Tax Debt Settled Using Multi-Step Resolution

Posted on March 29, 2015 by Kursti Nakagawa

Tax Debt Settled

Tax Debt Settled Using Multi-Step Tax Resolution Plan

A successful tax resolution plan often requires a creative approach that may include a variety of tax settlement methods used in various combinations. Such a plan often begins with an attempt to reduce the amount of the outstanding tax liability though the filing of back tax returns and amended returns. It may also involve an audit defense in the case where an audit has been requested. These initial tax resolution steps are followed by submitting an application for one of the various tax settlement options offered by the IRS or simply negotiating a payment plan to pay off the balance of back taxes owed.

The tax settlement case outlined below is one that involved multiple steps in order to achieve a successful resolution. Mr. C contacted Professional Tax Resolution in 2012 after receiving an IRS Notice of Intent to Audit informing him that his income tax returns for tax years 2009, 2010 and 2012 had been selected for further scrutiny. Our experienced professionals immediately went to work evaluating the audit request and collecting the documentation required to substantiate the specific items identified in the notice. Following a brief period of negotiation with the IRS, our tax team achieved a successful audit resolution, lowering his audit assessment by half. Although the audit resolution was a success, the back tax balance of 22k left at the end of the process was still more than Mr. C could afford to pay. He was in the financial industry and had been having a hard time making ends meet due to the difficult market.

Once he had filed his 2013 tax return, Mr. C again sat down with one of our tax resolution professionals. Before addressing his existing back tax balance, we advised him to fix his withholdings to ensure that he was withholding enough tax for the 2014 tax year. Following that, the Professional Tax Resolution team immediately started putting a multi-faceted tax settlement plan into action. Our first step was to resolve Mr. C’s back tax balance with the state by negotiating an affordable payment plan with the State Franchise Tax Board. Following that, we prepared and submitted and Offer in Compromise petition to resolve the balance of his outstanding tax liability with the IRS. The offer, which was received by the IRS on June 3, 2014, was accepted on September 9th after only one phone call. Mr. C, who could now see the light at the end of the tunnel, was thrilled at the overall outcome of the tax resolution process.

As was the case with Mr. C, the tax specialists at Professional Tax Resolution always devise a tax settlement plan the fits the specific needs of the client. They start the process at its source by making an accurate determination of the full amount of the back tax balance owed and follow this by devising a tax resolution plan that takes into account the amount of the back tax balance as well as the client’s ability if pay. Our tax professionals understand that the best solution is not the same for every person and customize each tax settlement plan to meet the needs of the customer.

Why You Should File Your Taxes

Posted on March 16, 2015 by Kursti Nakagawa

Why You Should File Your Taxes by April 15

Taxes Due April 15

April 15th is an important filing deadline for individual taxpayers. If the Internal Revenue Service does not receive either a completed tax return or an application for a six-month tax extension by this date, they will automatically assess a failure-to-file penalty. In addition, they will begin to assess a failure-to-pay penalty on any tax amounts owed. Although the failure-to-file penalty can be diverted by applying for a six month tax extension, late payment and interest assessments will automatically begin to accrue as of the April 15th tax deadline regardless of whether a tax extension has been filed.

Because the penalties and interest described above are compounded over time, the financial consequences of failing to file tax returns and failing to pay tax amounts owed can be significant. The failure-to-file penalty is assessed at a rate of 5% of the back tax balance for each month or partial month that a return is not filed up to a maximum of 25% of the outstanding tax liability shown on the return. A minimum penalty of either $100 or the entire amount of the back tax balance is assessed for any return that is not filed within 60 days of the filing deadline. In addition, a failure-to-pay penalty is assessed at a rate of 0.5% per month for each month or partial month following the filing deadline where a back tax balance remains unpaid. This rate is reduced it 0.25% if a taxpayer is making payments according to the terms of an official installment agreement and is excused altogether if a tax extension was filed and 90% of the back tax balance was paid on or before the original filing deadline. The failure-to-pay penalty is assessed for a maximum or 50 months, thus capping out at maximum of 25% of the original tax liability.

