If you’re in a position where you can’t afford to pay your taxes, you’re not feeling great. Keep in mind you’re not alone. A lot of people find themselves in a tight spot come tax season.

You may feel like you’ve been overcharged for your taxes. And, in some cases, you may be right, allowing one to get the tax burden reduced or eliminated. However, if you legitimately owe back taxes to the IRS, you will face interest, financial penalties, and eventually liens and levies on your wages and property if you don’t deal with the outstanding debt.

Once you’re in a financial situation where you owe the IRS, it can quickly spiral out of control and start affecting other areas of your life. It can be hard to obtain certain types of credit while carrying a tax debt.

Over the years, tax experts and consumer advocates accused the IRS of failing to help those who were making a genuine effort to pay off their tax debt. In response to mounting criticism, in 2011, the IRS announced the creation of a new initiative known as the Fresh Start Program. The program was designed to give more taxpayers who originally owed substantial back taxes the opportunity to resolve their tax debt.

This in-depth article is all about the IRS Fresh Start Program. There is a bit of a mystery behind the name and its current state, which are worth mentioning at the outset. Some people refer to the program as the Fresh Start Initiative rather than the Fresh Start Program. Others imply that the program is still functioning today as a special tool.

In actuality, the initiative ceases to exist as a standalone program. But, neither its existence today nor its name is as important as its legacy. The bottom line is that the benefits of the Fresh Start Program still exist, and many people still refer back to its name, so we’re going to do the same here.

What is the IRS Fresh Start Program?

To be exact, the IRS Fresh Start Program is not really a single program. It’s a series of changes the IRS made to the tax code to help individuals with tax debt. Since its start in 2011, The IRS has implemented several main programs around Fresh Start.

The goal is to make it easier for those who owe the IRS back taxes to pay it off and avoid a lien on their personal assets. In short, it’s an opportunity to start over. Some of the benefits the IRS Fresh Start Program introduced for many taxpayers include:

The entire aim is to make it easier to pay monthly taxes without excessive fees and liens. It’s the IRS’s attempt to be less aggressive and work better with individuals that have a tax debt. Currently, the tax relief options impacted by the Fresh Start include:

It will take the assistance of a tax professional to help you decide which option(s) make the most sense for you. The IRS will require detailed financial information that proves you qualify for tax relief options.

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Who Can Qualify for the IRS Fresh Start Program?

The IRS Fresh Start Program benefits are available to everyone. The amount of variety of options within the program makes it likely that you’ll qualify for at least one type of tax debt relief option. However, the complexity of the program makes it difficult to get started if you’re not working with a tax professional.

The first hurdle to overcome is dealing with your unfiled tax returns. The IRS requires you to be current with all required tax returns before even being granted any of the tax relief options available under the Fresh Start Program. You must also meet the correct amount of current withholdings for the current year. The IRS feels these qualifiers are a way to create trust before working with you.

IRS Fresh Start Initiative Qualifications

The IRS Fresh Start Initiative is not a program but rather a group of policy changes that have occurred over the years. Nailing down the qualifications for the initiative isn’t possible without first accessing each individual’s situation.

You must apply for the option you or a tax professional helping you, determines to be most appropriate for your personal situation. The IRS will not take any action to help you just because you qualify. Remember, the IRS charges interest on tax and penalties until your total tax debt balance is paid in full. It’s critical to find out if you qualify and apply as soon as possible to avoid paying more than necessary.

How Does the Fresh Start Program Work?

The IRS Fresh Start program simplifies the process of paying back significant tax debt and relieves some of the burdens that come with owing the IRS large sums of money, such as liens, levies, wage garnishments, and penalties. There are three repayment options under the program: an extended installment agreement, tax lien withdrawals, and the offer in compromise.

Extended Installment Agreement

The most common tax debt relief option is the extended installment agreement. It’s designed for qualified taxpayers that owe $50,000 or less. The IRS will also suspend collection activities like wage garnishments, tax liens, or tax levies. You’ll make affordable monthly payments based on your income and the value of your assets. The goal is to make the tax payments affordable so you can pay them on time without a financial burden.

Who Can Qualify for IRS Installment Agreements?
Although installment agreements are the most common tax relief option, you still must meet certain criteria to qualify:

• You must be current with all filed tax returns
• You will need to disclose all assets
• You must be able to prove that you lack the adequate cash available to pay off your tax debt by providing records of your checking, savings, and brokerage accounts
• You must be able to prove that you’re unable to borrow the total amount you owe in tax debt using loans or refinancing options
• You must be able to prove that you lack adequate equity in retirement accounts to pay off your total debt

Tax Lien Withdrawal

If you’re under a tax lien, you’ll probably want to pursue a tax lien withdrawal. This allows you to pay off your debt using monthly direct debit payments options. Once this is set up, you can request that the IRS remove any tax liens on your accounts. This also helps you avoid having the tax lien reported to the three consumer credit agencies.

