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Category Archives: IRS Notice

IRS Tax Debt – Don’t Just Ignore It – Resolve Tax Debt Before the IRS Collects

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Most people who have IRS debt do not find themselves in that situation due to an unwillingness to pay their fair share of taxes. It is much more common that taxpayers find themselves owing the IRS either due to a mistake on a previously filed income tax return or some unavoidable circumstance such as a lost job, a decrease in earned income or an illness. While the initial IRS debt may have been the result of an unfortunate turn of events or a simple mistake or unreported item, it has often been compounded over time by the addition further taxes, penalties and interest. It is not uncommon for penalties and interest, which are often applied retroactively when the IRS or state tax agency makes an adjustment to a return from a prior year, to account for as much as 50% of an outstanding IRS debt balance. 

 

Resolving an IRS Debt

The first and most important thing that a taxpayer should do to resolve an IRS debt is to stop avoiding the issue. Taxpayers often think they can simply ignore their IRS debt because collection efforts begin mildly with letters simply stating the outstanding balance. Generally, the IRS has 10 years from the date a tax return is filed to collect an IRS debt. While collection efforts begin with passive techniques such as sending an IRS letter or IRS notice, as the 10 year collection period progresses, the methods get more aggressive. Collection attempts eventually lead to the possibility of filing a lax levy on bank accounts, wage garnishments or the filing of a tax lien. Any of these actions can have a drastic effect on a taxpayer’s credit rating and financial wellbeing. When faced with an IRS debt, a taxpayer may be best served by contacting a tax settlement professional to help resolve the issue.

 

How a Tax Debt Settlement Firm Can Help

The most obvious way to avoid an escalating IRS debt is to not incur the debt in the first place. While this may seem obvious, it is easier said than done. Mistakes are made and life events occur that are sometimes unavoidable. However once an IRS debt is incurred, it may be a good investment to enlist the help of a qualified professional to resolve the issue. Without professional help, individuals often find themselves overwhelmed by the barrage of letters from the IRS and confusion over how to proceed.

 

Why Professional Tax Resolution is a Good Choice

There are many different types of tax settlement firms and some, unfortunately, make promises they can’t keep and resort to unethical practices. For this reason, it important to research a potential tax resolution firm in order to select one that is reputable and has had a history of success settling IRS debt issues. To insure that a firm meets these qualifications, it is a good idea to verify their current licensure with the state certification agency and the Better Business Bureau. It is also advisable to review references if any are available. At Professional Tax Resolution, we encourage you to check our licenses, memberships and reviews. Our licensed CPAs and Enrolled Agents represent our clients before the IRS and state agencies from start to finish. We work with our clients to prepare all un-filed tax returns, confirm and correct balances as reported by the IRS and provide our clients with the best tax settlement option available. Call (877) 889-6527 for a free, no obligation consultation today.

 

 

If You Have Unreported Income You May Get a Letter from the IRS

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Understanding The IRS “Soft Notice” Pilot Program to Encourage Income Reporting Compliance

In 2007, the IRS launched a pilot program designed to decrease the tax gap by identifying unreported income. Under this pilot program, which is still in effect, IRS notices are issued to taxpayers when there is a discrepancy between the income reported on their tax returns and the income reported directly to the IRS by various financial institutions and employers. These “soft notices” do not identify specific discrepancies or calculate amounts due. They simply ask taxpayers to review their returns and to file amended returns if errors are found. 

In spite of the fact that these “soft notices” do not require any specific response or action on the part of the taxpayers who receive them, they should be taken seriously. The IRS designed these letters to encourage compliance through self-correction and should be considered as advanced notification that IRS software has picked up a disparity in reported income.

Although the “soft notice” pilot program collected more than one million dollars in its first year and it can be expected to continue for many more to come, the IRS has not collected enough data to determine its long term benefits.