The lesson to be learned from all of this is that the filing of tax returns and the paying tax bills should be taken seriously. As is pointed out above, the financial consequences of not doing so can be significant. The failure-to-file penalty can be avoided by simply filing a tax return by the filing deadline even in the case where funds are not available to pay the tax amounts due. Outside of this, a taxpayer should avoid the compounding of penalties and interest by being proactive in coming up with a plan to pay any outstanding tax liability. To this end, the IRS is willing to work with delinquent taxpayers to come up with payment plans they can afford. Once a payment amount is determined based on the size of the back tax balance and the taxpayer’s financial situation, the taxpayer simply pays this monthly installment amount until the back tax balance is paid off. This is a far better solution than ignoring a tax bill and then having to pay the back taxes plus an additional 25% of the original tax amount owed.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Offer in Compromise Saves Client Over $95,000!

Posted on February 27, 2015 by Kursti Nakagawa

Offer in Compromise Saves Client Over $95,000!

The Offer in Compromise is an excellent tax settlement option for a delinquent taxpayer who meets the specific qualifying criteria set forth by the IRS. Such was the case for Professional Tax Resolution client, Mr. F. Not only did he have an outstanding tax liability, but the specific set of financial circumstances establishing his inability to pay the full amount of his back tax balance fell within the Offer in Compromise parameters set by the IRS.

Mr. F, a Hollywood voice over actor, was experiencing some health issues that were having a negative effect on his ability to earn a livelihood. As a result of his constricted financial situation, he was unable to meet his monthly financial responsibilities and began ignoring his income tax obligations as well.

By the time he contacted Professional Tax Resolution, he had failed to file income tax returns for the previous several years and had accumulated a back tax balance of over $101,000! At a loss as to how to climb out of this deep financial hole, he was hopeful that a tax settlement professional could provide him with a viable solution. Our tax resolution team immediately set to work filing Mr. F’s back tax returns and doing a complete analysis of his financial situation. Once we had an accurate accounting of the amount of his tax debt as well as his ability to pay it, we determined that the best tax settlement option for his financial situation was an IRS Offer in Compromise. Following this conclusion, our tax settlement professionals completed and submitted an Offer in Compromise application, proposing a settlement amount that we felt would be accepted by the IRS. As is always the case, the amount was calculated based on the amount of Mr. F’s back tax balance together with his specific set of financial circumstances. After a short period of negotiation, the IRS accepted Mr. F’s proposal, resolving his $101,000 back tax balance for only $3600.

This settlement amount represents just little over 3.5 % of his original tax liability! As exemplified by the case of Mr. F, the tax specialists at Professional Tax Resolution will always begin the tax settlement process with an accurate determination of the client’s back tax balance together with a thorough analysis their financial situation. Following that, they will select the best tax settlement option available and follow the tax resolution process through to a final solution. All the while, they will communicate with the IRS on the client’s behalf and protect their property and accounts from IRS levies and liens.

Choose Your Tax Preparer Wisely

Posted on February 23, 2015 by Kursti Nakagawa

How To Choose a Tax Preparer

Choose Your Tax Preparer Wisely

Choose Your Tax Preparer Wisely: With over half of all taxpayers enlisting the services of a tax preparer, tax preparation has become a major industry. This being the case, the selection of a reputable tax preparer is a task at hand for many at this time of year. Although the services of a tax preparer can be an invaluable asset in saving tax dollars as well as meeting tax deadlines and compliance requirements, choosing one that is both competent and ethical and is often a difficult process.

When choosing a tax preparer, it is important to select a firm or an individual that has an established licensing history and a verifiable physical address. The absence of either of these could mean that the firm may not be around to answer questions and follow up if there are problems once the return has been filed. In terms of licensing it is important to use a preparer with a Preparer Tax Identification Number (PTIN). Since Certified Public Accountants and Enrolled Agents are the only preparers who can represent their clients before the IRS in all tax matters, it may be advisable to seek a preparer with one of these additional certifications if the return is difficult or presents unusual problems. It is also prudent to check out available reviews and ratings of any tax preparer under consideration in addition to making sure there are no registered complaints against that firm or individual.

In light of the points discussed in the previous paragraph, the following is a list of some things to avoid when selecting a tax preparer:

 Avoid any tax preparer who does not have a valid 2015 PTIN. Preparer Tax Identification Numbers are renewable each year so any reputable tax preparer should have a current PTIN number.

 Avoid tax preparers who want you to sign a blank return or do not sign the return themselves.

 Avoid tax preparers who ask you to mail in a paper return rather than filing your return electronically. Most preparers are required to file electronically so a request that you do otherwise should be a red flag.

 Avoid a tax preparer who suggests that you deposit a tax refund in to any account other than your own. This practice is not allowed by the Internal Revenue Service.

 Avoid tax preparers who base their fees on a percentage of the refund amount rather than on the type and complexity of the return.

 Avoid tax preparers who make promises that have no basis in reality such as guaranteeing a high refund without examining tax documents or promising a refund by a certain date.

In summary, the process of selecting a tax preparer should focus on choosing an established individual or tax preparation firm with good reviews and ratings and a verifiable licensing history. It should avoid those who do not meet these qualifications and make extravagant promises that they are unlikely to keep. While a competent tax preparer can be a great asset, choosing the wrong one can be worse than not having one at all!

Back Tax Issues Resolved Through the Filing of Delinquent Returns

Posted on February 12, 2015 by Kursti Nakagawa

Back Tax Issues Resolved Through the Filing of Delinquent Returns – By the time Mr. P contacted Professional Tax Resolution, he had already had multiple years of delinquent tax returns prepared by another tax settlement firm. However, because the returns were sloppily prepared, they showed him owing a sizable back tax balance. While the returns reported income and other basic information, they failed to take into account any expenses that Mr. P had accumulated over the years. As a result, they showed a tax amount due that was far in excess of the amount he would actually owe after the returns were prepared correctly. Luckily for Mr. P, the firm stopped answering their phones and never filed the tax returns they had prepared. Unable to make contact with them, he began to search the internet for another tax settlement company and found Professional Tax Resolution. Having had such a bad experience the first time, he was hesitant to work with another firm. However, our professionals were able to gain his trust during the initial consultation and he enlisted our services to help him resolve his back tax issues.

The Professional Tax Resolution tax team quickly got to work preparing Mr. P’s delinquent returns. Our professionals did the necessary leg work to collect the expenses he had incurred during the time period under consideration and used them counterbalance the taxes owed on income earned during those years. Entering these legitimate expenses together with the accompanying tax credits and tax deductions brought Mr. P’s back tax balance down to a very reasonable amount. Once all of back tax returns had been signed and filed, the total amount of his outstanding tax liability was approximately $4000, a significant reduction from the amount shown on the incomplete returns prepared by the first tax settlement company. As with all of our clients, Mr. P was thrilled with the outstanding customer service and the excellent results he got from Professional Tax Resolution.

Mr. P’s case is a good example of that fact that the first step in the tax resolution process should always be to verify the accuracy of the tax debt in question. In this case, that verification process involved the preparation and filing of several years of back tax returns. At other times returns may have already been filed and need to be amended due to omissions and inaccuracies. Tax law allows this to occur at any time within two years from the date a tax was paid or within three years from the date a return was filed, whichever is later. No matter what is required, the Professional Tax Resolution Team will always begin the tax resolution process by verifying the accuracy of the outstanding tax liability. Once this is accomplished, they will move forward with other tax settlement options as required and follow the process though to a final solution.