If you set up a direct debit payment agreement, there’s a chance the IRS may withdraw the lien from public record under the following conditions:

• You are an individual, a business with income tax liabilities only, or you are out of business (for which any type of tax qualifies).
• The unpaid tax debt balance originally assessed, which includes tax, interest and penalties, is less than $25,000. Interest and penalties that have accrued since you filed (unassessed) do not count toward the tax amount limitation. If you are above $25,000, you can pay it down to qualify.
• You agree to a direct debit installment agreement with a 60-month term or less. What this means is that the payment is directly taken each month from your bank account. If the IRS can only legally collect for, say, 30 months, then you must pay off the balance in 30 months or less.
• You are in filing and deposit compliance.

An Offer in Compromise

The last Fresh Start Tax Program option is the Offer in Compromise, or OIC, program. In the OIC program, you may be able to settle your debt for less than they owe. You’ll make an offer based on the value of the assets the IRS can liquidate to use to pay off your tax debt.

The IRS will take into consideration your ability to pay, your current income and living expenses, and any asset equity in determining what they believe you can reasonably repay. An OIC must be negotiated with the IRS and can take many months to obtain, so you may want the help of a tax specialist to guide you through the requirements and negotiate with the IRS on your behalf.

Even then, only some taxpayers may qualify and be able to pay their debt for a lesser amount, and their assets will be reduced significantly if the IRS accepts the offer.

What Is the IRS Offer in Compromise Process?

After you submit your OIC application, the IRS will look at your financial position – including income, assets, expenses, and living circumstances. After analyzing all the variables, they’ll determine your ability to pay what you owe in back taxes. OIC is also an option if you do not agree with the amount the IRS claims you owe. You can file what is called an Offer in Compromise-Doubt as to Liability (DATL) if you want to have your tax liability reconsidered.

Qualifying for an OIC also makes you eligible to have tax-adjacent costs reduced. This means you’ll be able to negotiate settlements for penalties and interest. You’ll need to use IRS Form 656 when applying for an Offer in Compromise. You will also need to fill out a Form 433-A Collection Information Statement for Wage Earners and Self Employed Individuals or a Form 433-B Collection Information Statement for Businesses. If you’re considering an offer in compromise, working with a tax professional can give you the best chances of getting your offer accepted in the quickest amount of time.

How to Apply for IRS Fresh Start Program

The Fresh Start Tax Program itself doesn’t have an application. However, some of the resolution options impacted by the program do. Therefore, you first need to identify which strategy is best before applying. Each option has a different procedure, qualifications, and application process. Some applications can be filled out and submitted in minutes online, while others are extremely complex and can take as long as one year to get approved.

The fees for the various programs vary as well. An offer in compromise comes with a filing fee of $205, while an installment agreement fee will cost you $107 for direct debit repayment and $225 for other types of repayment methods.

As a matter of caution, you should not choose a tax relief program based only on the cost involved. The relief that costs you the least may not necessarily be the most appropriate one for you; it may prove to be more expensive than others in the long run.

Don’t choose your tax relief program based on cost. What costs more initially can end up saving you much more in the long run. Likewise, you should not apply for a tax relief program just because you’re eligible. Relief programs have plenty of disadvantages. For example, you may be required to disclose confidential financial information you’d rather keep private. Ultimately seeking the guidance of a tax professional will help you navigate your payment options and choose a program with maximum benefits and minimum downsides.

What is the People’s First Initiative?

To help qualified individuals facing Coronavirus-related challenges, the IRS put a series of measures in place to provide taxpayer relief on a variety of Fresh Start Initiative-related programs. The People’s First Initiative included reminders about available services and relief on installment agreements and other options within the Fresh Start Tax program. Here’s an overview of the notable measures the People’s First Initiative offered when it was in place.

Installment Agreements

If you had an installment agreement, payments due between April 1 through July 15, 2020, were suspended. Interest continued to accrue, however. Qualified taxpayers had the option to stop or continue their automatic bank debits as long as the People’s Firsts Initiative stayed active. For new installment agreements, taxpayers were able to resolve outstanding tax debt liabilities by entering into a monthly payment agreement with the IRS.