If you received a letter from the IRS or an IRS Notice and are seeking guidance, call us toll free at (877) 889- 6527 for a free, no obligation consultation with a CPA.  Professional Tax Resolution Inc., is an honest firm with strong values. We want our clients to understand all of the options they have and never promise that we can do something we can’t.

Tax Settlement can be achieved though many methods but often the most effective way is by reducing how the liabilities were incurred at the time and avoiding them in the future.

Can the IRS Take my Home Because I Owe Unpaid Taxes?

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A common fear is that the IRS may take your valuable assets to pay off unpaid taxes. The fact is, if you owe the IRS money they have a legal right to seize your possessions, including your home but the reality is, you have the ability stop or resolve the problem before it gets to that point.

But wait, how can the IRS take your home?  Relax – there are a number of steps that have to happen first. Here is a quick review:

The first step in the process if you owe money to the IRS is that they must notify you. Believe us – they are going to make every effort to make sure you know that you have an unpaid tax debt.

Of course owing tax debt does not imply you did something illegal or ill intended. Often a simple taxpayer misunderstanding causes a tax debt. For instance, perhaps this is the first time you ever paid taxes. Perhaps you just filed an extension. You can incur a tax debt in either of these scenarios.  New taxpayers may not know that they need to pay their tax liability at the time they file their taxes and taxpayers who have never filed an extension may not realize that their tax liability must still be paid on the original tax return due date of April 15 and not the extension date.

If you fall into one of these categories, it is likely that your unpaid tax liability is just a simple misunderstanding and one or two letters from the IRS to the taxpayer informing you of the tax debt is often enough to outline the problem and get the tax debt paid off; resolving the tax issue.

If a tax debt is not resolved through a few letters to you, the second step in the tax debt collections process is that the IRS will become more aggressive in their collection effort and may start the process to seize some assets. From the viewpoint of the IRS, if you do not respond to the IRS’ initial notifications of an unpaid taxes or follow-up to their communication, the IRS is lead to believe that you are not willing to work with them.  The seizure of assets is therefore a defensive action and only occurs in situations where the taxpayer is unwilling to work with the IRS to establish a payment plan or otherwise address the tax debt owed.

If at this point a taxpayer is still not working with the IRS to figure out a resolution, the next step in the collections process is an IRS levy of some kind. Before a levy can occur, the IRS will provide you a written notice of their intent to place a levy against your assets or property. Only after the written notice will they obtain a levy – something which allows the IRS to take your property to satisfy a tax debt.  Types of assets or property they can levy include bank accounts, wages, vehicles, and other personal property, including your house.

Clearly the IRS is aware that seizing the home of a taxpayer can cause a significant hardship in the life of the taxpayer.  Therefore, they won’t do so unless they see no other option.  Really in order to get to this point, the taxpayer has to remain unwilling to work with the IRS to establish a payment plan to pay the taxes. Also in order for the IRS to take a home, all of the other more liquid taxpayer assets – such as cash, wages, etc… must not have been sufficient enough to satisfy the amount tax debt.

As you can see, it takes a lot of effort to force the IRS to seize a home.  As long as you file your taxes, even when you cannot afford to pay them and are willing to work with the IRS and agree to a payment plan, you can avoid the common worry of having your home seized by the IRS.

If you find yourself unable to pay your tax liability to the IRS, it is a good idea to hire a tax professional.  The CPA’s and EA’s at Professional Tax Resolution have extensive experience working with the IRS and can address your tax debt quickly and effectively.  We provide our clients guidance about their specific tax situation and advice them on the best tax settlement options available.  Call for a free, no obligation tax consultation with our CPA’s today, (877) 889-6527 or email us at info@protaxres.com.

Tax Levy – Understanding and Resolving IRS and State Tax Levies

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Do you have or know someone with a tax levy? A tax levy is serious, it is the actual seizure of a taxpayer’s property by either the IRS or a State Tax Agency. It is one of the final steps in the enforced collection process and is usually exercised only after all previous attempts to collect a tax debt have failed.

A tax levy is different from a tax lien. The lien simply gives the issuing tax agency priority over other creditors with respect to the identified property while the levy actually results in the confiscation of the property.

The IRS must officially warn a taxpayer before assets are seized to satisfy an existing tax debt. The first official notice to go out is the Notice of Tax Due and Demand for Payment. If the delinquent taxpayer fails to respond to this notice, it will be followed by the Final Notice of Intent to Levy together with an official notice informing the taxpayer of their right to a hearing. Once this official communication process has been completed, the IRS can seize the identified assets without further notification.

With certain exceptions, the IRS can levy any physical asset held by a taxpayer. They can also levy retirement accounts, bank accounts, dividends, wages, insurance policies and numerous other assets that may be the property of the taxpayer but held by someone else. One notable exception to the list of assets that are subject to the levy process is the taxpayer’s principal residence. The taxpayer’s residence can never be seized to satisfy a tax debt of $5000 or less and can only be confiscated to cover a debt in excess of $5000 with written approval of the federal district court judge or magistrate. In addition, property (other than rental property) that is used as a residence by another person cannot be seized to satisfy a tax liability of less than $5000. Similarly, real or tangible property used in a taxpayer’s trade or business cannot be levied without written approval of an IRS director. Other categories of physical property exempt from an IRS levy include wearing apparel, school books and furniture and personal effects up to a fixed dollar amount. Certain types of payments are also exempt. This list includes workers’ compensation, unemployment benefits, some annuity and pension payments, certain types of Social Security, disability and welfare payments, judgments in support of minor children and certain amounts of wages and other income.

The IRS is a very powerful collection agency and an IRS Levy is one of its most aggressive actions. A taxpayer who receives and IRS Notice of Tax Due and Demand for Payment or an IRS Notice of Intent to Levy should realize that enforced collection action is imminent. At this point, the most effective response is probably to enlist the help of a qualified tax resolution specialist. An individual who understands tax law and has experience working with the IRS may be able to stop impending collection activity. There is also the chance that a tax professional will be able to reduce the tax liability that resulted in the collection action or eliminate it altogether.

If you are the target of a tax levy or any other type of aggressive collection activity by the IRS or State Tax Agency, our experienced tax professionals can help you forestall the action and resolve the tax debt issue that caused it. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

Tax Liens – How to Remove an IRS or State Tax Lien From Your Credit Report

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The most effective tool the IRS has for collecting tax debt are tax liens. What’s worse is that they are very difficult to get removed. Even after you pay off the tax debt, the tax lien will stay on your credit report for up to seven years. Only after they have expired will they be removed from your credit report. These five steps show how to get expired tax liens off of your credit report.

1. Get Your Credit Report: Each year you’re allowed one free copy of your credit report. There are many sites out there that offer this service, such as AnnualCreditReport.com. Use one of these sites to get a copy of your Equifax, Experian, and TransUnion reports.

2. Check for Errors: Yes, even the credit agencies can make mistakes. Carefully check your credit report. If a tax lien that has been paid for over seven years ago, and it hasn’t been removed, you are able to dispute the information with the credit reporting agencies.

3. Dispute: Sometimes, if you view your credit report online, you can dispute an erroneous item through the website. Otherwise, you may send an email or letter to the agencies with your dispute.

4. Send Backup to Prove Your Dispute: When you send your letter of dispute, make sure you attach documents that prove the tax debt was paid, and when.

5. Check Your New Report: The Credit Reporting Agency will reply with a new copy of your credit report after 30 days. The new report should reflect the changes.

Back tax issues can be overwhelming, but there is hope. A good tax settlement professional has the knowledge and experience to help you overcome these types of problems. If you need help with a tax debt issue, or just want to see what options are available to you, talk to one of the licensed experts at Professional Tax Resolution. We specialize in tax settlements and you won’t talk to a salesperson. Call us toll free at (877) 889-6527 or visit us at www.professionaltaxresolution.com today.