What Is the IRS Debt Forgiveness Program?
August 23, 2019
Even the IRS understands life happens. That’s why the government offers IRS debt forgiveness when you can’t afford to pay your tax debt.
Under certain circumstances, taxpayers can have their tax debt partially forgiven. When the IRS considers forgiving your tax liability, they look at your present financial condition first. This means the IRS can’t collect more than you can reasonably pay. If any collection action would force you into a financial crisis where you lose all sense of financial security, the IRS can’t collect the back taxes.
Know What You Owe
Before applying for IRS programs, find out how much in taxes you owe to the IRS. Knowing where you currently stand with your tax debt is vital when it comes to asking for IRS forgiveness.
There are many different ways to find out how much you owe, including checking online through the IRS’s new portal, calling the IRS, mailing the IRS a form, and having a tax professional do the research for you. No matter how you figure out how much you owe in back taxes, you’ll need to know before seeking forgiveness.
Be on the Lookout for IRS Collection Actions
If you can’t pay but you haven’t reached out to the IRS for forgiveness or assistance, you should still expect them to begin taking collection actions against you. These actions can range from seemingly benign, like loads of notices in the mail, to very aggressive, like private debt collection agencies getting involved and tracking you down. You could also find that your passport is at risk due to tax debt.
Some of the IRS’s often-used collection actions include:
A tax lien is the government’s claim against your property, which will secure their interest in your assets if you fail to pay your tax debt. Unlike a levy, a lien doesn’t mean your property will be taken immediately. However, you’ll still need to address the lien. Not only can a lien keep you from selling your property, but it can also snowball into a more aggressive action in the future.
A tax levy is the government’s legal seizure of your property to satisfy your outstanding unpaid tax debt. You should receive a notice of levy from the IRS, which will let you know that they are planning to pursue levying actions against you.
Levies can be placed on personal property like your home, car, or boat. They can also be placed on your assets, like your bank funds, tax refunds, and wages.
Wage garnishment is a type of tax levy in which the IRS will take part of your income in order to settle your existing tax debt. They will do this through your employer and will continue garnishing your wages until your tax debt is paid or other arrangements are made to pay your tax debt.
For more information about wage garnishment, check out this infographic:
If you find yourself facing these collection actions and they seriously threaten your financial security, tax debt forgiveness could be what you need.
Pay Less Than You Owe with Offer in Compromise
If you have the resources to pay a partial amount of your IRS tax debt, there’s still hope. You can apply for the IRS government payment plan called an Offer in Compromise (OIC) to resolve the remaining amount. Depending on your financial capacity and upon acceptance, the IRS significantly reduces the total debt that you can pay. This reduced amount can be paid in a lump sum or in fixed monthly payments.
There is a catch with the Offer in Compromise program though. It isn’t always easy to qualify for an OIC. The IRS considers your ability to pay, income, expenses, and asset equity when determining your eligibility for an OIC. While it can be a life-changing tax resolution for many people, the IRS doesn’t give an Offer in Compromise easily.
Here are some common reasons for ineligibility:
- You haven’t filed all required tax returns
- You haven’t made any required estimated tax payments
- You’re currently in an open bankruptcy proceeding
- You own a business with employees and haven’t submitted all required tax deposits
- You could pay your tax debt in a lump sum or through an installment agreement and/or equity in assets
But don’t let any catches deter you from seeking back taxes help. If you’re concerned you may not qualify for an OIC, consult a tax professional to see what IRS forgiveness options might be available to you.
See If You Qualify for the IRS Fresh Start Initiative
To make it easier for taxpayers to qualify for an OIC, the IRS has expanded their Fresh Start initiative.
These changes to the Fresh Start initiative make it easier to afford your IRS tax payments. Now, you won’t have to disclose extensive financial details to the IRS to judge your paying ability.
- Instead of looking at five years of future income to determine reasonable collection potential, the IRS now looks at only one to two year of future income for offers, depending on the payment period.
- Taxpayers are now allowed to make their student loan’s minimum payments for post-high school education loans guaranteed by the federal government.
- Taxpayers may, under certain conditions including financial hardship, pay delinquent federal and state or local taxes in monthly installments if they cannot pay it in full.
- The IRS has expanded the Allowable Living Expense standards. This allowance now includes credit card payments, bank fees and charges, and other various allowances.
- The IRS has doubled the dollar threshold for taxpayers eligible for Installment Agreements, which will help more people qualify.
What’s Next If You Owe Tax Debt?
Understanding your tax debt and dealing with the IRS isn’t easy to do alone, even with available programs like Fresh Start. Fortunately, there are professionals who can help you navigate your options. In fact, professional help may be necessary for you to get the best outcome for your tax problems.
