If you owe the IRS and can’t pay, you may qualify for the IRS Debt Forgiveness Program.
Under certain circumstances, taxpayers can have their tax debt partially forgiven. When the IRS considers forgiving tax debt, the present financial condition of the taxpayer is of primary importance. That means the IRS cannot collect more than a taxpayer can pay. If any collection action by the IRS would force a tax debtor into a financial crisis, the IRS cannot collect the back taxes.
Offer in Compromise
Taxpayers that have the resources to pay only a partial amount of their tax debt can apply for the IRS government payment plan called an Offer in Compromise (OIC) to resolve the remaining amount. Depending on the financial capacity of the taxpayer, the IRS significantly reduces the total debt to an amount that the taxpayer can pay. This reduced amount can be paid in a lump sum or in fixed monthly installments.
Fresh Start Initiative
To make it easier for taxpayers to qualify for an OIC, the IRS has expanded their Fresh Start initiative. Under these more flexible rules, taxpayers do not have to disclose extensive financial details to the IRS to judge their paying ability. The Fresh Start initiative for OIC offers taxpayers the following advantages:
- The IRS now looks at only one year of future income for offers if they are paid in five or fewer months when calculating a taxpayer’s reasonable collection potential. This is down from previous four years. For agreements of six to 24 months, the IRS now looks at two years of future income instead of the previous five years.
- Taxpayers are now allowed to make their student loans’ minimum payments for post-high school education loans guaranteed by the federal government.
- Taxpayers may, under certain conditions, pay delinquent federal and state or local taxes in monthly installments if they cannot pay it in full.
- The standard allowance for the Allowable Living Expense amount has been expanded. This allowance now includes credit card payments, bank fees and charges, and other miscellaneous allowances.
Understanding your tax debt and dealing with the IRS isn’t easy to do alone, even with programs like IRS Debt Forgiveness. Luckily, there are professionals who can help you navigate your options. Call Tax Defense Network for a no-cost, confidential consultation today at (877) 588-1098.
Do you know who is collecting your tax debt?
The IRS has called for backup from the private sector, and these four companies could be coming after your tax debt in lieu of the IRS. Here’s what you need to know to stay informed, lawful and safe.
What’s the deal with Private Debt Collection Agencies (PDCs)?
Private debt collection agencies, or 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, which includes a section requiring the IRS to use PDCs for outstanding tax debt that the IRS is no longer pursuing. Now a year and a half later, the program is in full swing. The IRS has hired four PDCs: Conserve, Pioneer, Performant Recovery, and CBE Group. Though not all tax debt cases are eligible for PDCs to handle (e.g. offer-in-compromise, innocent spouse cases, deceased), 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 four companies 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 – it will never call or text you out of the blue to demand payment, but rather send you notices in the mail that progressively increase in urgency to act. If your case has been assigned to a PDC, the IRS will let you know so it won’t be a surprise.
- Don’t pay the PDC directly – Though the PDC is hired to collect your debt, you’re not actually writing out your check to them. 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, or call Tax Defense Network for a free consultation at (877) 588-1098.
If you owe the IRS and don’t know where to start, then you’re one of over 8 million Americans who are in the same boat. And while many financial pros can claim to help, selecting one isn’t the same as choosing a candy bar at the grocery checkout line.
Tax debt resolution professionals help clients figure out the best approach to relieving tax debt or resolving issues concerning the IRS, but they’re not all cut from the same cloth. That’s why it’s important to evaluate which company can best serve you (and who you can trust) before signing on the dotted line.
Here are four things to consider when choosing a tax debt resolution provider:
1. Proven experience and dynamic resources – When tax relief can seem like rocket science, you’ll inevitably have questions for the pros. Look for a company that not only knows their stuff (hint: check their website, social media accounts and credentials), but grants clients direct access to licensed professionals such as attorneys, CPAs and enrolled agents. It’s a good sign that you’ll have a fast pass to the resources you need when these professionals are on staff.
Industry expertise pairs well with practice, so consider how long the company has been in the market and its track record. Is it a law firm that recently added tax services? Is it a bike shop turned tax solutions provider? In short, the longer the company has been successfully helping customers like you, the better.
2. A commitment to client empowerment – When you owe the IRS thousands of dollars, you don’t exactly feel powerful. Client empowerment occurs when a company puts forth effort in communication, guidance and transparency to help you feel valued. A tax resolution company that not only empathizes with your situation, but is a partner to you throughout the process, can be your best catalyst for regaining confidence. If you have a designated consultant on your case, this is a good sign you’ll be in good, steady hands.
3. Accreditation and stellar ratings – There are many unbiased, third-party review sites that provide valuable insight into a company’s business practices and the client experience. Organizations like Better Business Bureau (BBB), Best Company or Trustpilot take real customers’ reviews and ratings to grade companies. For example, the BBB rates companies from F (lowest) to A+ (highest), so you can ensure a company has a “passing” grade.
4. A broad range of service offerings – Here’s a little secret: Most tax resolution companies offer the same basic services. Sift out a true diamond in the rough by seeing if the company goes beyond the basics. Look for a tax services provider offering (and mastering) complex issues such as:
- Federal and state taxes
- Business tax solutions
- Self-employment tax solutions
- International filing
- Trust and estate taxes
- Offshore Voluntary Disclosure Program (OVDP)
Ideally, you want a partner you can trust for all tax-related services or guidance you may need now and in the future.
When you check “yes” to these four must-have qualities, you’ll be on your way to resolving tax issues in no time.
Tax Defense Network has been in the business of helping taxpayers resolve their issues for 10 years and has an A+ rating with the Better Business Bureau. To start the journey to tax debt relief alongside experienced professionals you can trust, call Tax Defense Network at (877) 588-1098 or chat with an analyst today.