Resolution Archives - Page 12 of 13 - Professional Tax Resolution

Category Archives: Resolution

A Successful Offer In Compromise – $74,000 IRS Problem Settled at a 95% Discount.

Posted on by

In February of 2011, Professional Tax Resolution finalized an Offer in Compromise agreement for a client who had initially contacted the firm in May of 2010. The taxpayer in question had an outstanding tax liability of over $74,000 which she was unable to pay. In this particular case, the debt was a combination of unpaid taxes, interest and penalties which had accumulated over a period of ten years. After verifying that the client met the IRS Offer in Compromise eligibility requirements, our firm initiated the settlement process by filing returns for tax years 2005 through 2009 which had never been filed. Once these returns had been finalized, we had an accurate assessment of the client’s total tax debt and were able to use this amount, together with her current financial information, to calculate a reasonable settlement offer. The completed Offer in Compromise application, including supporting documentation, was submitted to the IRS in July. Because the taxpayer’s eligibility had been well documented and established IRS filing guidelines had been adhered to throughout the application process, the initial settlement offer was accepted by the IRS without argument. The end result was the successful resolution of a $74,579 tax liability for $3785, just over 5% of the original debt!

The taxpayer whose settlement case is described in the preceding paragraph is a single mother who has struggled with chronic health problems for many years. From 1999 through 2009, a series of health-related setbacks resulted in periods of unemployment and accumulating tax liabilities. The client was hospitalized in January of 2010 in response some life threatening complications resulting from her health condition. She now receives state disability and is having trouble meeting her basic financial needs. Since it was very unlikely that this taxpayer would have been able to pay the full amount of her tax debt within a reasonable period of time, she was an ideal candidate for an IRS Offer in Compromise. Outlined below are the primary components necessary to obtain a successful Offer in Compromise settlement as they pertain to this specific set of circumstances.

• The taxpayer meets one of the three eligibility criteria (doubt as to liability, doubt as to collectability, tax settlement would promote effective tax resolution) specified by the IRS.

Professional Tax resolution determined that this client would be unable to pay the balance of her outstanding tax liability and therefore met the doubt as to liability standard for eligibility.

• The taxpayer’s eligibility can be adequately documented.

Professional Tax resolution submitted documentation for the client’s medications, outpatient medical treatment, hospitalization and disability claims.

• The total amount of the tax debt is accurate based on tax returns that have been checked, submitted and refilled when necessary.

Professional Tax Resolution filed a tax return for any year where a return had not been previously submitted and checked all other past tax returns for accuracy.

• The Offer in Compromise application and the necessary supporting documentation are submitted according to IRS guidelines.

Professional Tax Resolution has experience in submitting Offer in Compromise applications and adheres strictly to the established IRS policies and procedures.
While the offer in Compromise is an effective tax settlement option for a very specific group of taxpayers such as the candidate whose case is described above, it 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. The Offer in Compromise is an excellent tax settlement option only under certain very specific conditions and when submitted using the very strict guidelines set forth by the IRS.

Visit www.profesionaltaxresolution.com for more for more information about customized tax relief assistance. With over 16 years of experience, we have the can help you select the tax relief option that will best meet the specific needs of your tax debt situation. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.

Case In Point-Hiring A Qualified Professional To Handle Your Tax Settlement = A Good Investment

Posted on by

Although the IRS has numerous programs to assist taxpayers in settling outstanding tax debts, deciding which option to use is not always an easy task. Very specific acceptance criteria must be met in order for an application for tax relief to have any chance of being accepted. In addition, the process of filing the initial paperwork and documentation and following up by submitting the required responses to communication from the IRS can be lengthy and challenging. During the time a tax settlement application is under consideration, interest and penalties can accrue. If the settlement offer is then rejected, not only has there been a waste of time and energy on the part of the taxpayer, but the actual amount of the tax debt may have increased making the taxpayer’s financial situation worse.

Below is the detail of an interesting IRS Tax Court case in which the IRS Appeals Office failed to grant a taxpayer’s request for tax debt relief. The case is interesting because it highlights a number of the potential filing problems described in the preceding paragraph. Susan Fay Mostafa, the taxpayer in question, neglected to verify that she met the acceptance criteria for the type of tax debt assistance she was requesting. Her initial error was then compounded when she failed to file a formal request for tax relief on the correct IRS form and then did not respond to several official IRS letters and notices in an appropriate and timely manner.

The Case of Susan Fay Mostafa

• She received an IRS Notice of Deficiency for $1377 for a 1996 tax return that had not been filed. The notice stated that she was also liable for a 25% failure to file penalty.
• Although she submitted a Tax Court petition to challenge the deficiency notice, she later received an IRS notice of Intent to Levy.
• She then challenged the proposed levy by requesting a hearing with the IRS Appeals Office.
• At the same time, she wrote a check to the IRS for $701 and wrote on the check that endorsing it would mean accepting the 1996 tax return as Paid in Full.
• Once the amount of the check was credited to her account, she spoke with the appeals officer several times indicating that she considered her case closed since the IRS had cashed her check.
• In spite of the payment and the subsequent communication, the IRS Tax Court ruled against her.
• After considering all of the trial evidence, the Court of Appeals argued that she had not followed the specific IRS procedures for submitting an Offer in Compromise and had not received either an IRS letter or an IRS notice indicating that such an offer had been accepted.

The Tax Court case outlined above clearly shows that the assistance of a qualified tax settlement specialist may be helpful when submitting an application for tax debt assistance to the IRS. Each year many taxpayers who truly meet the qualification criteria for specific IRS tax relief programs have their applications rejected for one or more of the following reasons:

• failure to meet the acceptance criteria for a selected settlement option
• failure to file a request for assistance using the correct IRS form(s)
• failure to complete the required IRS form(s)correctly
• failure to provide all of the necessary supporting documentation
• failure to conform to the IRS time constraints for submitting forms and documentation
• failure to respond to formal IRS letters and notices in an appropriate and timely manner

Susan Fay Mostafa made all of the above errors when she tried to resolve her tax debt situation without the assistance of a qualified tax specialist. When the IRS Tax Court denied her appeal, she was no better off than she had been when she submitted her initial Tax Court petition. Had she enlisted the help of a tax professional, it would have been that person’s job to adequately document her inability to pay the full amount of her tax debt. Following that, it would have been the specialist’s responsibility to submit the request for relief with the accompanying documentation, to respond to follow-up communication from the IRS in an appropriate and timely manner and to advocate for Ms. Mostafa before the United States Tax Court.

The bottom line is not to try to handle a complex tax settlement case alone. Hire the right professional to help you achieve tax debt relief. Visit www.professinoaltaxresolution.com for more information about tax settlement options and contact us today at (949)-596-4143 or info@protaxres.com to receive a free, no obligation consultation.

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

Posted on by

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.

FAQ about An Offer In Compromise

Posted on by

What is an Offer in Compromise?
An Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service that settles a tax debt for less than the amount owed.

What do you do first?
A taxpayer submits an Offer in Compromise by completing two standardized forms and collecting all of the required supporting documentation. A check list identifying the necessary documentation is provided with the application.

Why should you take care to fill everything out correctly?
If an Offer in Compromise is not submitted according to the published IRS requirements and procedures, it can result in the delay or denial of the offer even if the taxpayer might otherwise qualify. The Offer in Compromise application must be submitted in writing, signed by the taxpayer (under penalty of perjury), and must contain all of the information required by the IRS. When the offer is submitted solely on the basis of doubt as to the taxpayer’s liability, there is no requirement to provide financial statements.

What happens after the offer has been submitted?
An Offer in Compromise attains a status of pending when it is accepted for processing by the IRS. As might be expected, the IRS generally will not accept an offer for processing if there is a related criminal case with the Department of Justice. Once submitted, if an offer does not contain all of the required information and documentation, the IRS will request that the taxpayer provide whatever is missing. If the requested information is not provided in a timely manner, the application may be returned. The IRS will deny an Offer in Compromise if it determines that the offer was submitted solely for the purpose of delaying collection of the tax debt.

What if you decide to withdraw your offer?
An Offer in Compromise may be withdrawn by the taxpayer at any time prior to acceptance of the offer by the IRS. It will be considered withdrawn upon the receipt by the IRS of written notification of the withdrawal. An official withdrawal of an Offer in Compromise may be made by personal delivery, certified mail, or upon issuance of a letter from the IRS confirming the taxpayer’s intent to withdraw the offer.

How will you know that your offer for tax settlement has been accepted?
An Offer in Compromise is considered accepted when the taxpayer or the taxpayer’s representative receives a written Notice of Acceptance from the IRS. As a condition of acceptance, the IRS may request that the taxpayer enter into a collateral agreement if it is deemed necessary for the protection of the interests of the United States. For instance, if the final payment on an accepted Offer in Compromise is contingent upon the simultaneous release of a tax lien, that payment must be made in accordance with the forms, instructions and procedures prescribed by the Secretary of the Treasury.

What is the end result?
Acceptance of an Offer in Compromise will settle the tax debt of the taxpayer (or taxpayers) designated on the application for the dollar amount specified in the offer. The acceptance of an Offer in Compromise for one taxpayer does settle the tax liability of any person not named in the offer.

Why should you consider hiring a tax professional?

The process of obtaining an Offer in Compromise can be difficult and time consuming. When it involves tax debts related to multiple years and/or multiple taxpayers and tax liens or tax levies, the process can be increasingly difficult. A qualified tax resolution specialist can be helpful, first, in determining if a taxpayer meets the acceptance criteria for an Offer in Compromise and, following that, in completing the application according to IRS specifications. A tax specialist will also have the knowledge to accurately calculate and document a taxpayer’s inability to pay the full amount of the tax debt so that the offer will have a reasonable chance of being accepted by the IRS.

FAQ about the IRS Notice of Deficiency

Posted on by

What is an IRS Notice of Deficiency?
A Notice of Deficiency is a formal letter from the IRS informing a taxpayer of a tax deficiency and advising them of their appeal rights with the United States Tax Court. It is required by law and is sent by registered or certified mail to the taxpayer’s last known address. Although a Notice of Deficiency can be issued when no tax return has been filed, it is most often sent when the tax amount shown on a submitted return is less than the actual amount owed according to IRS calculations.

What information is provided by an IRS Notice of Deficiency?
A Notice of Deficiency must include an explanation for the deficiency together with a statement of the tax, interest and penalties that have been assessed. The notice should also include the final date on which the taxpayer can file a petition with the United States Tax Court appealing the assessment. However, it should be noted that failure by the IRS to specify the last day on which to file a petition will not invalidate an otherwise valid deficiency notice if the taxpayer was not prejudiced by the omission.

How does a taxpayer respond to a Notice of Deficiency?
Within 90 days after a Notice of Deficiency is mailed (or within 150 days after mailing if the notice is addressed to a person outside the United States) the taxpayer must pay the assessed amount or file a petition with the Tax Court to contest the liability. Payment of the assessed amount after the deficiency notice is mailed does not deprive the Tax Court of jurisdiction over the deficiency. In addition, discussion of the case with the IRS during the 90 day period does not extend the time period during which a petition can be filed.

What are the consequences if a response is not submitted in a timely manner?
If the taxpayer does not file a Tax Court petition within the required time period, the appeal process is closed and IRS has the authority to collect the tax. Since the Tax Court is the only court that will hear the question of whether a tax liability is really owed, the taxpayer’s only option after the 90 day deadline has passed is to pay the assessed amount in full and then apply for a refund. If a response is not received within 90 days after the issuance of a Notice of Deficiency, the IRS is likely to issue a Notice to Levy. The Notice to Levy allows a 30 day response time, after which a taxpayer’s property may be seized to enforce collection if the assessed tax still has not been paid. The requirement to issue the Notice to Levy and wait 30 days does not apply if the IRS finds that the collection of tax is in jeopardy.

What are the advantages of obtaining the services of an experienced tax professional?
The IRS is authorized to collect taxes and issuing a Notice of Deficiency is the first step in the collection process. Receiving such a notice can be both intimidating and confusing and may make enlisting the help of a qualified tax professional a worthwhile investment. Collection of taxes by the IRS is permitted without proof of the debt so the burden rests with the taxpayer to determine whether the tax amount shown on the Notice of Deficiency is actually owed. Because of the complexities of tax law, accurately making this determination may require someone with both expert knowledge and experience. In addition, obtaining the help of a tax professional will ensure that the response to such a notice meets the IRS requirements and is submitted correctly, thus avoiding unpleasant consequences down the road.

If you have received a letter from the IRS such as a Notice of Deficiency or Notice to Levy or are threatened with a tax lien or wage garnishment, we can help stop the immediate collection action and help you work toward resolving your tax debt. Contact us today at (949) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.