Tax Defense Network’s team of trained tax professionals has been helping people with IRS issues since 2007. It all starts with a free consultation to get you on your way to a better tax solution.
Owe the IRS and Can’t Pay? Why You Need Tax Relief Help
May 9, 2019
By now, your taxes have hopefully been filed. You may have come out of 2018 without owing the IRS (or even getting a refund). However, there’s a big chance you instead found yourself with a tax bill you aren’t able to pay. If that’s the case, don’t be too hard on yourself. Many people found themselves in this position due to a withholding mistake (thanks, recent tax reform!) Getting bogged down in frustration and fear of an unmanageable tax bill won’t help now. Instead, read on to determine if tax relief help is your best bet to focus on a brighter tax future.
You don’t have the money to settle your bill and can’t see how you ever will.
You’re feeling hopeless. Maybe your current balance with the IRS is more money than you’ve ever seen in your bank account at any given time. Or perhaps you just mortgaged a house or leased a car, and you’re concerned about what this tax bill could mean for you. Whatever financial pickle you find yourself in, the fact remains: there’s no way you can just make one easy payment to clear up this tax debt.
Tax relief help experts like ours have been around the IRS block and have seen all sorts of financial situations. They’ll take the time to learn everything important about your unique circumstance. Then, they will be able to walk you through your options to find a route out of tax debt that works for you.
You don’t know how to deal with the IRS.
Imagine the headache you’d have if you went to make that dreaded IRS call. You immediately face droning hold music. With every staticky chord, your anticipation gets worse and worse. Even if you get a pleasant IRS rep, you’re still ultimately getting ready to have a conversation with someone whose main goal is to get what you owe the government.
Okay, we’re sorry we asked you to imagine that. Instead, just imagine the headache you wouldn’t have if you had a professional working with the IRS on your behalf.
Experience is key when it comes to IRS dealings and we’ve got plenty of it. Our team has a collective 250 years of experience in tax relief help. We know what questions the IRS will ask before they ask them. And we can help minimize long delays caused by submitting unnecessary information or payment requests that we know they won’t accept. Working with the IRS is our specialty, so it doesn’t have to be yours!
You want to keep the tax relief damage to a minimum.
The worst part about tax debt isn’t the notices that the IRS will send you nonstop or even the anger you might feel for being in this situation. There are far more serious consequences ahead. From levies against your property or wages to penalties and interest that bury you in even more debt, the IRS can be unrelenting when it comes to trying to recoup what they’re due. And trust us, they can take things up a notch if they feel like you’re not paying attention.
The good news is that the sooner you tackle your tax debt, the better. By seeking tax relief help, you’ll ensure that there is a tax pro with experience and passion dedicated to working with the IRS to get you the best possible outcome.
If any of the above applies to you, tax relief help may be right for you – but be wary.
Tax relief help can really change your life. However, you’ll want to be careful. There are tax relief companies out there that will scam you out of your money and leave you in a worse situation.
Make sure any tax debt relief company you decide to work with is transparent. They should be open about their pricing and what you can expect from them. Most honest tax debt relief companies will offer a free consultation to gain a better understanding of your current situation before discussing what relief options are available to you. They won’t promise you solutions like tax debt forgiveness without knowing the full picture. Feel free to ask about their experience and expertise to ensure you’re getting seasoned professionals on your side.
We’ve helped resolve over $18 billion in tax debt in the decade we’ve been in business. Our tax experts have a wide range of professional accreditations and are always ready to provide you with top-rated tax relief help. Contact us for your free initial consultation to take that first step towards freedom from tax debt.
How Tax Audit Help Could Save You from an IRS Headache
February 26, 2019
It’s happened. You open your mailbox and there it is – the dreaded letter from the IRS stating that they’ve selected your tax return for “examination.” The IRS letter contains detailed instructions, but it doesn’t come with a translator. Before you get too worried about your tax audit fate, take a few deep breaths. We’ve got you covered. Here’s everything you need to know about audits and how tax audit help could help you through this distressing experience.
What does an audit include?
When the IRS audits you, they’re saying that they want to examine your return more closely. They’re looking to ensure all the information you provided is correct. There are three different audit types to look out for:
- Correspondence audits: Audits conducted mainly by mail.
- Office/desk audits: In-person audits at an IRS office.
- Field audits: In-person audits that are either at your home or business.
The majority of IRS audits for fiscal year 2017 were correspondence audits at 70.8 percent of all audits.
What triggers an audit?