Offers in Compromise (OIC)

To help taxpayers who were in various stages of the offers in compromise process, the IRS extended the deadline to provide requested additional information to support a pending OIC. They allowed taxpayers the option of suspending all payments on accepted OICs as well, although interest continued to accrue. The IRS put emphasis on reminding people with tax debt liabilities exceeding their net worth that the OIC process was designed to resolve tax debts and provide a fresh start.

Liens and Levies

Liens and levies initiated by IRS officers were suspended. New automatic, systemic liens and levies were also suspended. However, IRS officers continued to pursue high-income non-filers.

Passport Certifications

The IRS notified the Department of State of taxpayers who were “seriously delinquent,” and those taxpayers may have found their passports suspended, or their ability to renew their passport revoked. Those taxpayers were encouraged to submit a request for an Installment Agreement or an OIC. The possibility of having your passport revoked, suspended, or being denied a new one if you have a serious tax delinquency remains.

The IRS offers specific guidance on this issue.

Where are We Now?

Although not all of the advantages to the People’s First Initiative remain, the IRS Fresh Start Program still offers a straightforward way for taxpayers to address back taxes. The eligibility requirements for each option can be complex, and communicating with the IRS can be frustrating. If the IRS requests additional information or financial data, it can be impossible to know whether you’re providing the right documents or making the financial situation worse.

In most cases, it’s wise to hire a professional tax relief company to help you with the IRS Fresh Start Program.

An experienced tax relief company like 20/20 Tax Resolution can review your situation, advise you about your best options, and walk you through the process step by step. Here’s how a tax resolution company like 20/20 will help you:

Enroll in the Best Tax Relief Program
20/20 has a complete understanding of the Fresh Start requirements and can quickly assess which option is best for your individual situation. They can also guide you through requesting enrollment in the appropriate program.

Help You Make a Convincing Case
When the IRS requests personal information or financial statements to support your request, 20/20 Tax Resolution can make an accurate and convincing case for you. Your tax relief experts can communicate with the IRS on your behalf, which will reduce your stress levels and save you time.

Save as Much as Possible
If you request an offer in compromise, your tax resolution partner will ensure that you only pay what you’re able to afford. Ultimately, this strategy can allow you to save as much as possible on your tax debt and pay less than what you owe.

When you’re looking for a tax relief company to help you with the Fresh Start initiative, don’t limit yourself to local firms. A tax relief company in your area might be convenient to visit in person, but proximity doesn’t necessarily equal great results.

Do your homework and find one that has a strong reputation on a national level. The ease and availability of remote communication and video calls free you to work with the right company no matter where you’re located.

20/20 Tax Resolution are nationwide go-to tax experts when it comes to tax relief help. 20/20 Tax Resolution has helped over 32,000 businesses and individuals reach successful resolutions with their IRS and state tax liabilities.

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The questions don’t stop with, “when are taxes due?” The list goes on and on and on. Instead of spending hours searching for all of your tax help questions, we’re hoping you can find what you’re looking for here. This Tax Help Guide is designed to answer the most commonly searched-for tax questions people ask and search for every year.

Don’t need answers to every question on our list? No problem. Just click on your question, and we’ll take you directly to that question and answer within the tax help guide.

Who can I call with a tax question?

Did you know the IRS reports that it gets more telephone calls the day after President’s Day than any other day of the year?

If you’re one of the hopefuls directly calling the IRS, don’t hold your breath. The agency’s funding issues and shift in resources to handle new tax law and backlogs means it’s likely your call will go unanswered.

For perspective, a 2019 IRS watchdog report noted that in the first week of the 2019 tax season, callers routed to an IRS reached a person 38 percent of the time. This was after an average wait of 48 minutes. The wait times are increasing, and the odds of reaching an actual person are decreasing. You’re probably ready to hear an alternative solution. Don’t worry, you have a lot of much less painful options.

Find Online Help

Check the IRS website. A major reason taxpayers call the agency is to ask about the status of their refund. For that, you can go to “Where’s My Refund?” on the IRS website (click Refund Status). The page is updated once every 24 hours. Backlog from the shutdown notwithstanding, the agency is still saying it will process most returns within 21 days, so wait about three weeks before you start checking. Always check the IRS FAQ page before picking up the phone.

You’ll find detailed information on numerous topics throughout the IRS website. It has a variety of interactive worksheets and calculators on subjects such as whom you can claim as a dependent, which filing status to choose, eligibility for education credits, and even whether you need to file a tax return at all.

Try a free DIY Tax Forum

If you’re a tax DIYer, your tax-prep software likely hosts an online forum that you access for questions. You can ask questions and get answers from tax experts or other seasoned DIYers. TurboTax even allows you to have your self-prepared taxes reviewed by a tax expert before officially submitting them.
Some free versions of online tax-prep products are now allow you to access their tax experts—CPAs or agents. H&R Block offers such a service through its free online product, allowing users to ask their questions via chat.

