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Tax relief companies advertise help for taxpayers in distress — in exchange for an upfront fee, which can be thousands of dollars. They say they’ll apply for IRS hardship programs to lower or even eliminate your federal tax debts. They even promise to stop back-tax collection. But the truth is that most taxpayers are unlikely to qualify for the programs these scammers advertise.

In many cases, these companies don’t settle your tax debt. Some don’t even send your paperwork to the IRS to apply for programs to help you. These companies often leave people even further in debt.

If one owes back taxes and doesn’t know how their going to pay the debt, then we’ve got news for you! Join us for our next FREE webinar “10 Ways To Settle IRS & State Tax Debt” which is being held on Thursday June 15th 2023 at Noon CST.
We plan to hold these webinars monthly so if you’re reading this after June 15th, still click the link below.  If another webinar is planned, the page will be updated to show you the date of the next scheduled webinar.

Upon sign up, you will immediately receive instructions on how to join to the webinar, as well as Jared’s special report 5 Questions To Ask Any Tax Resolution Firm BEFORE Paying Them A Dime.”

ALL attendees will be eligible to receive a comprehensive 30-minute Tax Debt Settlement Analysis and personalized Tax Resolution Plan. This plan is regularly $175, but FREE to all attendees, so act NOW!

To learn more visit www.solvemytaxmess.com and then sign up.  Space is always limited so don’t miss your chance to attend this exclusive event!

The Truth About Settling Taxes for “Pennies On The Dollar”

Every year we here from taxpayers who have IRS debt and are looking for a solution.  Inevitably, they will also make a reference to the possibility of settling their debt for less than what they owe.  What usually follows is a conversation about what this actually means and how most people DON’T qualify for it.  Let us elaborate.

In advertising, you’ll hear companies talk about settling back taxes for 20%, 10%, or even less than the original balance.  What these ads, and the sales people whom you talk to on the phone, are trying to sell you is an Offer in Compromise service package.  This package is a reference to the IRS Offer in Compromise (OIC) program, which allows eligible tax debtors to pay the IRS an amount of money that is less than what they owe in order to wipe out their entire tax liability.

The phrase “pennies on the dollar” was actually determined several years ago by the IRS to be a form of deceptive advertising.  As a result, they explicitly instruct licensed practitioners that using this phrase is a violation of Circular 230, which is the handbook us practitioners must follow when working with the IRS.  However, since the IRS doesn’t always have jurisdiction over firms that just market these services, it comes into the FTC’s purview to look out for these deceptive marketing practices.

Some ads, web sites, and salesmen are out there trying to convince taxpayers that what you settle for is some fixed percentage of your tax debt.  However, this is blatantly incorrect. There is absolutely no provision in the tax code for allowing a taxpayer to pay a set percentage of their tax liability and just calling it good.  This has never existed, and most likely never will.

Instead, the amount of your OIC settlement is calculated using a very, very strict formula.  What’s even better is that this formula is NOT secret — it’s available on a worksheet in IRS publication 656B.

Based on this formula, if you have equity in assets that exceed your tax debt, you simply don’t qualify.  Period.  End of story.  For most individuals, the common thing is going to be equity in your house or rental properties, or perhaps equity in a collection of classic cars, stamps, coins, guns, art, etc.  If the value of ANY of that stuff is greater than your tax debt, you do not qualify for the OIC and cannot settle for “pennies on the dollar” – there is no way around this.

In the same vein, if you are a high income earner, it’s also highly unlikely you will qualify for the OIC.  The reason for this is that the IRS only allows certain amounts of money every month as “eligible expenses” for housing, cars, food, etc.  If your lifestyle exceeds these amounts, the IRS doesn’t care — they will only allow you to claim the National Standard expenses. Any monthly income over those amounts gets multiplied by either 48 or 60, and THAT number goes into your offer amount.

In these circumstances, you may qualify for a period of up to 12 months to make a “lifestyle adjustment” and reduce your living expenses to come into line with IRS standards. This will often involve selling luxury homes and getting rid of toys such as cars and boats.  Keep in mind that these items are all covered by your tax lien, so any proceeds from the sale of these items technically is owned by the IRS, and should be paid over to them. A good tax representative can assist you with structuring these sales so that both you and the IRS get something out of it.