Audits are typically triggered when something on your return is abnormal or “off” to the IRS. This can be as simple as making a typo or error, earning more money than you have in previous years, or forgetting to report cryptocurrency. But the cause can also be more complicated, like a self-employment tax issue.
Other audit causes include:
- Failing to report taxable income
- Having three consecutive years of business losses if you’re self-employed
- This isn’t likely for corporations, but it’s still possible.
- Using round numbers on your return
- Deducting 100 percent of a business car
The most interesting audit cause? The IRS selects a very small amount of returns for audit at random as part of the National Research Program they conduct. That’s why most tax preparers cannot offer you an entirely “audit-free” return. Even with a completely clean return, there’s always a possibility that you could face an audit.
What can come from an audit?
There are three ways to conclude an audit:
- Accepted – the IRS proposes changes that you understand and accept.
- Disagreed – the IRS proposes changes that you understand but don’t agree with completely.
- No change – no changes come from your audit.
Sometimes the changes that the IRS proposes will include an increase in your tax bill. However, it’s not always the case that you’ll owe money after an audit brings about changes. In almost 34,000 instances out of the total 1.1 million tax returns audited in 2016, taxpayers received additional refunds totaling more than $60 billion.
No matter what conclusion comes from your audit, the biggest key is to watch out for deadlines. The IRS gives you a specific amount of time to respond and if you don’t respond, they will still post the changes.
Why turn to professional tax audit help?
There’s nothing that says you can’t take on an audit on your own, especially if it’s a correspondence audit. With these types of audits, you can usually complete them by sending the IRS whatever they’ve asked for. But if they aren’t satisfied with what you’ve sent or if you don’t have what they want, it could benefit you to seek out professional tax audit help.
You have certain taxpayer rights, which extend to the right to retain representation. This means that you have the right to have an authorized representative of your choosing to represent you with the IRS. Dealing with the IRS is far from your favorite activity. Luckily, tax audit reps like ours have experience in dealing with the IRS. Experienced pros know the right questions to ask. They can even translate confusing IRS terminology into phrases normal people can understand. With tax audit help and representation, you will rarely have to talk to the IRS. We’ll handle all the legwork for you and spare you the droning IRS on-hold music.
Is tax audit help expensive?
You may think you’re saving money by skimping on tax audit representation. But it can be even more financially damaging to receive a hefty IRS bill for tax deficiencies and penalties you may not fully understand. A representative who is well versed in tax code should be able to keep you from paying more than is necessary.
So give us a call today. You’ll have a free consultation with one of our experienced tax audit pros to get to the root of your audit issue. We’re always transparent about what to expect when it comes to our process and pricing.
5 Tax Tips to Get You Through the IRS Shutdown and Its Wake
January 24, 2019
“But if the government is shut down, can’t I just wait to file my taxes or pay back my tax debt?” This is one of the most dangerous thoughts you can have during the shutdown. The IRS shutdown mode should not keep you from dealing with your taxes or tax debt. The government may be able to shut down, but you can’t shut down taxes or tax debt. With tax season beginning next week, we’ve put together a simple guide to help you prepare to deal with your taxes and tax debt during and after the IRS shutdown.
Here are some tips to help you make your way through this IRS shutdown and the aftermath:
1. Gather all your tax forms.
Make sure all your tax forms arrive on time. If they don’t, make sure you check your records to ensure you didn’t receive any missing forms earlier than expected.
If you still cannot find some of your necessary forms, be sure to reach out ASAP to the responsible party. The IRS may not be available by phone due to the shutdown. So, you will want to put extra effort into contacting the issuer of the form you need. If you’re missing a W2 form, be sure to contact the responsible employer before considering reaching out to the IRS. You’ll want to make sure you have all the tax forms needed before you file, otherwise you could be at risk for an audit.
2. File as soon as you can.
Once you have all your tax forms, don’t hesitate to start filing. The deadline to submit personal tax returns for most of the nation is April 15, 2019. The only exceptions to this deadline are for Maine and Massachusetts residents, who have until April 16 to file, and District of Columbia residents, who have until April 17.
If you do think you’ll need an extension past these deadlines, you can seek one from the IRS or state taxing authority. Just keep in mind that an extension is an extension to file, not to pay. So if you owe, you must pay on time. You’ll want to keep a copy of your extension too as proof that you filed one.
Also, you should consider e-filing this year. The IRS has strongly encouraged taxpayers to file their returns electronically in order to minimize errors and receive faster refunds.
3. Check online before you call.
The average wait time for the IRS between April 2016 and April 2017 was about 70 minutes. Even with the IRS bringing back 36,000 furloughed workers to work without pay, there’s no telling how long wait times will be now during and after the government shutdown. If you do call, you’ll need to maintain plenty of patience.
