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​All about IRS Hardship

 In some cases, individuals can’t financially afford to pay the IRS for debt. Instead of carrying the exorbitant weight of tax debt for years, the IRS does offer some outlets for relief, exemption, and forgiveness. IRS hardship can be complex to navigate. Here are some answers to common questions you may have and information for finding professional help to make the process easier.

What is IRS Hardship?

One of the ways taxpayers who are going through immediate financial distress can get tax relief is by filing for hardship. IRS Hardship rules allow only an IRS official or a tax collector can file IRS form 53, which declares a taxpayer as “currently not collectible.” While filing for hardship will not indefinitely remove you from the weight of a tax burden, it can give you enough time to pool your resources and get back on your feet. The filing is evaluated on a case-by-case basis and can stall debt collection by anywhere from six months to a couple of years. 

How Does Someone Qualify for Hardship?

As an individual or business, you’ll also need to fill out IRS form 433-A or B in detail. The individual forms are the basis for qualification for this status and can help you prove your case to the IRS. 

The forms will look at numerous factors that may influence your ability to pay the debt. Your monthly bills, all sources of income, financial information, legal background, previous tax returns, employment information, and personal identification information may all be required as part of your filing. 

Through the information you file, the IRS will evaluate your ability to provide for yourself and to meet your obligations, keep your job, and get necessary medical assistance while paying off debt. If they decide that you can do all that successfully, even if your budget will be ridiculously tight, they can decide to reject your application and require you to pay back the debt. If, however, your budget does not allow for the extra payments, you may qualify for hardship and have your debts stalled for a period of time. 

Individuals may qualify for hardship only in extreme circumstances, so you may want to evaluate your situation carefully before choosing to file as uncollectible. You’ll want to contact a tax professional to help you develop all the supporting information necessary to prove that you qualify for hardship. Failing to include the required information or failing to provide it in a way that supports your case may result in your request being denied. 

Tapping into Retirement Plans

If you do qualify for hardship with the IRS, you may be eligible to collect early distributions from your retirement plan. The 401k, 403b, and 457b retirement plans all provide a means for individuals to collect distributions. In times of dire hardship, the distribution income may be used to cover necessary expenses such as medical bills and funerary costs. What you are allowed to use the assets for will be carefully allocated and monitored but can help individuals pay taxes, debts, and other necessary expenses during a time of financial crisis. 

IRS Hardship Exemption and Health Insurance

If you file for hardship with the IRS, you may also be exempt from paying for medical coverage under the Affordable Care Act. Each year, your status with the ACA is calculated along with your tax return. Keeping your hardship status information available and understanding your exemption status may help you determine your tax responsibility in coming years. If you are not sure about how your hardship status will affect your medical coverage and upcoming tax return, you may want to speak with a tax professional who can help you understand your situation. 

When to Contact a Professional for Help

Going through financial hardship can feel overwhelming. You may need to make certain filings and update your status with the IRS to ensure that you are not held liable for debts that you can’t foreseeably pay. Contact a tax professional at the first sign of financial insecurity that could lead to insolvency. There may be ways that you can avoid becoming insolvent or notify the IRS and other agencies of your situation to avoid collection actions and penalties. 

A tax resolution expert can help you fill out paperwork, negotiate terms with the IRS, and diminish your overall tax liability. Tax professionals, such as resolution experts who are enrolled IRS agents and who understand tax code, can help you develop a personalized plan to target your tax debt with a number of strategies. For more information about IRS hardship or reducing tax debt, contact the tax professionals at Long Island Tax Resolution Services.

Something you don’t realize until you have children of your own is exactly how expensive they are. The cost of providing food, clothing, baby products, healthcare, education, and other necessities can quickly mount. Thankfully, the IRS and the United States government understand the cost of being a parent and offer the Child Tax Credit to qualifying individuals.

 What is the Child Tax Credit?

The Child Tax Credit is designed to bring relief to families with children. It is worth up to $1,000 per child under the legal age of 17. The child must be claimed as a dependent and additional criteria must be met to qualify.

Child tax credits are designed to help parents reduce their child’s federal income tax liability to zero. When this happens, the child tax credit may be refundable to the benefit of the taxpayer. As the income level grows, the amount a taxpayer qualifies for is gradually reduced.

