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Category Archives: Debt Relief

Amazing Tax Settlement – $1,600,000 Tax Debt Reduced to Zero!

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Karen M. was recently divorced and owed the IRS over $1,600,000 for a joint IRS liability she had incurred with her ex-husband.  The debt had accumulated over many years and, as is usually the case, included a significant dollar amount of assessed penalties and interest. The taxpayer was newly single, lived on a modest income and had no possibility of settling the debt owed to the IRS. After looking at the taxpayer’s situation and all of the available tax settlement alternatives, we determined that filing for Innocent Spouse Relief gave the taxpayer the most realistic chance of one day being free of the tax debt.

Innocent Spouse Relief provides a taxpayer relief from tax debt if their spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.  While the benefits from obtaining this tax settlement option can be significant, it is usually difficult to obtain. Generally, a taxpayer requesting Innocent Spouse Relief must claim and document that he or she had no knowledge of the unreported income and did not receive the benefits of that income.

In the case of Karen M., we were able to provide documentation demonstrating that our client had no knowledge of the unreported income and had limited involvement in the financial matters of the family. We were also able to prove that she did not receive the benefits of the income that was never reported and that the non-innocent spouse had a history of hiding income from both her and the IRS.

Professional Tax Resolution and the taxpayer were thrilled when a letter was received from the IRS indicating that the Innocent Spouse filing was accepted and that the $1,600,000 tax debt was reduced to zero.  This is another good example of why CPAs, Enrolled Agents, and Attorneys are often so passionate about what they do.  In most cases there are tax settlement options available even in the most complicated situations.

An Audit Reconsideration Success Story – A $26,000 Mistake Corrected Results in Zero Tax Liability

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Professional Tax Resolution has successfully helped many clients find tax relief. Here is the story of a client who came to us in March of 2011.

Mr. and Mrs. M lived, worked and paid taxes in the United States from 2008-2010. In early 2010 both Mr. and Mrs. M moved out of the country and despite leaving a forwarding address, never received a notice from the IRS asking for supplemental documentation related to a 2008 tax return. Unfortunately more than a year passed before the taxpayers became aware of the problem and once they were informed, the IRS had moved on from their initial request for supplemental information and had both audited their return and disallowed more than $26,000 in deductions taken on their 2008 taxes. The result of the audit was a notice of deficiency for a sizable tax liability.

Now aware of their problem, Mr. and Mrs. M came to us asking how we could help. By examining the tax code, we determined that the original deductions were legitimate and we developed a tax settlement action plan. Professional tax resolution was able to request an audit re-consideration with the IRS directly. The IRS granted our request and re-opened the audit. During the re-examination period, Professional Tax Resolution Inc. was able to defend Mr. and Mrs. M successfully by providing all of the necessary documentation and evidence of the legitimate deductions in question.

In April 2011, just a few weeks after Mr. and Mrs. M hired Professional Tax Resolution; the client received final notice from the IRS that all adjustments and balances owed were reversed. No petition to the US tax court was required and a final “No Change” letter was issued closing the case.

Not only was their audit re-considered but by providing the correct paperwork and documentation, their entire liability has been eliminated. Professional tax resolution has another satisfied client and achieved an amazing 100% reduction in tax debt liability.

Make the IRS an Offer They Can’t Refuse, and Reduce Your Tax Debt with This Tax Settlement Option.

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Chances are, you have heard the claims that your federal taxes can be settled for “pennies on the dollar” Sounds too good to be true, right? Although many of the companies advertising these claims are a scam, the IRS does have the authority to settle, or “compromise,” on tax debts, accepting less than the full amount owed. This settlement type is called Offers in Compromise, and it is just one of a few different options.  While only a select group of taxpayer’s qualify for this program, with the tough economic times we’ve all been through the past several years, the chances of qualifying are better than ever. If you can answer yes to any of the three questions below, it’s worth getting expert advice on how to make an Offer in Compromise.

Is your home underwater and your income less than your expenses? We’ve all seen our home’s value drop dramatically during this economic recession. It is possible you have negative equity or maybe you’ve lost your home altogether. Perhaps you lost your job as well, or are making far less than you were in the past. With more people in these types of situations than ever before, the IRS figures they will not be able to collect the full amount owed by you. That makes you a good candidate to make an Offer in Compromise.

Is it possible the government is wrong? Mistakes do happen. IRS examiners work under tremendous pressure. Perhaps yours misinterpreted the law, or maybe the examiner got the law right, but got the facts wrong. Maybe you have new evidence that would have affected the calculation of your tax liability. It makes sense to have an independent third party examine your records to determine if the IRS might doubt the accuracy of your tax liability and thus accept an Offer in Compromise.

Is the tax correct, but unfair? The IRS has the authority to reduce tax debt when collecting it would create economic hardship, or simply be unreasonable. The IRS gives an example of a couple with assets to satisfy their tax debts, but with an ill child requiring long term care. The couple’s assets and income are necessary to provide for the child. An Offer in Compromise is a legitimate consideration.

An Offer in Compromise is a negotiation. The taxpayer makes an offer, including a lump sum payment or payments over time. The IRS might accept the offer, reject it, or make a counter offer.

Contact one of our licensed tax experts at Professional Tax Resolution to find out if you qualify for an offer in compromise, or one of the other settlement options and see what we can do for you.