And if you were thinking of going to a walk-in taxpayer assistance center (TAC) or sending the IRS something via mail, you’ll be out of luck. The TACs are closed during the IRS shutdown and the IRS has said they will be responding to mail “to only a very limited degree during this lapse period.” Your best bet will be to use the IRS’s online resources to address any questions you have.
4. Get ready for the rigor of audits and collections once the shutdown ends.
During the IRS shutdown, they won’t be conducting audits or actively engaging in collection activity. You’ll still get automated initial contact letters about audits and any automated collection activity will continue. Just because they won’t be auditing or partaking in collection activities doesn’t mean you should put your feet up and relax.
In fact, this is the perfect time for you to prepare yourself and your paperwork for the inevitable. The government can’t stay shut down forever. And once the IRS is up and running again, they’ll be starting up those audit and collection processes in full force. You don’t want to be caught unprepared for something like that. Make sure you find tax audit help as needed and start looking into ways to stop those collection activities.
5. Don’t wait to take action on outstanding tax debt.
A government shutdown may seem like the perfect time to avoid your tax debt. It gives you so many excuses not to resolve your IRS bill: it’s hard to reach the IRS, they won’t be pursuing you actively, you may not be getting paid if you’re a furloughed government worker or third-party government contractor, etc.
Don’t let any of these excuses stop you from taking that first step towards freedom from tax debt. Instead, take this moment to confront your tax debt and explore ways to find relief. Our tax professionals can walk you through ways to get tax relief help during a free consultation. And if you’re struggling with tax debt, why not enter our #PayMyTaxes Contest for your chance to win up to $50,000 towards your IRS bill? Click here to apply to the #PayMyTaxes Contest.
At the end of the day, this IRS shutdown has come at an unfortunate time, coinciding with the first tax season that includes all the tax reform changes that came with the Tax Cuts and Jobs Act. If you need any help figuring out your taxes or finding back taxes help, our team is always here to help.
4 Ways the #PayMyTaxes Contest Could Change Your Life
January 21, 2019
We couldn’t be more excited to finally announce our first-ever #PayMyTaxes Contest. MoneySolver’s #PayMyTaxes Contest gives entrants a life-changing opportunity to have up to $50,000 in tax debt paid off. Yep, you read that right. $50,000! We’ve even been interviewed by News4Jax about this awesome opportunity.
Here are four ways that the MoneySolver #PayMyTaxes Contest could help you change your life:
1. Winning the #PayMyTaxes Contest = reduced stress and space to finally breathe.
Studies have shown that people who struggle to pay off their debts are more than twice as likely to experience depression and anxiety. But what if that struggle was lifted off your back?
If you were to win up to $50,000 in tax debt off your back, you’d be able to take much more than just a huge sigh of relief. The winner of the #PayMyTaxes Contest will be able to brush that tax debt stress off and bask in some serious relaxation.
2. Higher likelihood of avoiding unpaid tax debt risks, like wage garnishment and liens.
No one wants to face collection activities. But if the amount you owe decreases (or disappears), it’ll be easier for you to avoid the consequences of unpaid tax debt.
Of course, if you still have some tax debt left over after that $50,000 is paid off, you’ll still have to pay the IRS the remaining amount to avoid collections. However, you’ll be a little closer to freedom from tax debt!
3. Lowered tax burden, which lessens your financial load.
Paying off your tax debt in full can be nearly impossible for some people. But the winner of the #PayMyTaxes Contest will suddenly find themselves free from up to $50,000 in tax debt.
That’s a lot of money that you’ll no longer have to pay, which means a much lighter financial load for you in the long run.
4. Lessened financial load = more freedom.
No more worrying about how your tax debt might affect your spouse or what happens with your tax debt when you die. With less of a financial burden on your shoulders, you’ll be able to explore the things you love and stop worrying about your tax debt.
Instead of having to pay $50,000 towards your IRS tax debt, you’ll be able to use that money to live your life. The cash that you would’ve used to pay the IRS could go towards something much more meaningful to you. And honestly, if given the choice, wouldn’t you rather spend $50,000 on yourself than on your tax debt?
So, what are you waiting for? With the chance to win $50,000 towards your tax debt and change your life, send in your application for the #PayMyTaxes Contest before the deadline of May 31, 2019. We’ll be notifying the lucky winner on or around July 4, 2019.
Click here or click through the image below to learn more and apply.
