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Category Archives: Tax Lien

Avoid IRS Penalties – Settle your IRS Tax Debt – Tax Settlement Tips

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If you have been disregarding a notice from the IRS, tax filing deadlines, or ignoring tax liabilities, it is probably time to think about filing those back tax returns and paying outstanding tax balances. Even though the Obama Administration’s 2012 Budget request for increased funding for the Internal Revenues Service was not approved, the ability of the IRS to enforce tax compliance has improved over time. System modernization and software improvements have made it harder for a taxpayer to stay under the IRS radar by making it easier for this powerful collection agency to track down individuals who fail to file tax returns or owe back taxes.

When tax amounts are owed over an extended period of time, the financial burden can become overwhelming due to the continued accumulation of penalties and interest. It is not unusual for these additional amounts assessed by the IRS to total as much as 50% of the original tax amount owed.  The financial consequences of failing to file a tax return or owing back taxes are outlined below:

  • Failure to File Penalty The Failure to File Penalty is calculated on the tax balance due as shown on the tax return. This penalty is 5% of the tax amount due for each month the return is late, with a maximum penalty of 25%. Although it is seldom invoked, a taxpayer who fails to meet a filing deadline can also be charged with a misdemeanor, which carries a maximum fine of $25,000 and up to a one-year prison term.
  • Failure to Pay Penalty The Failure to Pay Penalty is calculated on the tax balance due as shown on the tax return. These penalty charges are assessed at the rate of 0.5% for each month that the tax balance is not paid in full, beginning from the original April 15th filing deadline. The Failure to Pay Penalty has no limit on the maximum percentage amount that can be assessed.
  • Interest Interest is charged on the balance of any tax liability for each day the back tax balance is not paid in full. The interest rate, which is variable and set quarterly, is currently 4%.

With the downturn of the economy, even more taxpayers have missed filing deadlines or have found themselves with outstanding tax balances that they are unable to pay. When these tax debts or unfiled tax returns are left unresolved, the IRS will initiate collection activities to enforce compliance and collect the tax amounts owed. Unpaid tax debt or unfiled tax returns will result in collection efforts by the IRS. These collection activities begin with the assessment of interest and penalties and are followed by more aggressive actions including the filing of tax liens or tax levies and the initiation of wage garnishments. On a positive note, there are many tax settlement options available to taxpayers who are unable to pay the tax balances they owe. The important thing is to begin the resolution process immediately before penalties and interest accumulate further or the more severe consequences of owing the tax debt are imposed.

A licensed tax professional will be familiar with all of the tax settlement alternatives available and can be invaluable asset to a taxpayer who is the subject of collection attempts by the IRS. If you have failed to meet tax filing deadlines or have an unresolved tax liability, our experienced tax professionals can help you become tax compliant. For more information about our tax settlement services, visit www.professionaltaxresolution.com. The members of our staff have a thorough understanding of tax law together with the experience to know which tax settlement option will most effectively resolve your specific back tax issues. Contact us today at (877) 889-6527 or info@protaxres.com to receive a free, no obligation consultation.

 

IRS Innocent Spouse Relief – A $1,200,000 Tax Settlement Success Story

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Mrs. M. was referred to us by a local attorney. Her husband had recently passed away and, shortly after his death, she became aware of an outstanding IRS tax liability in the amount of an astonishing $1,200,000.

Mrs. M. had had no knowledge of this tax debt before her husband’s death.  A few months later in our initial meeting with her, we learned that her personal tragedy was even worse than the death of her husband and realization of this massive IRS debt.  She informed us that she had hired a very large tax settlement firm to resolve the issue and had already paid them a whopping $25,000.  She came to us after six months, when she had no indication that the tax settlement company she had employed was making progress towards resolving the issue. Now skeptical that a firm might really be able to help, she did her research and read all of our credentials and reviews before arranging our initial meeting.