In closing, beware of anybody promising that your tax debt can be settled for some fixed percentage.  That’s not the way it works and a skilled professional can show you if you stand a chance at qualifying for the OIC.  Anybody trying to sell you on the percentage idea might as well be selling you swampland in Florida, and you’ll be best served to seek assistance elsewhere.

By |2013-06-05T12:34:33-06:00June 5, 2013|Categories: IRS Talk|Tags: , , , , , , , , , , |Comments Off on The Truth About Settling Taxes for “Pennies On The Dollar”

How To Deal With IRS Debt

So these little envelopes that read “Official Business – Penalty for Private Use, $300” kept showing up in your mailbox.  You kind of had an idea of what they were about since they said they were from the Department of The Treasury.  But you figured that if you ignored them they might go away.  Or maybe you just needed a little more time to save up some money so that you could settle your debts.  But time kept passing, you never settled up and the letters kept right on coming.  When you finally decided to open one of those envelopes, it said that the IRS was in the process of levying you.  Now what?

If you are faced with tax related debt, it’s important that you take the following steps as soon as you can:

Own the situation.  All difficult situations only get worse the longer that you prolong dealing with them.  Think about it, does that achy tooth get better by itself?  Will that funny noise your car is making just go away if you ignore it?  Do those termites in your house stop munching on everything if you just pretend they aren’t there?  The answer to all of the above is no.  The first step to dealing with tax debt is to own up to it and start the process of resolving it.

Assess the damage.  We recently were dealing with a client who hadn’t filed taxes for 6 years.   They didn’t want to deal with the situation because they figured they owed thousands of dollars.  Well, when we prepared their returns it turned out they only owed about two thousand dollars – initially.  Because they didn’t deal with it early on the IRS penalties and interest just about doubled the initial balance owed.  Thus, it’s important that you assess just how much is owed as soon as possible.  Our experience has been that the situation typically isn’t as bad as a taxpayer thinks.  Additionally, if you are willing to work with the IRS you will find that they’ll reciprocate.

Seek professional help if needed.  Some tax debts can be settled without too much professional assistance.  Did you know that if you owe $50,000 or less in combined individual income tax, penalties and interest you can apply online for an installment agreement?  Yup, no need to speak to anyone at the IRS or have a professional get involved.  Now that is, of course, if you can make the payments.  If you owe a lot, don’t have substantial assets or just can make any sort of “significant” payment, then maybe you should have a professional look at your situation.  They may be able to recommend options that can help you pay your debt AND not put yourself under financial stress while you do so.

Ensure that your professional is qualified.  There are lots of boiler room tax resolution firms out there that will promise you they can settle your debt for pennies on the dollar.  When reviewing any firm, make sure that they have the following:

  • Professional, and Useful Website
  • Successful Track Record
  • Friendly, Helpful Representatives
  • Easy-to-Understand Fee Structures
  • Free Analysis and No Guarantees

Figure out your options.  When it comes to tax resolution, many people hear the advertisements touting how they can settle for less than they owe (i.e. an offer in compromise).  While this is in fact true, this is not the case for 80% of taxpayers because they will not qualify for an OIC.  You have to remember that the IRS is the collections arm of the US Treasury and that they are not in the business of giving away free money.  With that said, tax resolution typically falls into the following categories:

  1. File unfiled tax returns
  2. Dispute the tax debt on technical grounds
  3. Request penalty abatement
  4. Request innocent spouse relief if the debt was the fault of your spouse or ex-spouse
  5. Pay the tax debt in full
  6. Request an installment agreement
  7. Put the debt into currently not collectible status
  8. Apply for an offer in compromise
  9. Await expiration of the collection statute expiration date

Move forward.  Once you outline your arrangement to resolve your tax debt, make sure that you have a plan in place so that you don’t create any new debt.  For example, if you receive most of your income via 1099, make sure that you make estimated payments though out the year.  Lastly, take a personal vow to never generate tax debt going forward.  While there are numerous people you can owe, the IRS is really the only entity that can make your financial existence almost unbearable if you let it get that bad.  Thus, let’s all try and stay on their good side shall we?

Until next time…

By |2013-04-28T23:01:06-06:00April 28, 2013|Categories: IRS Talk|Tags: , , , , , , , |Comments Off on How To Deal With IRS Debt
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