Gambling Taxes: Report Your Winnings with Form W-2G
August 21, 2018
Lucky you! Maybe you won rolling dice, playing cards or betting on ponies. No matter how you won, you definitely had some cash flow coming in from gambling this year. There’s just one catch: Gambling income (including winnings in a jackpot, race, raffle, or contest) is considered taxable income and must be reported on your tax return. Did you win a car or another noncash prize? Then the fair market value will be taken into account for purposes of reporting and withholding. Gambling taxes can be a little confusing, so let’s clear some things up.
What is Form W-2G and how do I get it?
If a large amount is won in gambling, the organization that is paying the winnings sends Form W-2G, Certain Gambling Winnings, to the winner. This form reports the amount of your winnings to you and the IRS. The payer must send Form W-2G only if the winner receives:
- $1,200 or more in gambling winnings from bingo or slot machines
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager, or
- Any other gambling winnings subject to federal income tax withholding
You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.
When the winnings are shared by more than one person, or when the person receiving gambling winnings is not the actual winner, Form 5754, Statement by Person(s) Receiving Gambling Winnings, is used instead of Form W-2G. Typically, the person receiving the winnings must furnish all the information that Form 5754 requires. You won’t send Form 5754 to the IRS. You’ll keep a copy for your records and return the form to the payer for preparation of Form W-2G for each person listed as winners.
Deducting gambling losses
Gambling losses can be deducted by itemizing your losses on line 28 of Schedule A, Form 1040. Just remember, you cannot deduct more than your winnings.
To find out how to claim your gambling winnings or deduct your gambling losses, you may use this 10 minute IRS interview. When using this resource, you will need:
- The amount of your gambling winnings and losses
- Your filing status
- Any information provided to you on Form W-2G
Recordkeeping for gambling taxes
If you receive Form W-2G, pay gambling taxes on your winnings, or deduct your losses, it is important to keep an accurate record of the precise amounts involved. In order to verify the amounts, you will need to keep the receipts, tickets, statements, etc. of each win and loss. It is also helpful to keep a journal or record of your activity. Overall, you want to be able to show your winnings separately from your losses.
Still baffled by gambling taxes? A tax professional can help you figure out the best way to optimize your tax savings when reporting your winnings and filing your taxes.
Will My Spouse’s Tax Debt Affect Me?
August 18, 2018
Marriage is a lot of work. Once you say your “I Dos,” you start to realize just how much more you have to learn about your spouse. Sometimes getting to know your spouse better can be great. Maybe you discover they are an amazing pastry chef or can handle stressful situations with astonishing grace! But other times, getting to know your spouse better can be a little bit more alarming. For instance, what if you discover they have extensive tax debt with the IRS? Even if you are the picture of taxpayer perfection, your spouse’s tax debt and previous history with the IRS can affect you. No matter how much you love your spouse, it’s important to know how their tax debt can impact you.
Can my spouse’s tax debt affect me?
Did you file your return jointly with your spouse? If so, and if your spouse owes back taxes or other federal debts, it can affect your refund. The interested agency can try to recover the debt using your tax refund if they are unable to do so using your spouse’s.
How do I protect my refund?
Why should you lose out on your refund because of your spouse’s mistakes? If you do not want your refund to be taken away to satisfy your spouse’s tax debt, you can file for Injured or Innocent Spouse Tax Relief. This is an IRS relief program that releases spouses from the responsibility to pay a debt entirely owed by their spouse. You can file for Injured Spouse Allocation by completing Form 8379.
How do I retrieve my refund?
Even if your refund has been taken due to your spouse’s tax debt, you may be able to retrieve it by filing for Injured or Innocent Spouse Relief. The following must be accurate to recover your refund:
- You filed a joint tax return with your spouse.
- The return had a refund due, all or a part of which was applied to satisfy your spouse’s debt.
- You reported income (from any source) on the tax return.
- Your spouse owes the entire debt.
- You made estimated tax payments or had your income withheld for paying taxes, and/or you claimed the Earned Income Tax Credit (EITC) or other refundable tax credits on the joint return you filed with your spouse.
You can file Form 8379, Injured Spouse Allocation with your tax return. If you are filing for Injured Spouse relief with your return, it may delay your refund as a result; the IRS will need time to review your return and process your request for relief. It might take up to 14 weeks for your refund to reach you.
If you have already filed your return, you may then file the form separately. The IRS takes around eight weeks to process Form 8379.
If you don’t qualify for Innocent Spouse Relief and are held liable for the due balance, contact one of our experienced tax consultants. We are well-equipped to find an alternative solution for you to resolve your tax issues.
Is Your Passport at Risk Because of Tax Debt?
