Tax debt reduction: Offers in Compromise explained

turbotax

There are many different types of debts that people are struggling with these days and for some people it is their tax debt that is causing them a huge problem. Whilst the Internet Revenue Service does, of course, expect people to pay the taxes that they owe, but in some cases an exception may be made and the tax debt may be reduced through the use of an Offer in Compromise.

If the IRS has reason to believe that there is little to no chance of being able to receive the total amount of the tax debt that you owe, or maybe there is dispute over whether someone is definitely liable for any tax debt that they are in, the IRS may – at its discretion – accept the submission of an Offer in Compromise. This is where you basically make an offer to the IRS, which would see you paying less than the amount that you owe.

The reason why the IRS is sometimes willing to accept an Offer in Compromise is because it means that it will at least be able to recoup some of the debt owed whereas without the Offer in Compromise the IRS risks losing out on the whole tax debt.

If you do enter into an Offer in Compromise with the IRS you have to make sure that you adhere to the terms and conditions of the contract, which you will have to agree to as part of the submission process. Form 656, or the Offer in Compromise, needs to be completed in addition to Form 433-A, which is the Collection Information Statement. Form 433-A Worksheet is also used when calculating the amount that you offer to pay to the IRS as part of the Offer in Compromise.

As part of any Offer in Compromise you will be agreeing to a number of things, which includes:

  • You will pay the sum of money that has been offered as part of the Offer in Compromise
  • For the next five years you will make sure that you both file your tax returns regularly and on time and that you pay your tax bills on time
  • Any refunds or credits relevant to your taxation debts prior to submission of the Offer in Compromise can be kept by the IRS
  • During the year for which your Offer in Compromise is approved the IRS will be able to hold on to any potential taxation refunds that might have been paid to you
  • The IRS has the power to revoke any Offer in Compromise and demand the total  amount of the debt if you fail to adhere to the contractual rules

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.

Monitoring your Federal Tax Refunds via your iphone.

Amazingly the IRS has embraced modernity (in one area at least) and it is possible to now check your tax status via your iphone, android phone or tablet device. An organization which seems to creak under its own antiquated history and seems to patch up its rules and regulations every year rather than innovating and moving forward has actually brought out something worth getting hold of!

The IRS2Go app was released earlier in the year for the purposes of allowing people to quickly and easily check the status of their tax refund. All the app does is simply access the mobile form of the IRS website. Once there all you need to do is fill in your social security number, then your filing status and the exact amount of your refund, and the IRS will do the rest of the work, finding your details in its database and then telling you exactly when you can expect your refund to arrive. All of this is done over an encrypted and secure connection.

The app also allows you to sign up for IRS tax updates and the IRS newsletter (whoopee!) which arrives daily during tax filing periods and monthly for the rest of the year. It also directs you to the IRS twitter account which sends out advice, tips and facts about everything tax related. Finally, it also includes an option for calling straight through to the IRS via a single button.

Best of all, the IRS2Go is a free app and can be downloaded from both the Android Market and the Apple App store.

Alex is a freelance journalist and financial blogger. He loves to write about football and jazz but spends most of his days writing about mortgages, credit cards and payday loans.

Tax debt: Ways in which you can pay off IRS debt

If you think that you are having problems with tax debt, there are various ways in which you can pay off your tax dues. If you are having financial problems in general, you can include your tax debt in your debt consolidation. You can consolidate debt in order to pay off all of your unsecured debts. However, there are some other tax debt pay off options too.

Tax debt pay off options

The Internal Revenue System or the IRS offers you various payment options that can help you to pay off your IRS taxes easily enough. The different pay off options are:

  1. The installment agreement – In installment agreement you are allowed to make monthly payments.

Some of the different installment agreement types are –

  • Partial payment – If you don’t even have the ability to make minimum payments too, partial payment is the most suitable tax debt relief option. Under this payment option you can make the payments as per your affordability. However, the IRS will re-evaluate your financial situation every 2 years.
  • Guaranteed – If you owe less than 10,000 USD to IRS, guaranteed installment agreement is one your viable tax debt solutions. If you want to qualify for installment agreement, it is essential for you to acknowledge that you will file your taxes and pay it off within the right time for the coming years. However, you may not be eligible for this type of payment if you had made payments through this payment plan.
  • Streamlined – In streamlined payment option, there is no requirement for you to fill out 433-F Form which IRS needs to analyze your finances. However, if you want to make tax payments through this agreement, the amount which you owe should not exceed 25,000 USD. In addition, you may also require to agree to 60 month pay off period with the IRS.
  1. Offer in Compromise – In OIC, the IRS does not require you to pay the full amount which you owe. The offer in compromise is more like the debt settlement pay off option. However, the IRS needs you to agree to some terms and conditions before making payments through OIC, else the IRS can even revoke your OIC.
  2. Currently not collectible plan – Under the currently not collectible plan you are not required by the IRS to pay your due taxes for the time being. If you do not have enough cash in your hands, this might be your best tax debt pay off option.

However, if you want you can also take the help of a debt help attorney who can provide you in handling and paying off your tax debts.