 The 7 Child Tax Credit Requirements

To qualify for child tax credit, you must meet a list of pre-established requirements. Here are the official necessities, according to the IRS:

•  The age test: Your child must be under the age of 17 at the end of the 2014 calendar year.

• The relationship test. The child must be your legal daughter or son, or your brother or sister. Your stepchild, foster child, stepbrother, or stepsister will also qualify for the relationship test. It is also possible for the child to be a descendant of any of these people. This means grandchildren, nieces, and nephews can sometimes meet this test. According to the IRS, adopted children and children placed for adoption also qualify.

• The support test. The third test refers to the level of financial support you provide for your child. Passing the support test requires you provided at least half of their support throughout 2014. A child who provided the majority of their own financial resources does not qualify for a child tax credit.

•   The dependent test. Meeting the fourth requirement means you must claim the child as a dependent on your 2014 income tax return.

•  The joint return test. A married child is not permitted to file a joint return with his/her spouse if the sole intention is to claim a tax refund.

•   The citizenship test. The child is required to be a U.S. citizen, U.S. resident alien, or U.S. national.

•   Residence test. In most situations, you must prove the child lived with you for more than half of 2014.

 Additional Requirements and Information

While those seven requirements are clear, there are some additional limitations that sometimes come into effect. Depending on your filing status or income level, you may be disqualified from receiving child tax credits. Only those with a modified adjusted gross income less than $110,000 (for those who are married filing jointly), $55,000 (for those who are married and filing separately), or $75,000 (for those who are single and the head of household) can claim the credit.

It’s also worth noting the Child Tax Credit is nonrefundable. In the situation that the tax credit exceeds the tax liability, your tax bill is reduced to zero and the remaining credit is forfeited. However, in some situations, you may be eligible to claim an extra credit. Known as an Additional Child Tax Credit, this allows you to use the unused balance towards your income tax return. Finding out if you qualify is as easy as completing the IRS Form 8812.

 The Vote to Boost Some Child Tax Credits

This past July, the House voted to boost child tax credits to include higher income families by tying the figure to inflation. It also targets illegal immigration by prohibiting people without Social Security numbers from receiving tax credits. As you may guess, the dispute divides Democrats and Republicans.

Democrats typically follow the viewpoint of Rep. Sander Levin of Michigan, who said, “This bill leads to harm for millions of low and middle income families and their children.” The Republican opinion is largely aligned with Rep. Dave Camp of Michigan, who said, “It is time we make some simple improvements to the child tax credit, so it keeps up with the cost of raising children.”

In 2012, 37 million taxpayers claimed the Child Tax Credit. These taxpayers were able to reduce their tax bills by a collective $57 billion. While there is much political debate surrounding the finer details of the credit, nearly everyone agrees some form of tax relief is good. For assistance navigating the Child Tax Credit, discuss your options with a qualified tax professional.

Something you don’t realize until you have children of your own is exactly how expensive they are. The cost of providing food, clothing, baby products, healthcare, education, and other necessities can quickly mount. Thankfully, the IRS and the United States government understand the cost of being a parent and offer the Child Tax Credit to qualifying individuals.

 What is the Child Tax Credit?

The Child Tax Credit is designed to bring relief to families with children. It is worth up to $1,000 per child under the legal age of 17. The child must be claimed as a dependent and additional criteria must be met to qualify.

Child tax credits are designed to help parents reduce their child’s federal income tax liability to zero. When this happens, the child tax credit may be refundable to the benefit of the taxpayer. As the income level grows, the amount a taxpayer qualifies for is gradually reduced.

 The 7 Child Tax Credit Requirements

To qualify for child tax credit, you must meet a list of pre-established requirements. Here are the official necessities, according to the IRS:

•  The age test: Your child must be under the age of 17 at the end of the 2014 calendar year.

• The relationship test. The child must be your legal daughter or son, or your brother or sister. Your stepchild, foster child, stepbrother, or stepsister will also qualify for the relationship test. It is also possible for the child to be a descendant of any of these people. This means grandchildren, nieces, and nephews can sometimes meet this test. According to the IRS, adopted children and children placed for adoption also qualify.

