Posts Tagged ‘oic’

From Owing $10,000 to $15,600 in 5 Months?

Monday, June 13th, 2011

Do you have any credit cards that charge you 47.5% interest? If you answered “No ”…Don’t be so sure. ..you might end up paying the government this much in interest and penalties?

Did You Not File at All? If you didn’t file taxes this past year (or any other year for that matter), interest is being compounded daily on what you owe – the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 8% per year. Non-filers also pay a .5% late payment penalty plus a 4.5% late filing penalty, for a combined penalty of 5% for the first month your return is late. Every month that you don’t file – your penalties double…until 5 months when it caps at 47.5% (22.5% late filing penalty + 25% late payment penalty). 47.5%.

What You Should Do If You Haven’t Filed. By all means, file your taxes…even if you can’t afford to pay the tax that’s due. Here’s why: Every day you don’t file you’re getting charged the huge non-filing penalty I’ve described in the section above.

By filing your taxes and not paying them, you’ll at least go from Non-Filing to Non-Paying status. This will enable you to qualify for one of the 5 negotiating tactics:

-Be declared Non-Collectible Status

-Have the debt reduced through an -Offer In-Compromise

-Set up a monthly installment agreement plan

-Set up a partial installment agreement (where you pay less than the total owed)

-Declare Bankruptcy

 

If you don’t file your taxes, you won’t qualify for any of these ways to pay down your debt. You’ll be considered a non-filer.

Did You File and Not Pay? If you filed but didn’t pay the tax, that’s a little better, but don’t breathe easy just yet. If you don’t figure out a way to pay it soon, the IRS will start coming for their money in ways that you don’t want them to: like tax liens, wage garnishments, levies, and seizures. If you didn’t pay up, there’s interest being compounded daily on what you owe, which is the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 8% per year. That’s 11%. But remember that in addition to interest, you’re also being charged a Failure-to-Pay Penalty, which is .5% of the tax owed for each month. There is no maximum for the failure-to-pay penalty. If you’re sent a number of notices from the IRS and you still don’t pay, the penalty increases to 1%.

What You Should Do If You Filed and Didn’t Pay. The most obvious answer is to pay the debt. So what if you just can’t come up with the money? Here’s legal ways to negotiate with the IRS:

-Be declared Non-Collectible Status

-Have the debt reduced through an Offer-In-Compromise

-Set up a monthly installment agreement plan

Set up a partial installment agreement (where you pay less than the total owed)

-Declare Bankruptcy

All of these options have their pros and cons, and depending on your situation – one choice may be a lot better than the other.

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Can You Really Pay the IRS Pennies on the Dollar?

Thursday, November 4th, 2010

Is it really possible to pay the IRS “pennies on the dollar” and have the rest of your tax bill forgiven?  Yes – it is possible…but it’s not very likely.  It’s called an Offer-In-Compromise – and it used to be the only legitimate way to negotiate an actual lowering of the amount of taxes owed to the IRS by a taxpayer…sometimes far less.

However, since the IRS has seen so much “abuse” of this particular method of tax relief in recent years, they have shown by their actions that they are less and less apt to accept an Offer-In-Compromise.

In a press release dated October 2004, the IRS stated “This program serves an important purpose. But we do warn taxpayers to watch out for unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements,” said IRS Commissioner Mark W. Everson. “Taxpayers should not be duped by high-priced promises.” In fact, as of 2006, the IRS now rejects 85% of all Offers-in-Compromise.

Although an Offer-In-Compromise is one option for paying off IRS debt, it may not be the right option for you.  There’s no sense in pursuing this payment option with 15% success rate if there’s little hope that it will be accepted.

In fact, if you choose to hire a lawyer to represent you before the IRS, it’s critical that he/she is looking out for you and only wants the best outcome for your case.   Since the IRS only accepts 15% of Offers-In-Compromise, any good lawyer representing you must have full knowledge of all other options available through the IRS.  Plus, they would need to be able to thoroughly examine your case before they ever made a suggestion of the best action to take.