Get In-Person Assistance

Are you more of a face-to-face kind of person? No problem, you can go to an IRS Taxpayer Assistance Center. Speaking face-to-face with an IRS representative is possible, but of course, it’s not as simple as walking through a door and taking a waiting ticket. The IRS has eliminated walk-in hours at its Taxpayer Assistance Centers. You’ll need to identify the closest office to you and call 844-545-5640 to make an appointment. Hours are typically 8:30 a.m. to 4:30 p.m. local time Monday through Friday but can vary by office.

If you’d rather not jump through all of the IRS hoops to get in-person help, you’ll likely find dozens of professional service options in your area that provide in-person help.

Free Community-Based Help Centers

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) are programs sponsored by the IRS and managed by trained local community volunteers. They can help you fill out your tax returns. Some are staffed by accounting students from local colleges and supervised by an accounting professor. The TCE program is available for taxpayers 60 or older. Most TCE services are operated by the AARP Foundation Tax-Aide program.

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What if I Can’t Afford to Pay My Taxes?

Sometimes you can’t afford to pay your own taxes by the deadline. A lot of people face this problem. The worst thing you can do is avoid the issue and ignore it. You can’t hide from the IRS. The best thing to do is face the problem and exercise all of your available options.

The challenge is knowing where to start. Here are four steps that will help if you can’t pay your own taxes.

Step One: File by the Deadline

If you can’t pay for everything, you still need to file on time. If you can, work with an experienced tax professional to help you fill out your forms. Often they can find credits and deductions that can lower your tax bill. Later you’ll have to pay the penalty for not filing on time, and there is no advantage to filing past the deadline.

Step Two: Pay What You Can Now

Don’t drain all of your cash flow on your tax bill. Take care of your food, utilities, transportation, and living costs first. You don’t need to start racking up credit card debt. You can file a tax extension to give you more breathing room. You’ll have to pay interest for what you can’t pay by the deadline, but the interest is much lower than credit card interest. So pay the IRS what you can now, but always take care of the essentials first, and avoid credit card debt.

Step Three: Keep Paying What You Owe

After tax day passes, you’ll have a few months before the IRS contacts you about your remaining tax balance. During that time, keep paying off your tax bill with the goal of paying it off in full before they contact you. If you still have a balance, you can attempt to secure a monthly installment arrangement. However, it may not be that easy, as many taxpayers have found the process tiring and frustrating to try and work through on their own. The IRS’s job is to get as much as they legally can, so getting professional assistance for your negotiation is always a good idea.

Step 4: Make a Plan for Future Taxes

Find a tax expert you can trust to make sure you’re not in the same spot next year. They’ll help you figure out how much you should be setting aside each month, so you’re not facing another massive tax bill next year. Most qualified individuals working for a company can get their own taxes withheld in their paycheck, so they don’t need to worry about it. But if you have a business or side business, it will be up to you to determine how much to set aside.

Make sure to see what the IRS says to the question, “What if I can’t pay my taxes?”

Can You negotiate with the IRS?

Yes, you actually can negotiate with the IRS. The IRS calls a negotiation “An Offer in Compromise.” It’s just a fancy way to say negotiate.

An offer in compromise is a way to settle your tax debt for less than the total l amount owed. The IRS takes several factors into consideration when determining if you qualify for a negotiated or reduced settlement.

The IRS will often approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. They recommend you explore all other payment options before submitting an offer in compromise.

Offer in Compromise Eligibility

If you choose to attempt to negotiate you’ll need to make sure you’re eligible before starting the lengthy process. The IRS will reject your OIC application if you have not filed all required tax returns. You do not qualify if you are in an open bankruptcy proceeding. Use the IRS’ Offer in Compromise Pre-Qualifier to see if you’re eligible.

How do I Get out of Tax Debt?

Nobody plans on getting into tax debt, but it’s a common occurrence. If you owe back taxes, there are a lot of strategies you can use to get above water. The strategy you use will depend on your unique situation. The most common ways people get out of tax debt are by using an IRS payment plan, an IRS Offers In Compromise, and getting your account into Currently Not Collectible Status. We just discussed Offers In Compromise, so let’s take a closer look at the other two options.

What is the IRS Payment Plan?

An IRS payment plan is exactly how it sounds. In most cases, this will be your best path to getting out of tax debt. The IRS offers several types of installment plans.

Guaranteed Installment Agreement
– is an option if you owe $10,000 or less to the IRS. It’s generally easy to qualify for the plan. You must file all past tax returns. The previous five years must have been filed on time. You can’t have used an installment agreement plan within the past five years. You must be able to pay the entire amount within three years or less.