• The support test. The third test refers to the level of financial support you provide for your child. Passing the support test requires you provided at least half of their support throughout 2014. A child who provided the majority of their own financial resources does not qualify for a child tax credit.

•   The dependent test. Meeting the fourth requirement means you must claim the child as a dependent on your 2014 income tax return.

•  The joint return test. A married child is not permitted to file a joint return with his/her spouse if the sole intention is to claim a tax refund.

•   The citizenship test. The child is required to be a U.S. citizen, U.S. resident alien, or U.S. national.

•   Residence test. In most situations, you must prove the child lived with you for more than half of 2014.

 Additional Requirements and Information

While those seven requirements are clear, there are some additional limitations that sometimes come into effect. Depending on your filing status or income level, you may be disqualified from receiving child tax credits. Only those with a modified adjusted gross income less than $110,000 (for those who are married filing jointly), $55,000 (for those who are married and filing separately), or $75,000 (for those who are single and the head of household) can claim the credit.

It’s also worth noting the Child Tax Credit is nonrefundable. In the situation that the tax credit exceeds the tax liability, your tax bill is reduced to zero and the remaining credit is forfeited. However, in some situations, you may be eligible to claim an extra credit. Known as an Additional Child Tax Credit, this allows you to use the unused balance towards your income tax return. Finding out if you qualify is as easy as completing the IRS Form 8812.

 The Vote to Boost Some Child Tax Credits

This past July, the House voted to boost child tax credits to include higher income families by tying the figure to inflation. It also targets illegal immigration by prohibiting people without Social Security numbers from receiving tax credits. As you may guess, the dispute divides Democrats and Republicans.

Democrats typically follow the viewpoint of Rep. Sander Levin of Michigan, who said, “This bill leads to harm for millions of low and middle income families and their children.” The Republican opinion is largely aligned with Rep. Dave Camp of Michigan, who said, “It is time we make some simple improvements to the child tax credit, so it keeps up with the cost of raising children.”

In 2012, 37 million taxpayers claimed the Child Tax Credit. These taxpayers were able to reduce their tax bills by a collective $57 billion. While there is much political debate surrounding the finer details of the credit, nearly everyone agrees some form of tax relief is good. For assistance navigating the Child Tax Credit, discuss your options with a qualified tax professional.

Imagine being prosecuted for a crime you know nothing about. Instead of being informed of your offense, you’re immediately punished. Sounds scary, doesn’t it? In many cases dealing with tax problems, people are surprised to learn they’re in trouble because in their eyes, they’ve done nothing wrong.

Luckily there’s something called a Freedom of Information Request.

Introduced in the late 1960s, the Freedom of Information act gives every person the right to ask for information from the government. There are limits to what you can learn, however. For example, for tax problems specifically, you can ask for IRS tax records or information pertaining to you, as long as it doesn’t affect anyone else. Also, a 1996 amendment required several federal agencies to make some of their records available online.

Filing a Freedom of Information Request

Any taxpayer can file for such a request, but it must be done correctly. Unlike most official requests, there is no form for a Freedom of Information request. You simply send the request in writing, ensuring the proper documentation and relevant information is included. You may send the request by post, fax, or email.

For the IRS to process your request, be sure to include:

• A letter describing your issue
• What information you require
• Tax years during which you have identified the issue
• Any additional information that would help your case

A good Freedom of Information request:

• Is thoroughly fleshed out, with a proper description of what you want
• Asks for specific information, not just ‘any file’ pertaining to you
• Contains relevant information required, such as address, full name, identity proof, and any additional documentation
• Is descriptive, yet precise and to the point
• Mentions the statute(s) you are using in addition to your rights, so that it is taken seriously
• Has a valid reason for the request

As part of the act, the IRS is mandated by law to divulge information from a proper Freedom of Information request. However, it is exempt from divulging information about internal processes, law enforcement efforts, and matters of national security. The IRS must also, of course, uphold client-attorney confidentiality, not causing harm to other taxpayers. Despite these exemptions, the Freedom of Information act can help you gain vital information that could tip the scales in your favor. Understanding what the IRS knows about you will help with creating a more precise appeal, which could give you tax relief quickly.

Help from the Professionals

The request can be most beneficial if you think that the IRS has made a mistake or has been misinformed of your tax liability. If you seek the help of a tax professional, he or she will prepare an appeal for tax relief. In some cases, such as criminal tax problems and civil tax problems, a Freedom of Information request becomes much more difficult to file. In this case, help from certified tax professionals is advantageous. Furthermore, if the Freedom of Information request does not yield satisfactory results or if you think the IRS is not properly responding, you can file an administrative appeal to higher officials. In case this doesn’t prove fruitful either, you can file a judicial appeal. In both cases, professional help is advised.

Putting your money in sound investments is a financially savvy thing to do. It offers the opportunity for growth and protection and allows your money to work for you. While there are lots of honest investment opportunities out there, thousands of fraudulent investments are pushed by unscrupulous brokers and malicious perpetrators.

Common Types of Investment Fraud

Investment fraud comes in a number of forms and guises. Some of the most common include:

• Ponzi schemes: The prototypical investment fraud is the Ponzi scheme. Named after Charles Ponzi, who duped thousands of people into investing in a postage stamp scheme in the 1920s, this type of fraud pays investors with funds collected from newer investors. The organizers recruit investors by claiming they will invest money into high return accounts, but instead keep the money for themselves and use the funds of new recruits to pay existing investors. Ponzi schemes are characterized by high return-no risk investments that produce strangely consistent returns from unregistered investments. They usually collapse when new investors cannot be attracted.

• Pyramid schemes: Much like Ponzi schemes, pyramid schemes make money by continually recruiting new participants. While the organization may attempt to disguise itself as a multi-level marketing program, fraudsters use new money to pay off existing investors. Pyramid schemes differ from Ponzi schemes in that they boast an actual product or service and may charge recurring member fees or payments.

• Pump and Dump schemes: Pump and dump schemes are becoming increasingly popular and refer to situations wherein promoters attempt to boost the price of a stock with false information and misleading statements. Once the price is successfully increased to the desired level, the fraudsters sell their holdings and earn a tidy profit. By dumping their shares, the stock price then drops and causes victims to lose the value of their investments.

• Advance fee fraud: Some fraudulent investments will ask investors for an upfront fee, payment, or commission for the right to invest funds at a later date. Typically, these schemes target investors with underperforming assets and offer to let them “off the hook” if they pay an advance fee.

• Microcap fraud: When dealing with microcap stocks or penny stocks, it’s important to find accurate information. Many of these companies, however, don’t file reports with the SEC. This allows fraudsters to produce false and misleading information. They usually disseminate information through email spam, paid promoters, and internet message boards.

• And more. While these are some of the most common forms, there are dozens of other scams, including affinity fraud, high yield investment programs, pre-IPO scams, promissory note scams, and “prime bank” investments.

What to do if You’ve Been Defrauded

While prevention is the best defense mechanism against investment fraud, it’s far too easy to fall into a hidden trap. When it’s too late to avoid a fraudulent investment – but you’re aware that it’s illegitimate – you can still take action. Some of the steps you’ll need to pursue include:

• Put it in writing: The first step is to put your complaint in writing with the broker, firm, or organization you believe has defrauded you. This serves two purposes: (1) your accusation will demand a response; and (2) your complaint will start a paper trail for future reference.

• Contact appropriate resources: Next, you’ll want to find the appropriate regulatory body and contact them directly. This may be the Securities and Exchange Commission, State Securities Regulator, National Association of Securities Dealers, Federal Bureau of Investigation, Better Business Bureau, local district attorney, or local Postal Inspector’s Office. These resources have the authority to conduct in-depth reviews and will accelerate the process. For best results, provide them with concrete and factual evidence of the fraudulent activity you believe has occurred.

• Find representation: At some point in the process, it will help to find some representation. Victims of investment fraud may be eligible to recover a portion of their losses through tax deductions. This could affect how you proceed. According to Section 165 of the Federal Tax Code, taxpayers are eligible for reimbursement for losses incurred in the same tax year. To investigate this possibility, you will need the services of a tax resolution specialist.

Investment fraud can be gut-wrenching and painful for victims, but the good news is that there is hope and all is not lost. Instead of lashing out and taking drastic measures, you can better address the issues by taking a calculated approach. You may even find that you’re able to recover some of your losses and regain financial peace of mind.

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