We immediately started working on her case and during our initial conversation with the IRS Revenue Officer assigned to Mrs. M’s file, we were brought up to date on the details of the case.  Unfortunately due to the inaction of the previous tax settlement company, the IRS had already levied the client’s insurance and financial accounts. Even more alarming was the fact that the IRS was also in the process pursuing other aggressive collection techniques to the extent that Mrs. M actually risked the immediate seizure of her additional assets to settle the outstanding liability. After assuring the revenue officer that we were working towards a resolution, we were granted a 90 day hold.  This time interval gave us the opportunity to resolve the case in manor that was acceptable to the IRS and still allowed Mrs. M to keep her assets.

After reviewing all of the relevant information and consulting with our client, we felt that she qualified for Innocent Spouse Relief. Innocent Spouse Relief is an IRS tax settlement option available to taxpayers who owe the IRS for tax amounts incurred by their spouse.  While it is an excellent tax settlement alternative for a spouse who meets the qualifying criteria, it is definitely not a blanket solution for anyone with a marital tax debt. The acceptance criteria for Innocent Spouse Relief are very explicit and must be well documented. After careful analysis, we determined that Mrs. M’s situation met these criteria and felt that her application would be accepted by the IRS

After gathering all of the relevant information and documentation, we were able to prepare and file the application for Innocent Spouse Relief.  Although there was a wait of several months after the request was submitted, the IRS granted the Innocent Spouse Relief for our client’s half of the $1,200,000 tax liability.

This was excellent news. However because the husband was deceased, this is not the end of the story. While this was the best result that anyone could have hoped for, the IRS did not relieve the husband’s estate for its share of the outstanding tax debt. Therefore to complete the resolution process, we continued our efforts.  We were able to negotiate a settlement contract for the estate with the IRS. The terms were that Mrs. M. would sell one of her residences and whatever the sale of the home produced as an asset, the IRS would accept 50% of the net equity from this sale as a final settlement of the debt.

This is truly a remarkable success story and Mrs. M. is finally able to move on and heal after a tumultuous year.

Here is a Recap:

  • Total Deceased Husband/Wife Total IRS liability            $1,200,000
  • Wife’s portion of this liability                                                $600,000
  • Wife’s liability after Innocent Spouse Relief Ruling          $0  a 100% Reduction!
  • Husband’s Estate IRS Liability                                             $600,000
  • Tax Settlement (50% of Net Equity from Home Sale)      $300,000   a  50% Reduction!

 

This example is an excellent illustration of how Innocent Spouse Relief can be used to settle large IRS tax debt.  In Mrs. M’s case the joint $1,200,000 tax debt was settled for just $300,000!  The wife’s personal liability was reduced by 100% and the total estate settled for just 25% of the original liability!

 

If you have an unresolved tax debt, visit us today at www.professionaltaxresolution.com for more information about our customized tax settlement assistance. The CPAs and tax professionals at Professional Tax Resolution use their extensive knowledge of the tax code to provide taxpayers with the best settlement option available. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to learn more about our services and to receive a free, no obligation consultation

 

 

 

 

 

 

 

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.

IRS Tax Debt Who Has it? Tax Lien Statistics Give Some Clues

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Feel like you are the only one with a tax debt problem? Ever wonder where in the US more people have the tax debt issues? Is this a problem of the rich or is the problem of incurring Tax Debt affecting everyone?
A recent 2010-2011 analysis of tax liens from across the U.S. found that New York City, which happens to have some of the wealthiest neighborhoods in the nation, was actually the country’s leading geographic area for federal tax liens. According to the data,New York City accounts for nine, or 18 percent, of the top 50 U.S. zip codes with the most liens recorded over the past 12 months ending in September.

Is this a problem of the rich of New York trying to skirt their fare share payments to the IRS? The economy has hit everyone so perhaps this is not the full story. Taking a harder look, four of theNew York City zip codes include some of Manhattan’s most affluent neighborhoods, including the Upper West Side (10025 and 10023), Chelsea(10011), and Murray Hill (10016), but the remaining five New York City zip codes are in more typically minority and working-class areas of Brooklyn, Queens, and the Bronx. To really understand how much richer these neighborhoods are, if you break down the differences in the New York Zip Code demographics by using recent U.S. Census data, those Manhattan’s four zip code tax debtors earned a whopping 250 percent more than those in the city’s less affluent areas. Of course with more income, comes the potential for bigger tax burden and the average IRS debt of Manhattan’s wealthier tax debtors is much higher than the amount owed by their working-class neighbors. It turns out the tax debt of the wealthy NYC zip codes averages $58,592 or about 86 times more than the boroughs. So, while the rich owe a lot more per capita the problem of owing tax debt in the NYC area is affecting both the rich and working class.