Streamlined Installment Agreement
– can be used for tax debts up to $50,000. The qualifications are similar to the guaranteed installment agreement. On this plan, you can make payments for up to six years. This was introduced by the IRS Fresh Start Program.

If your account goes into “Currently Not Collectible Status,” this is just a temporary hold. The IRS will not attempt to collect owed taxes until you resume a financially stable condition.

Does the IRS forgive tax debt after 10 years?

This one is complicated, but yes, there technically is a statute of limitations on IRS tax collection. But it only goes into effect if specific criteria are met. Your tax debt can be canceled after 10 years if the IRS makes no effort to collect on your account and if you don’t contact the IRS. However, this is not as simple as just waiting a decade without ever paying what you owe.

The date begins once you receive written notice from the IRS concerning what you owe. For example, if you filed your tax return on April 15th, 2019, and got a notice in the mail dated June 1, your statutory period would have begun on June 1st. The date is called the CSED (Collection Statute Expiration Date). Some situations can also delay the CSED by halting the clock on the 10-year time frame. These include:

Filing for bankruptcy
Being outside the U.S. for at least six months
Military deferment
Submitting an offer in compromise to settle back taxes
Filing a lawsuit against the IRS
Having your assets held in court custody due to divorce, judgments against you, etc.

Having your assets held in court custody due to divorce, judgments against you, etc.
It takes six months after bankruptcy cases settle to get the clock restarted on the CSED. This means the IRS has more time to take collection actions against you, and the IRS will tend to ramp up these efforts before the statute of limitations expires.

Does State Tax Debt Ever Go Away?

Taxpayers who are subject to state income tax need to find out what options, if any, are offered by their state tax department. State tax departments may take harsher collection actions and have fewer options for taxpayers to settle back taxes or make payment plans. They can also have a much longer statute of limitations on collections. The IRS usually gets negatively portrayed in movies and on TV, but it’s the state tax departments that are more likely to show up unannounced or issue liens a lot sooner.

Should You Try Riding out The Statute of Limitations?

It’s very rare that anyone rides out the statute of limitations, and it’s usually due to extenuating circumstances like disability or a debilitating business closure. If enough time has passed that you think you might be able to go the whole 10 years without payments or responses to collection actions, you must keep detailed records of all correspondence with the IRS. It’s not recommended to intentionally try riding out the IRS statute of limitations without the guidance of a tax professional specializing in tax relief and resolution issues.

What is the IRS Fresh Start Program?

The IRS Fresh Start is not really a single program, but rather a series of changes the IRS has made to the tax code. The IRS has implemented several programs around Fresh Start since 2011. The idea is to make it easier for qualified individuals who owe back taxes to pay the IRS while avoiding a lien on their vehicle or home.

Today, the Fresh Start Program is no longer available, but many of the negotiating structures that were created for the program exist for taxpayers.

The program increased the threshold for a lien from $5,000 to $10,000. Taxpayers can also apply to have a lien withdrawn when their taxes owed are less than $25,000, and they agree to automatic installment payments. There are different tools available to help struggling qualified individuals and small businesses pay off and/or eliminate some of their debt. The goal is to allow citizens to pay taxes without liens and excess fees. The current program is now called the Fresh Start Initiative, formerly named the Fresh Start Program.

Who Can Qualify for the Fresh Start Initiative?

Technically nobody can qualify for the program as it no longer exists; however, the programs left behind are still an option. Everyone is eligible for these programs once they jump through a few tax hoops. First, you need to get current. You must have filed all past tax returns, usually going back six years. The IRS will not consider anyone to be current if they have unfiled own tax returns, so they will not sit down to negotiate. If you’re currently in or pursuing bankruptcy, you will not be eligible for any of the programs. Self-employed qualified individuals must demonstrate a drop in their net income of 25 percent or greater. Earnings for married couples filing jointly must be under $200,000 per year, and single filers under $100,000. Finally, you must owe less than $50,000 dollars in taxes.

What do I do if I have been levied?

A tax levy is similar to a tax lien, but more serious. A levy is the seizure of property to pay taxes owed. Tax levies can include garnishing wages or seizing assets and bank accounts. Tax levies often come after a tax lien, but are not required to. A levy is really the exercise of the lien claim.

In most cases, if you’ve been levied, the IRS will contact your bank and place a 21-day hold on your account. If you cannot negotiate a deal with the IRS during that time, the bank may send some or all of your money to the IRS. Your house is another option, but the IRS would rather not go after your house because it makes them look bad in the public eye.