Consider Carrying Back a Net Operating Loss as a Tax Settlement Tool

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The Net Operating Loss Carry Back is a tax relief option that allows a taxpayer to reduce an existing tax liability by applying net operating losses for the current fiscal year against gains from previous years. In light of the recent economic downturn, is not uncommon for allowable deductions in any given year to exceed gross income, thus resulting in an operating loss. By the same token, it is a fairly common occurrence in the current economic environment for a taxpayer to have paid taxes on substantial net income in past years and yet have incurred financial losses for the current year. This is the set of financial circumstances for which the Net Operating Loss Carry Back provision was designed.

The Net Operating Loss Carry Back is dissimilar to several of the other tax settlement options offered by the IRS in that it is a tax relief alternative that is available to any taxpayer, regardless of their financial situation. Unlike the Offer in Compromise and the Partial Payment Installment Agreement, there are no specific qualifying criteria. Because of this difference, it is always advantageous to use the Net Operating Loss Carry Back option whenever the financial circumstances are such that there has been a financial loss in any given year following gains in previous years. In recognition of the current economic climate, the IRS has made the use of this carry back option even more attractive by instituting steps to accelerate the payment of any refunds generated by offsetting a prior year’s tax liability. For certain specific situations, the IRS has also extended the time period over which that loss can be offset.

Of course the use of Net Operating Loss Carry Back is subject to the same scrutiny as that of a regularly filed tax return. When this offset is requested, IRS will look carefully at the current year’s tax return together with returns that were filed during the carry back period. Great care should be exercised to make sure all of these returns have been filed correctly and any necessary amendments to previous returns have been submitted according to established IRS guidelines. As with any of the tax settlement options, enlisting the help of a qualified tax specialist to assist in this process might very well prove to be a worthwhile investment. Although the IRS has made changes to the Net Operating Loss Carry Back option in order better accommodate the needs of taxpayers in the current economic climate, it nevertheless has not compromised its existing requirements for thoroughness and accuracy.

Visit www.professionaltaxresolution.com for more information about customized tax debt relief assistance. With over 16 years of experience, we have a thorough understanding of tax law together with the experience to know which tax settlement option will best meet the specific needs of each of our clients. Contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

Understanding The Three Settlement Types for an Offer in Compromise

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The Offer in Compromise is a specific tax relief option made available by the IRS through which a taxpayer offers the IRS a certain amount of money in exchange for which the IRS agrees to cancel the taxpayer’s outstanding tax debt. While it is an effective tax settlement option for a very specific group of taxpayers, the Offer in Compromise definitely does not represent a blanket solution for anyone with an outstanding tax liability. The acceptance criteria are very explicit and, since many applications are submitted that do not meet the published IRS guidelines, the rejection rate is high. When considering filing an application for an IRS Offer in Compromise it is important, not only to understand the specific qualifying criteria, but also to be familiar with the available settlement alternatives.

There are three payment options available for an IRS Offer in Compromise. An application requesting any one of the three payment plans requires a $150 application fee (unless the taxpayer submitting the application qualifies for a low income waiver or is submitting the application for the reason that he or she doubts they actually owe the outstanding tax debt). All three tax settlement options require an initial payment (unless the taxpayer qualifies for a low income waiver) followed by a lump sum or a specific set of scheduled installments. The plans vary as to the calculation of the settlement amount, the amount of the initial payment, the number of periodic payments and the time period over which those payments will be made.

The three settlement alternatives for an Offer in Compromise are summarized below:

1) Lump Sum Cash Payment
• Generally requires a 20% payment upon the filing of the application with the balance paid within five months of acceptance. Low income taxpayers may be exempt from the initial payment requirement.

2) Short Term Periodic Payment
• Payments are made in monthly installments with the balance being paid in full within 24 months of the IRS receiving the Offer in Compromise. Taxpayers must generally make the proposed monthly payments while the IRS considers the offer unless they qualify for the low income waiver.

3) Deferred Periodic Payment
• Payments are made in monthly installments with the balance being paid in full in 25 months or more but within the statutory collection period. Taxpayers must generally make the proposed monthly payments while the IRS considers the offer unless they qualify for the low income waiver.

The flexibility of the settlement alternatives available for an Offer in Compromise makes it a viable and effective tax relief alternative for taxpayers with varying financial situations. However, since the Offer in Compromise involves a settlement for an amount less than what the taxpayer actually owes, it can be difficult to obtain. The IRS will carefully review the available assets and income of the taxpayer and the taxpayer’s ability to pay the original tax debt. During the review of a submitted Offer in Compromise by the IRS, all other collection activity will stop. The job of a qualified tax resolution firm is to assist in demonstrating a taxpayer’s inability to pay the full amount of his or her tax debt and to prove that it is in the best interest of the IRS to accept an offer for less than the full amount.

When selecting this tax relief option and the accompanying payment plan, the taxpayer should be well aware that it is an official contract with the IRS and comes with a specific set of financial responsibilities. If an individual entering into an Offer in Compromise fails to comply with any of the contractual provisions set forth in the agreement, the IRS will probably revoke the contract and reinstate the full amount of the original tax debt.

The Offer in Compromise is one of numerous tax relief options open to a taxpayer who may be facing an impending tax lien, tax levy or wage garnishment due to a large outstanding tax debt. For help in determining whether your tax debt situation meets the acceptance criteria for an Offer in Compromise and whether it is the best tax settlement option for your specific needs, contact an experienced tax professional at www.professionaltaxresolution.com.