There’s also a new plan available: the new Partial Payment Installment Agreement (PPIA) enacted in January of 2005 is a form of payment that may allow you to pay off your taxes and have part of the debt forgiven.  With this new method, the IRS considers how much you owe before the 10-year statute of limitations runs out.

Legally, a tax professional can represent you to the IRS even if they live thousands of miles away from you.  But is that what you want when you’re dealing with something as stressful as IRS problems?

Or would you rather have someone who you can speak with face-to-face…who lives in your city…who has a reputation to uphold in your community?

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What Happens If You File Taxes—But Don’t Get Around To Paying Them

Wednesday, June 23rd, 2010

Back taxes are simply taxes that you owe that you didn’t pay when they were due.

If you’ve underpaid taxes for any reason, the balance that you owe is considered back tax.

If you fail to report taxable income (intentionally or unintentionally, it doesn’t matter) – as the IRS sees it – you still owe them money in the form of a back tax.

Some people don’t have the money when the tax bill comes around, so they just don’t pay.  They may plan on paying the money when they’re able…but that time never seems to come around.

If nothing seems to happen or they don’t get ‘caught’, some people start believing that they’ve somehow slipped under the radar of the IRS and that they’re getting away with it.  They’re not.  In fact it, might take years for the IRS to come after you, but they will eventually.

You will know  if your back tax problem is serious if  the IRS sends you  a Notice and Demand for Payment.  At this point, you pay the tax, or you don’t.

If you don’t pay, at least 30 days before the first levy, you’ll be sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.

If you receive the Final Notice of Intent to Levy and Notice of your right to a hearing, then you know you’ve got big problems.  Because that means in 30 days, the IRS will start helping itself to the money in your bank account.  If you’ve received a Final Notice of Intent to Levy, you need to take action immediately.

If this happens, there’s absolutely no time to waste. You must get help. There are a number of solutions that can keep the IRS from dipping into your bank account:

* You may have some deductions coming to you that you didn’t claim

* The IRS may have miscalculated your tax

* I may be able to negotiate a legal extension to the process

* The IRS may reduce your debt through an Offer in Compromise

* You Could Set up a monthly installment agreement plan

* You Could Set up a partial installment agreement (where you pay less than the total amount owed)

* You may declare bankruptcy, depending on your situation

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Can The IRS Take Your Social Security?

Saturday, March 27th, 2010

If you owe money to the IRS, and you are receiving Social Security benefits due to:

  • Federal Old-Age and Survivors Trust Fund (or)
  • Disability Insurance Benefits

The IRS can take 15% of your Social Security payments to satisfy your tax debt.

Prior to 1996, there was a $750/month “off limits” amount that had to be left for the Social Security recipient. However, that changed with the introduction of the Federal Payment Levy Program, which allowed for 15% of the total monthly payment to be collected – regardless of the amount.

However, benefit payments such as lump sum death benefits and benefits paid to children are not eligible. Additionally, Supplemental Security Income (SSI) payments, under Title XVI, and payments with partial withholding to repay a debt owed to Social Security will not be levied through the Federal Payment Levy Program.

How To Know if Your Social Security is About To Be Tapped by the IRS

The IRS must send you a “Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing” form. At this point you’ll have 30 days to respond.

You have a few choices at this point – you can either:

  • Pay the tax
  • Negotiate an alternative payment method (payment plan, partial payment plan, Offer-in-Compromise)
  • Be declared non-collectible (hardship) status
  • File for an appeal
  • Ignore the Warning and do nothing

If you decide to do nothing and you don’t contact the IRS, after 30 days they will submit your levy to the Financial Management Service (FMS) and 15% of your Social Security will begin to be taken to satisfy your tax debt.

The levy will remain in effect until the tax is paid off, or until you make other arrangements.

If you’re counting on Social Security benefits to live, you can’t afford for the IRS just to waltz in and take 15% of your livelihood without a fight.

Depending on your situation, you may be able to qualify for a Offer-In-Compromise and end up paying the IRS significantly less than you owe.

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Posted in Common Questions | 4 Comments »