July 30, 2018
Traveling around the world is already hard enough – and now for those with tax debt, it’s even harder. The IRS is now enforcing procedures that will put your passport at risk if you have “seriously delinquent tax debts.”
How Is My Passport at Risk?
Though the law behind this plan has been in place for over two years, the IRS is now implementing and enforcing the policy. The 2015 Fixing America’s Surface Transportation (FAST) Act states that the IRS can send notice to states to deny, limit, or revoke your passport if you owe delinquent taxes.
Under the FAST Act, an individual has “seriously delinquent” liability if:
- The IRS has assessed the debt,
- The debt is over $50,000 in back taxes, penalties and interest, and
- The IRS has filed a lien to secure the liability or the IRS has issued a levy to recover the liability due.
This amount of debt may seem hard to accumulate. However, one mistake or ill-advised taxable event can land you there quickly. In the same way, failing to plan for your self-employment income or defaulting on a secured loan can cause the debt to pile up. Fortunately, there are ways to prevent having your passport revoked, even if you meet the criteria above.
How to Avoid and Resolve Losing Your Passport
Passport revoked? It’s not the end of your travels. The IRS and State Departments can reinstate your passport if it has been suspended. However, they will only do this if you’ve paid back your debt or made plans to do so.
Your passport will not be revoked under the following exceptions:
If you received a notice of passport revocation before you established a formal resolution with the IRS, you can resolve it – but it won’t be overnight. Paying your debt back in full is the quickest way to release your liens and get your passport back, but that might not be an option for you.
Resolve the Issue with Professional Help
You can enter into an installment agreement with the IRS, which can take 30 days or longer to process. A successful Offer in Compromise will also reinstate your passport; however, this can be a very lengthy and in-depth procedure with strict guidelines. Unfortunately, Currently Not Collectible status (proof of hardship and inability to pay your debt), will not grant you the passport back.
MoneySolver knows how to deal with the IRS red tape. We can quickly show proof that you’re getting help with your tax debt situation. Avoid having your passport at risk due to aggressive IRS actions and get your life (and travels) back on track.
The Truth About the IRS’s Private Debt Collection Agencies
July 19, 2018
The IRS has called for backup from the private sector. What does this backup look like? Four private companies that could be coming after your tax debt in lieu of the IRS. Here’s what you need to know about private debt collection agencies (PDCs) to stay informed, lawful and safe.
What’s the deal with Private Debt Collection Agencies (PDCs)?
PDCs aren’t rookies to the federal tax debt collection game – they assisted the IRS in both 1996-1997 and 2006-2009. Despite warnings from the IRS and National Tax Advocate on the unsuccessfulness of these previous efforts – wasting money, yielding half the amount of collections, and contributing to inequities in the U.S. tax collection system – it seems that history is repeating itself.
Congress passed Fixing America’s Surface Transportation Act (FAST Act) in December 2015. The FAST Act includes a section requiring the IRS to use PDCs for outstanding tax debt that the IRS is no longer pursuing. Now, the program is in full swing. The IRS has hired four PDCs: Conserve, Pioneer, Performant Recovery, and CBE Group. Not all tax debt cases are eligible for PDCs to handle (e.g. offer-in-compromise, innocent spouse cases, deceased). However, you may be getting a notice that your account will be in new (private) hands.
What are the risks associated with PDCs?
The problems don’t necessarily lie with the PDCs themselves, but the program’s loopholes. Here are some of the dangers associated with private debt collection:
- Scam magnets. More scam artists can pretend to be PDCs, especially because PDCs aren’t required to identify themselves as IRS contractors. Here’s a smart rule of thumb: Do not disclose any personal information to someone randomly demanding payment over the phone or internet.
- Elevated risk for low-income taxpayers. PDCs have an agenda to push people to make payments, even if the taxpayers can’t afford it. This can create economic hardship for people who would otherwise qualify for alternative payment plans by the IRS. National Taxpayer Advocate reports half of taxpayers outsourced have incomes of less than 250 percent of the federal poverty level (FPL) and nearly a quarter are at less than 100 percent of the FPL. The result is low-income, elderly, and income-restricted individuals are buried deeper in economic woes and unpayable debt.
- A lack of consumer awareness. The IRS wants consumers to know what’s up, but public awareness campaigns are minimal at best due to drastic IRS funding cuts. As a result, consumers are left in the dark and even more vulnerable to scams.
What you need to know to protect yourself:
- How the IRS works – The IRS isn’t like your crazy ex. The agency will never call or text you out of the blue to demand payment. Instead, they will send you notices in the mail that progressively increase in urgency to act. If they have assigned your case to a PDC, the IRS will let you know so it won’t surprise you.
- Don’t pay the PDC directly – Though the IRS hired the PDC to collect your debt, you’re not actually writing out your check to the PDC. All your repaid debt will go straight to the IRS as usual.
- Consult with a licensed tax professional – Turning to a licensed tax professional, which may include CPAs, enrolled agents or tax attorneys, can give you the support and direction you need regarding your tax debt. These experts can negotiate with the IRS on your behalf to relieve tax debt or tie-ups like liens, levies and wage garnishments.
While the lawfulness of PDC use is under scrutiny, it is today’s reality. The key to avoiding trouble is being smart about tackling your tax debt and not going at it alone.
Remember: It’s crucial that you never disclose information to someone calling or messaging to collect immediate payment. Instead, call the IRS directly to see if you owe taxes.
FBAR versus FATCA Form 8938: Reporting Overseas Assets
July 16, 2018
Having assets in a foreign bank account may sound very mysterious and exotic. However, it can lead to lots of confusion practically when it comes to reporting overseas assets to the IRS.
There are many similarities between the Foreign Bank and Financial Accounts Report (FBAR) and IRS Form 8938 (required under the Foreign Account Tax Compliance Act, or FATCA), which has caused even more confusion among taxpayers. There is certain information that you must report on both FBAR and Form 8938. But Form 8938 requires information that isn’t included in an FBAR, like details on other foreign financial assets and income.
Do you have a financial account at a foreign branch of a U.S. financial institution? If so, you do not need to file FATCA Form 8938, but you do need to file an FBAR. If an FFI (Foreign Financial Institution) holds the account, then you need to file both Form 8938 and an FBAR.
Who Needs to File When Reporting Overseas Assets
Resident aliens of U.S. territories and U.S. territory entities must file FBAR, but not Form 8938. Filing Form 8938 is mandatory for those U.S citizens, resident aliens, and certain non-resident aliens that have an interest in certain foreign financial assets and meet the reporting threshold set by the IRS.
The filing threshold for FBAR is $10,000. If the value of your assets during a calendar year reaches $10,000 at any time, you will need to file an FBAR when reporting overseas assets.
Form 8938 has a different filing threshold. The amount of foreign assets for a tax year must be $50,000 on the last day of the tax year or reach $75,000 at any time during the tax year. These thresholds are for those filing separately. Married filing jointly and individuals living abroad have a higher filing threshold.
What You Must Report
For FBAR, you need to report if you have sufficient interest in a financial entity and/or have the authority to control the assets. You’ll need to report the maximum value of financial accounts maintained by a financial institution that is located overseas.
For FATCA Form 8938, you must report if you have any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or assets that need to be reported on your tax return. You’ll need to report the maximum value of certain specified foreign financial assets. These include financial accounts in FIIs and certain other foreign non-account investment assets.
How to Report
You can file FBAR electronically using the BSA E-Filing System. It’s important to know that you never file an FBAR with a tax return. On the other hand, you always file Form 8938 with your income tax return.
If you have any questions about reporting overseas assets, contact us and one of our tax professionals can help you ensure a correct and compliant filing.
Tax Balance Due: 3 Steps to Address IRS Notice CP14
Unfortunately, filing your tax return isn’t always your only contact with the IRS for the year. If the federal tax agency finds errors on your return that lead to an assessment, they will send Notice CP14 for collection. This isn’t a time to freak out as long as you follow the appropriate steps to address the issue.
If applicable, you’ll receive your “balance due” notice within four weeks of your return being processed. This letter is the first contact from the IRS to collect overdue taxes. If you ignore or neglect to pay what’s owed, then the IRS sends additional notices and begin aggressive collection actions, like liens and levies. Here are three steps to take when you get your “balance due” notice:
1. Review the Notice CP14 Details
The first thing to do when receiving Notice CP14 is to know why you received it. The notice includes the following:
- The tax year for which taxes are due
- The notice issue date
- Your Social Security Number
- IRS phone number
- Tax amount owed
- Payments and credits
- Penalties charged on taxes owed
- The final amount due to be paid
- The deadline for paying the amount owed
The Notice CP14 also includes information on payment options, penalties, and interest.
2. Determine If the IRS Is Correct
Before agreeing or disagreeing with the Notice CP14, check to see if your return had errors that led to the assessment of taxes due. If you find errors, you will need to pay the amount owed before the payment deadline in order to avoid further penalties and interest.
If you don’t see any errors or you find a different amount than what the IRS determined, you can call the IRS on the phone number indicated on the Notice CP14. An IRS representative will assist you in resolving the issue.
3. Pay the Amount Due
You can make the payment indicated on the Notice CP14 using IRS Direct Pay, a service that allows you to electronically pay your taxes directly from your savings or checking account. Alternatively, you can pay by credit or debit card.
If you can’t pay the full tax owed, either send a request to the IRS to receive up to an additional 120 days to pay or set up an Installment Agreement payment plan. An Installment Agreement allows you to pay your tax bill in fixed monthly installments. Get help from a tax relief professional before requesting your Installment Agreement to ensure you get the best tax debt resolution for your situation.
Why Was My Refund Applied to Back Taxes?
May 27, 2018
Waiting for your refund check can make you feel as excited as a kid the day before your birthday. When you get that envelope from the IRS, you’re ready to tear it open and reveal your hard-earned money. But what does it mean when, instead of your refund check, you get a notice informing you that the IRS applied your refund to unpaid taxes? This happens when the IRS finds that you owe back taxes. They automatically use your refund amount to satisfy the full amount or a part of your tax debt.
What is this notice?
The IRS sends Notice CP49 to inform you about how much tax you overpaid over the last year (i.e., the amount of your refund) and how much of it the IRS used to fulfill your tax debt.
The Notice CP49 means that you have a tax debt or there are other federal taxes that have remained unpaid. If your refund money covered for the entire tax debt, then you don’t need to take further action. If your refund money didn’t satisfy your entire tax debt, then you can either pay the remaining balance in a lump sum or qualify for a payment plan.
Why was my refund applied to back taxes?
Many times, the IRS discovers that a taxpayer is under tax debt after they review their information and make changes to the tax return. In such cases of underpayment of taxes or owing of other tax debts, if the taxpayer has a refund, the IRS will apply the refund to the tax debt.
Simply put, if the IRS discovers that you have any unpaid federal taxes, they will satisfy the maximum amount of debt using your tax refund.
What if my refund didn’t cover the full amount of my tax debt?
Do you still owe federal taxes after the IRS used your refund? And can you not pay the balance in a single payment? Then you can use an Installment Agreement to pay the remaining tax debt in monthly installments. If your financial condition does not allow you to pay the balance, then you can consider applying for tax debt reduction plans such as Offer in Compromise or Partial Payment Installment Agreement.
Already making payments to the IRS under a payment plan? Great! You should continue to do so. The IRS will apply your refunds to your tax debt until your entire tax debt is paid off.
What if I do not have tax debt?
If you don’t have a tax debt, then you should immediately contact the IRS to correct their mistake. Your CP49 notice should have a toll-free number in the top right corner that you should use to call the IRS. Make sure you have your paperwork – including any canceled checks and amended returns – ready when you call.
Did you file jointly with your spouse? It’s also possible that the IRS applied your refund to your spouse’s tax debt. If so, you have options to claim your share of the refund.
Was your refund applied to back taxes? Don’t fret! Give us a call and we can help you figure out the best way to resolve your tax debt problem.
IRS Letter 5071C: Preventing Identity Loss One Verification at a Time
March 24, 2018
What if someone tries to submit a tax return in your name? Identity thieves often steal personal information from taxpayers in order to file fraudulent tax returns and pocket their refunds. But wait! Does the IRS do anything to keep these identity thieves from making off with your hard-earned refund? You can rest assured that the IRS has processes in place for identity theft. They use their handy Letter 5071C to obtain information from taxpayers to verify their identities. This additional information is meant to help the IRS prevent fraudulent tax returns from sneaking through their system.
What does Letter 5071C say?
Letter 5071C informs you that the IRS has received a tax return with your name and/or social security number. It also lets you know that they need to verify the identity of the recipient of the notice.
How do I respond to Letter 5071C?
You have two options to respond:
- You can verify your identity using the IRS Identity Verification Service
- Alternatively, you can call the IRS on the toll-free Identity Verification number in the upper corner of your letter
When using either of these two contact methods, you should have a copy of your last filed tax return and your current year’s tax return, along with other documents that verify your identity. Until your identity is verified, the IRS will not complete the processing of your return.
If you filed the return and there was no identity theft, the IRS should process the return in approximately six weeks. If you did not file the return, then you must contact the IRS immediately using either of the two methods shared above.
Will the IRS contact me outside of Letter 5071C to verify my identity?
The IRS will not ask you to confirm your identity via email or phone. Fraudsters use a number of tactics to deceive taxpayers, including sending out fake emails, letters or making phone calls. You should only respond to Letter 5017C to verify your identity and only use the two methods given above to provide information to the IRS.
Tools like our TaxSafe™ plan can also help ensure that your identity is protected no matter what.