Not everything can be seized by the IRS. They can’t take unemployment benefits, certain annuity and pension benefits, disability payments, worker’s compensation, some public assistance payments, and child support payments.

If you disagree with an IRS employee’s decision about a lien or levy, you can ask for a conference with their manager. If you disagree with the manager’s assessment, you can ask the Office of Appeals to review your case. In some cases, filing for bankruptcy can get rid of tax debt, but it’s a long process, and doesn’t always work out.

What is a Tax Debt Relief Company?

Working your way through the complex web of tax laws can be a time-consuming and exhausting task. With so many requirements, forms, and needed paperwork the IRS requires it can quickly get overwhelming. You have a lot of questions but finding consistent answers feel impossible. A good tax debt relief company acts as professional guidance on your tax debt journey.

There are many solutions for tax debt, but knowing which one is right for you, and figuring out how to make it work involves layers of complexity. For some people, an Offer in Compromise makes sense, while for others, an installment agreement will work better. Another person might qualify for Innocent Spouse Relief, a Penalty Abatement, or Levy Relief. A combination of solutions might work best too.

Good tax debt relief companies will have a licensed tax professional look at your specific tax debt situation and determine the best one or combination of solutions to help you get your tax debt paid off. The IRS has a lot of resources and people power to get overdue taxes from people. They have incredible power to seize wages and property. However, dealing with the IRS doesn’t have to be stressful. You just need a good plan.

A tax debt relief company helps you develop a realistic plan. They take care of all the paperwork and negotiations with the IRS on your behalf.

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Penalties and interest will dramatically increase what you owe the IRS or state taxing authorities. The longer you wait to file and pay, the more overwhelming the situation can become. To start, we’ll need to collect some basic information below.

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In July of 2013, we submitted a proposal for an Installment Agreement in the amount of $300 per month to resolve the liability through what’s called a Partial Payment Installment Agreement. Although we knew that this agreement would need to be reviewed every two years, the taxpayer could not afford a larger monthly payment to meet the six-year rule so as to avoid the two-year review. After submission of our proposal, there was the normal back-and-forth of negotiations and collection of additional supporting documentation as well as awaiting the appeals process for the previously filed appeals.

During this time, we also had to deal with a Revenue Officer who was not playing by the rules and issuing erroneous levies. We were successful at getting these levies released based on the rules and regulations set forth in the Internal Revenue Manual (IRM), but all of these issues lead to a delay in obtaining a formal resolution.

By April of 2014, the business’ financial condition was only worsening. Things were even more dire than they were a year prior. This being the case, we decided to move forward with an Offer in Compromise on behalf of the business. The taxpayer was skeptical at first that we could work out an agreement of this type, but we discussed with him the new rules and regulations surrounding the Offer in Compromise based on the Fresh Start Program and showed him why his business qualified for the program. By October 2014, we completed the Offer in Compromise and sent it to the taxpayer for signature and to forward with the appropriate down payment and filing fee. Unfortunately, the taxpayer forgot to send in the Offer, delaying our efforts a bit longer. By February of 2015, the Offer was submitted and we were then tasked with awaiting an Offer Specialist to be assigned to the case. The Offer process is quite lengthy and can take up to two years before a formal determination is made on the case. After negotiations back and forth, we were finally successful at resolving this case through the Offer in Compromise program, compromising the liability for a total of $324 in February of 2016.

We were all very pleased with the final results and received this “thank you” from the taxpayer:

I wanted to write to you to say thank you for all the work that you did for me to help me resolve this tax issue. As you may remember, we had previously used another company, which charged us huge fees and did not advance the process of settling the debt. That company went bankrupt. I had mistakenly turned over all my documentation to that company. I lost all of it. That was an enormous error on my part. I trusted the wrong people. I also lost all my records, which made your job even more difficult. I, not only, lost my money to that company, I also found that the tax issues worsened. I was quite “gun-shy” when I hired your company. However, you were very patient with me throughout the process. I thank you so much for that. When you laid out my options, I could not have imagined that this would have been settled so fully and completely. It is like a breath of fresh air. So, I just wanted to thank you so much for your professionalism, diligence, and patience.”

As you can see, not all cases are cut and dry, and the IRS can be an extremely difficult entity to deal with. This being said, with proper representation, and maybe a little bit of patience, your case could be resolved just as completely as this one was. Get in touch with us today to learn more about how we can help with your particular situation.

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The Collection Division is responsible for collecting taxes that have not already been paid or placed on a voluntary resolution program.  Unfortunately, there is quite a bit of misinformation regarding cases assigned for collection by the IRS.  Regardless of your circumstances here are a few of the most common myths of IRS collection cases:

1. You’re not responsible for mail you never get: Many taxpayers believe, mistakenly, that if they don’t let the IRS know their most current address they are not responsible for collection letters the IRS is sending.  Nothing could be further from the truth.  Generally, the IRS’ requirement for service by mail is the taxpayer’s last known address.  Therefore, if the taxpayer has not notified the IRS of an address change the taxpayer will actually be the one to suffer by being in the dark.  This issue can end up costing a taxpayer valuable collection appeal rights.
2. The IRS will settle for “pennies on the dollar”: The IRS does have a settlement program called the Offer in Compromise (OIC). Interestingly, offers happen probably more often than many tax professionals think, but a lot less than taxpayers have come to believe. The IRS’ own numbers over the past two years show an Offer in Compromise acceptance rate of roughly 40%.  Still, the key to a successful offer is the pre-qualification process.  There are many nuances to an Offer in Compromise case and as a result, there is no substitute for experience when it comes to presenting a viable, realistic offer. 
3. The IRS can collect against you for a lifetime: Sometimes dealing with IRS Collections for more than a day can feel like a lifetime.  Especially, if you’re on hold.  In fact, the rules concerning how long the IRS can pursue unpaid taxes are quite clear.  Generally speaking the IRS’ statute of limitations for collection is ten years from the date a liability is assessed.
4. The IRS will take your home: In actuality, the IRS is not going to take your home.  That’s not to say that the IRS can’t take it… only that the IRS doesn’t do it.  Seizures (which can include home, car, boat, etc.) themselves are fairly rare for the IRS.  In the past two fiscal years, the IRS has reported fewer than 500 total seizures.  And because policy statement and stricter rules make seizing a primary residence more difficult it becomes increasingly difficult to face that proposition.
5. At least the IRS can’t get to your retirement accounts: Unfortunately, the IRS can get to retirement accounts.  There are very few assets exempt from the reach of an IRS levy.  They are outlined specifically in the Internal Revenue Code and include (here), but are not limited to, Workmen’s Compensation, Unemployment Benefits and minimum exemptions for salaries and wages.  What one won’t find exempted by rule are 401k accounts, stock accounts or Social Security benefits.

When it comes to #IRS collection cases, are you falling for one of the top 5 myths? @2020TaxResInc
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Of course, dealing with IRS Collections is a nuanced process that should not be taken for granted.  But, dispelling the myths above should help bring more clarity to what one may face when dealing with IRS Collections.

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As a business owner, this infographic outlines five tax pitfalls that you DON’T want to make when dealing with a liability.

There are solutions available to taxpayers who owe taxes. The key to making the experience as manageable as possible is knowing a few easy tips about what to avoid.

You can always learn more about the ways in which we can help you and your situation, or feel free to contact us with any questions.

Be aware of the ‘5 Tax Mistakes You Don’t Want to Make’ @2020TaxResInc #SMB
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To download a high-resolution version of this infographic, please click here. 

The post [Infographic] 5 Tax Mistakes You Don’t Want to Make appeared first on 20/20 Tax Resolution.

Unfortunately, they couldn’t be more wrong and it’s usually a levy or lien that brings about the realization.  Yes, of course, voluntary payments are important to paying unpaid taxes.  In fact, they are the first thing I recommend in nearly every case, especially employment tax cases.  But to think that voluntary payments alone will alter the course of one’s case can be a huge miscalculation.  State and IRS collections are done by system.  They’re not whimsical or based on good faith.  Until a tax liability is paid in full or a formal resolution, such as installment agreement, is agreed to the collection process moves forward exposing taxpayers to liens and levies.

Just recently, in fact, I encountered this very situation.  A taxpayer came to me at the end of last year irate about being levied by the IRS.  The company owes the IRS just over 100k in employment taxes but the owner of the company had been making voluntary payments of $2,000 per month.  He hadn’t spoken with the IRS but had noted less mail was coming since beginning the voluntary payments.  He was angry that the levy followed his very obvious effort at resolving the situation.  Unfortunately, this taxpayer had assumed that his payments had directly influenced the IRS’ lack of urgency with his case.

Immediately, I began my effort of educating the taxpayer about the collection process. Most every state and definitely the IRS has a set protocol for collecting unpaid taxes. The process begins with notification of a balance due, letters with an increasing demand for payment and ultimately assignment to a field personnel for collection.  Every collection case goes through this protocol until the liability is paid or a collection determination is made.  A collection determination means the state or IRS’ decision on how the liability will be resolved.  A tax practitioner’s goal is to mold and influence that collection determination within the rules to their clients’ best interests.