Settling Tax Debt

Filing for tax returns and finding money for those ridiculous taxes are enough stress that can add another wrinkle in one’s aging memorabilia. However, these things are simply unavoidable and mandatory. Despite how one tries to live ideally and be a model citizen, there are times where one fall short from his/her responsibilities to pay taxes. Some simply ignore the payments due to financial concerns while others neglect such duties to focus on important circumstances. Whatever reasons they may have, settling tax debt requires certain processes.

Firstly, it best for the debtor to check on his/her previous tax returns just to double check on unseen deductions. Amending your tax return can mean lower tax payment. Second, read on the different IRS debt settlement program and choose on a program that suits your financial status. Third,decide whether to hire a profession or you can manage to settle IRS tax debt on your own.

When do you hire a professional or when is it okay to settle IRS debt on your own? Hiring or not is purely your prerogative. Nevertheless, it is recommended to hire a professional when you are dealing with a tax debt of $10,000 or more. You must make sure that the professional you hire is a certified public accountant, enrolled agent or a tax attorney. These professions are credited by the Internal Revenue Service as eligible to handle such problems.

You would also consider that fees charged by these tax experts. Some would have an hourly rates while others might have fixed rate for services rendered. See to it that the task done by these experts requires specialized skills and knowledge, offer to do the task on paper works and errands.

Lastly, remember when there is an opportunity to make money, most of the time, con artists and scammers will seized this chance to snatch your hard earned money. According to reports, fake tax companies guarantee results without prior knowledge of you tax debt situation, require amount of cash as deposit, pass you to different representatives, and does not a physical address. Always be on the look out for these signs.

Tax and Your Well-Being

Tax and Your Well-Being

Tax issues and tax problems are some of the very threatening things to your well- being. There are three common mistakes many people make to find trouble with the IRS. These people delay needlessly. They try to exemplify themselves. They normally would appoint some inefficient agents for their work and finally fall into circumstances where they would need more help.

A tax attorney provides the relevant services in such situations, e.g. penalty abatement petitions, offer in compromise cases, business strategy sessions and full audit representations. They also provide help in preparation and tax return filing. … Read more at 2011 Tax.

Tax and Your Well-Being

Tax issues and tax problems are some of the very threatening things to your well- being. There are three common mistakes many people make to find trouble with the IRS. These people delay needlessly. They try to exemplify themselves. They normally would appoint some inefficient agents for their work and finally fall into circumstances where they would need more help.

A tax attorney provides the relevant services in such situations, e.g. penalty abatement petitions, offer in compromise cases, business strategy sessions and full audit representations. They also provide help in preparation and tax return filing. Get help from the tax attorney to save on your taxes, to stop giving extra to the IRS, to settle your property-related issues and acquire installment agreement, to lessen your interest amount and penalties, and so on. With the help of a good IRS tax attorney, you can attain very favorable settlement of issues related to taxes, and also you can lower your tax liability significantly. The “offer in compromise” program from IRS helps the taxpayers settling down their debt in taxes.

What is the offer in compromise program from IRS?

This program helps to lessen your tax liability to a significant extent if you can prove you’re unable to pay your taxes. Looking at your affordability, IRS will issue an order so that you can pay a few pennies for every dollar that you owe. This is in fact a very nice strategy most taxpayers use; and once done properly, it saves a lot of money. But you have to be extra careful. A professional having adequate knowledge of all IRS procedures must be hired. This professional will be able to find out the least amount the IRS will charge from you. An offer that is not correctly submitted with necessary documentation may be rejected and finally you might have to pay a lot extra.

This “offer in compromise” can really save you huge money. Do you have the idea that there is only limited time with the IRS for collecting back taxes? The professional tax attorney can determine when the time limit of the IRS runs out for collecting taxes. In majority of the cases, there is very small amount of time in the hands of the IRS for collecting unpaid taxes. A careful evaluation of exactly when this time runs out is necessary. Then you may be saved. In case the time period has already run out, or it is going to run out soon, all your problems might end.

Using certain delaying tactics, the time limit of the IRS may be made to run out. As soon as the IRS goes out of time, all their collection actions have to stop.

The IRS has to give you back all your property rights.

Failing to file your tax returns

There could be many reasons why many people cannot file their income tax returns on time. Even though there are certain innocent reasons, the fact in majority of cases is that they cannot afford their taxes.

It becomes difficult getting back to the system once this happens. Suppose you filed for 1998. Then you didn’t file for 2000 as you couldn’t afford to pay your taxes. Afterwards in 2001, you were afraid to file again. So since then you have not been filing your returns. Is there anything you can do now?

It is a criminal offence to not file your tax returns. But nobody so far has been prosecuted criminally who has filed back returns voluntarily before getting caught. The key is to file before being caught by them.

IRS penalties

The penalties of IRS may be even 100 percent to 150 percent of original unpaid taxes. The extra penalties are sometimes so high that it becomes truly very difficult to pay back the whole balance.

The penalties imposed by the IRS are meant for punishing the rule-breakers. But the IRS can forgive you and save you from paying the extra. You need to give a convincing explanation to the IRS, requesting not to punish you as you were not guilty.