Struggling with IRS debt? Help needed before Tax Day, on April 15th? Learn everything there is to eliminating tax debt with former IRS agent, Michael D. Sullivan.
We have all heard it. We all know it. We have probably been there. For whom the death bell tolls, tax bells toll louder. If you think of taxes to be as certain as death, then you must think of the IRS to be as ghastly as the Grim Reaper!
The IRS has more than 14 million open tax-debt cases against individuals and businesses in 2018, according to its own records. Tax evasion is considered to be a Class B felony. The main goals of the IRS are to prevent tax fraud and collect tax debts. IRS agents go to great lengths in order to accomplish these goals.
Tax debts have not been as much in vogue as some of the other debts like student debt, but they do build up fast. The IRS also imposes an underpayment penalty for defaulters. This penalty begins at 0.5% of what you owe, increasing each month till it reaches the limit – 25% of the unpaid taxes. Interest is compounded daily, while penalties are added monthly. The IRS is within their rights to lay claim on your property and/or assets or even directly deduct from your paycheck. This happens to millions of Americans.
All these checks and balances are in place to stop the usual delinquents. But under extraordinary and/or valid circumstances, they do provide IRS tax help, relief, and assistance.
In fact, if you owe money and can’t pay, all or a part of your tax debt can also be forgiven by the IRS. It’s true.
Not wasting any more time, here are 7 ways to get rid of IRS Tax Debt.
- Hardship: (Form 1127). It is common knowledge that during filing tax returns, one can get an extension of 6 months. But did you know that you could also get a similar six-month window after April 15, with no penalties? Using Form 1127, also known as Application for Extension of Time for Payment of Tax Due to Undue Hardship, you can. Although there are two caveats to this scheme.
- A demonstration to IRS agents showcasing the said hardship is needed. This evidence can be something as simple as medical bills or sophisticated as transactions of a business deal.
- Although the penalties are not imposed, the interests are still levied. It’s not much, but the owed amount is incremental in nature.
- Offer in Compromise: (Form 656) popularly known as the pennies to the dollar program, OIC is a negotiation between a tax defaulter and the IRS, for a settlement at less than what they owe.
Offers in compromise are only open to select candidates. Taxpayers can check their eligibility for this program by filling out the OIC Pre-Qualifier questionnaire online.
The IRS then sends a team of IRS agents to properly evaluate your assets and measure the risk of hardship. If all seems good, and you can genuinely not pay the owed amount, a compromise is reached and IRS tax help is received.
- Currently Not Collectible: (Form 53) If you do not qualify for the OIC, but the IRS agents do agree that you have no way to pay them, you can always try and fill Form 53, or the Currently Not Collectible Form.Under this status, the IRS tax help kicks in, and not a single dollar from the taxpayer at that point in time is collected. However, the penalties and the interests are not lifted. In the future, usually every year, the IRS may feel free to look at your income and reinstate your tax debt, if your salary has improved.
- Partial Payment Installment Plan (Form 9465): Looking at your financials the IRS agents might also want to devise a step-by-step payment scheme, rather than a lump sum one. The PPIA program can break down the total tax debt into small monthly installments.However, if your debt is over $50,000, you cannot file Form 9465 online and need to return the hard copy form with original signatures.
- Innocent Spouse Relief (Form 8857): In case, your spouse or ex-spouse has been engaged in tax evasion or fraud, without your knowledge or consent, and you have to bear the brunt in form of tax liabilities, an option for you is to file form 8857. Post this, your spouse will be solely responsible for the tax obligation.Since July 25, 2011, the IRS tax help has increased the amount of time given to apply for the relief. However, the taxpayer should submit Form 8857 as soon as they become aware of the issue, even if they do not have the necessary documentation immediately available.
- Re-file SFR Tax Returns: In case you have not filed your tax return for a given period, then the IRS agents file it on your behalf, and this is known as SFR (Substitute for returns). This is based on an estimate made by the IRS and is hardly ever accurate. They apply no deductions or exemptions.By re-filing SFRs, you can reduce your tax debts by just finding incongruencies with your actual income transcript, and refiling your returns.
- File for Bankruptcy: Filing for Chapter 7 bankruptcy, should be used as a last resort. Also known as liquidation bankruptcy, in this program, the assets are sold to pay off both the secure and the insecure debt.A Chapter 7 bankruptcy will remain on an individual’s credit report for 10 years. The taxes are ought to be 3 years or older, filed for at least 2 years, and assessed for at least 240 days.
While these are all fine ideas, there are three major things that you should do, if you suddenly get notified of your tax debt.
- Take action: More you put it off for later, or sweep it down the carpet, the more it is going to grow. The most important step is to let the IRS agents know, and most probably they can provide assistance.
- CSED: It is an open secret that the IRS has a statute of limitation of ten years. This means after the expiration of this time period, they cannot collect any more tax from the candidate. The tricky part is to know the exact date of your CSED, as the beginning point is not really known to the taxpayer.
- Hire a Tax Attorney: In order to save yourself from tax catastrophe, you need an expert batting on your side. The faster you get a tax attorney, the higher the chances of IRS tax help.
Although doing taxes can feel taxing, the real joy is in saving thousands of dollars in the long run. If you are one of the millions afflicted by IRS debt and are targeted by IRS agents, you can talk to one of our experts at Fresh Start Tax.
Michael D Sullivan, Former IRS AGENT was formed by a dedicated team of tax professionals with a wide range of experience in the field of taxation as CPA’s, Enrolled Agents, ex IRS Agents, and Accountants.
Your IRS tax problem receives the attention of our tax professionals who have over 100 plus years of combined professional tax experience. Michael D Sullivan, Former IRS AGENT can provide immediate representation and stop the intrusions into your business and personal life.