What about the rest of the country? Virtually all of the remaining nationwide zip codes in the top 50 are located in minority and economically depressed neighborhoods. Perhaps not coincidentally six of these neighborhoods are in areas hit hard by the economy including Las Vegas, Washington, D.C., and Detroit all of which have high unemployment, short sales and foreclosures which can lead to high levels of tax debt.

All that said, New Yorkhas been a high ranking tax debtors location for some time but this may be due to population density. Taking a second analysis of prior year nationwide tax liens, this time from July 2009 to July 2010, reveals that at that time New York City accounted for 16, or 32 percent, of the top 50 U.S. zip codes with the most tax liens and six of those New York zip codes were located in Manhattan.

Why did the NYC area drop in 2010-2011 to just 18 percent from a 2009-2010 amount of 32 percent? Seems the nationwide recession has caused more working-class Americans to lack the means to pay their tax debts. The problem is more widespread, so perhaps the number of individuals affected in New York is simply a smaller percentage to the growing nationwide issue.

If you are in need of tax settlement help, probably the most important decision you will make is the selection of a qualified tax professional. The CPAs and Enrolled Agents at Professional Tax Resolution have many years of experience providing tax settlement help. We encourage our customers to check our memberships, reviews and affiliations for verification of our credentials and our past successes. For more information about the tax settlement services we can provide, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation

 

IRS Tax Settlement Help – Tax Debt Tips From a Qualified Tax Professional

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The help of a qualified professional can be an invaluable asset when attempting to resolve a tax debt issue. However, finding the right person for the job can be a difficult task in itself. Many companies that advertise tax settlement help are made up of salespeople and marketing agents who know very little about negotiating with the IRS. Tax law is complex and negotiating with the IRS can be challenging so it is important to find a tax professional who is experienced in providing tax settlement help. To insure that an individual has the knowledge and experience to provide the help you are looking for, it is a good idea to verify their current licensure with the state certification agency and to check their standing with the Better Business Bureau. Hiring a tax professional with verifiable credentials is really the only way that you can be sure of the qualifications of the person you are hiring.

By the time a taxpayer contacts us, they have frequently made numerous unsuccessful attempts to resolve their tax debt by negotiating directly with the IRS. While IRS employees are usually very competent, it is important to remember that it is the job of an IRS agent to collect the taxes you owe. In addition, the IRS is divided into many unconnected departments with very specific functions, so there is a good chance that the agent who happens to receive your call actually does not know how to provide the tax settlement help you are seeking. At Professional Tax Resolution, we work with the IRS on a daily basis. Since we are very familiar with their policies and procedures, we know how to communicate with them effectively and will negotiate with them on your behalf to provide the tax settlement help you need.

If you are a person who has put off seeking tax settlement help, it is important to realize that procrastination can result in some very unpleasant consequences. Tax debt balances continue to accrue penalties and interest until the balance is either paid in full or a tax settlement is reached. This being the case, it is not uncommon for penalties and interest to make up more than half of the total balance that a taxpayer owes. In addition, if a tax debt is ignored long enough, the IRS will initiate some form of enforced collection activity such as a tax lien, a tax levy or a wage garnishment. Any one of these actions usually results in serious damage to the taxpayer’s credit rating. An experienced tax professional will often be able to stop such enforced collection actions and will negotiate on the taxpayer’s behalf to arrive resolve their tax debt using the settlement option that best fits that taxpayer’s specific situation. The available tax settlement alternatives include the waiver of penalties and interest and partial payment settlement options where the IRS accepts an amount that is significantly less than the amount actually owed.
If you are in need of tax settlement help, probably the most important decision you will make is the selection of a qualified tax professional. The CPAs and Enrolled Agents at Professional Tax Resolution have many years of experience providing tax settlement help. We encourage our customers to check our memberships, reviews and affiliations for verification of our credentials and our past successes. For more information about the tax settlement services we can provide, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation