategies, tips, and tricks mentioned here, you can lower your taxable income this year.

September 29, 2014 by James Grennen Leave a Comment

Types of IRS Installment Agreements for Your Tax Debt Solution

The stress of delinquent IRS tax debt can be overwhelming at times. While it’s tempting to run and hide, the best way to get collectors off your back is to pay tax debt in a timely fashion. But what about when you can’t realistically settle the debt with a single lump sum? In these situations, an installment agreement may be just what the doctor ordered.

Types of Installment Agreements

The IRS, for all the negative press it gets and the common perception that it’s a greedy, compassion less institution, is sympathetic in certain situations. The IRS wants its money and is willing to work with you to get the amount in full. Because they understand some people cannot pay the full amount with one stroke of the pen, they offer “installment agreements”. Installment agreements are specific arrangements in which taxpayers can pay liabilities over a period of time. This spreads payments out and reduces the financial burden of having to produce large sums of money in a short period of time. The challenging part for many individuals is not actually applying for an installment agreement, but choosing which installment agreement to pursue. The IRS offers four different options, including guaranteed, streamlined, partial payment, and non-streamlined.

Guaranteed Installment Agreements

If your balance is $10,000 or less and you meet certain criteria, the IRS is required to agree to an installment plan. In addition to owing a particular amount, taxpayers must check off on the following:

Over the past five years, you haven’t filed or paid late.

All of your tax returns are appropriately filed.

You haven’t applied for an installment agreement in the past five years.

Your monthly installment payments will settle your debt balance in three years or less.

You are willing to sign an agreement stating you will file and pay on time in future tax years.

A guaranteed installment agreement is most often preferred for delinquent taxpayers. The biggest benefit is that the IRS cannot file a federal tax lien. Your minimum monthly payment will be the total amount owed (including all penalties and interest) divided by the number of months the IRS agrees upon for the installment plan. For example, if you owe $8,000 and the IRS tells you to repay it within 30 months your minimum monthly payment would be $266.66.

Streamlined Installment Agreements

If you don’t meet the criteria for a guaranteed installment agreement, a streamlined installment agreement is the next best thing. In this case, you must owe a balance of $25,000 or less and agree to pay it off within 60 months. Additionally, if your balance is set to expire under the 10 year statute of limitations, the IRS can require full payment within the time leading up to this deadline. As of March 7, 2012, the IRS agreed to extend installment agreement plans to those owing $50,000 or less and willing to pay off the balance within 72 months. This is part of the IRS’s “Fresh Start Initiative” and is a welcome expansion for many laden with tax debt. Again, the major benefit here is that the IRS will not file a federal tax lien, which will be reported to the credit bureaus.

Partial Payment Installment Agreement

The most flexible option – though it permits the IRS to file a federal tax lien – may be a partial payment installment agreement. Under this type of repayment plan, the minimum monthly payment is calculated based on how much you can afford. It also permits longer repayment terms that extend beyond 72 months. However, unlike other plans, the IRS is allowed to regularly re-evaluate the terms and increase monthly minimums based on your ability to pay more.

Non-Streamlined Installment Agreements

If none of the pre-established plans work in your situation, a non-streamlined installment agreement may need to be negotiated. In this situation, you will be required to directly negotiate terms with an IRS agent. You will be asked to provide a financial statement for review, among other requirements. Additionally, the IRS can legally ask you to take out a bank loan, home equity loan, or sell non-essential assets.

IRS Tax Debt Help

Delinquent IRS tax debt is difficult to deal with. Whether you believe you will qualify for a guaranteed installment agreement or need help negotiating a non-streamlined plan, it’s important to get professional help. These situations can be tricky and often require expert help. When you use a tax professional, they can legally speak on your behalf and help you decide the best course of action.