The point here is that making voluntary payments, while advisable, does not alter the collection process.  Short of full paying the liability proactive and consistent contact with the authorities is not just recommended but required in order to ensure that a client remains protected from enforcement action.

If you find yourself in this situation, it is now more important than ever to get in contact with us. We are always here to answer any questions that you might have about your particular situation. Make it a point to contact us today so that we can get your life back on track.

The post “I’ve Got My Tax Liability Under Control” appeared first on 20/20 Tax Resolution.

Most importantly, compliance is a prerequisite to any case resolution.  When a case is with IRS collections, the taxpayer’s compliance with returns and deposits is subject to higher scrutiny.  The Service simply seeks to draw a line in the sand to stop accruals otherwise known as “pyramiding.” When an individual or business is current and not pyramiding, they are more likely to be protected from collections such as bank levies and garnishments.  They can be protected by being placed into “pending installment agreement status” if a formal proposal is made.  Further, an IRS revenue officer is also more likely to grant a hold on collections and work on a timeline for resolution.  Finally, if an appeal is filed, the Office of Appeals is more likely to consider their case without collections to achieve a resolution.

In its simplest form, the IRS can only formalize a resolution with a taxpayer who is compliant, for the exact periods with balances due.  If returns are outstanding or current deposits are not made, the total balance due is also unknown and terms for an agreement cannot be set. More so, after an agreement has been established, if a taxpayer does not remain compliant, new periods outside of agreement have been created.  This automatically breaks the terms of any agreement and the entire process must start over to encompass all periods with balances due.

For an individual, this means that all personal income tax returns (Forms 1040) must be submitted.  Keep in mind an extension to file a return is not an extension to pay.  Therefore, if a balance is expected on any return on extension, it should be filed at once so it can be included in the resolution.  In addition, if required, sufficient year to date estimated income tax deposits must be made in order to show compliance.

For a business, all payroll tax returns (Forms 941), unemployment returns (Forms 940) and corporate income or partnership returns (Forms 1120 & 1065) must be filed.  Primarily the business must show that in the quarter in which it is currently in, sufficient and timely payroll tax deposits have been made.  If current deposits are late, sufficient payments to cover penalties should be addressed as well.

Very often the IRS is also more likely to formalize a resolution for a taxpayer who is compliant in working with a third party payroll service provider.  Specifically, payroll service providers can help establish a very efficient, formal schedule for deposits and filings under the control of a business owner.  This significantly lowers the risk for accruals, which helps both the taxpayer and IRS in the future.

Overall, cases can easily turn in a taxpayers favor when they first can establish compliance.  Being current must be the primary focus of any individual or business working with IRS collections.  Ultimately, having the experienced representatives at 20/20 Tax Resolution, Inc. will make this process easier and more successful in the long run. Please feel free to contact us with any questions — we are here to help.

The post The Importance of Compliance appeared first on 20/20 Tax Resolution.

In the article, The Beginner’s Guide to Collection Representation, Miles focuses on the nuances that go into effective collection representation work.  He explains that the goal of this piece is to, “give practitioners just beginning in collection representation the tools necessary to build a solid foundation of their practice. This foundation is critical to ensuring proper representation for taxpayers while practitioners continue to gather experience over time.”  

This will be the fourth time in the last five years that Miles has been published in the EA Journal.  Click here to read the full article.

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Now, let’s take a look at how the IRS views this exact situation:

• A: Do you have assets (liquid or illiquid) to pay the debt? In other words, do you have the cash or something that you can sell for cash to write the IRS a check? Probably not, but that’s the first thing it will look at.
• B: Do you have the cash flow to pay back the debt over time? What does the businesses’ cash flow look like? This is what the IRS will evaluate to determine if you can afford an Installment Agreement (Payment Plan).

You may be curious as to how the IRS knows these things about your business. For starters, it will ask you for a financial statement and require that the statement be submitted on one of its standard forms. In this particular case, Form 433 B: Collection Information Statement for Businesses, would be requested. This form is what the IRS will use to determine how much and how fast you can pay it back.

It’s very important to be accurate when filling out this form because it will back up any statements you make to the IRS about how much you can afford to pay. If your financial statement overstates your cash flow and / or assets, you guessed it, the IRS will ask you to pay back more than you can actually afford. If you understate your cash flow and / or assets, the IRS will think that your business is insolvent.

The bottom line: don’t view the task of filling out one of these forms as something that is merely a formality and fail to put the proper attention towards this essential task. Completing these forms without mistakes is a very important part of the negotiating process.

The post The Importance of Form 433B appeared first on 20/20 Tax Resolution.