In this article, we summarize the main ways we can help you solve your tax problems for good.
If your tax debts have ballooned beyond what you can pay, we suspect that you have the IRS’s attention and once you are on their radar, the IRS will simply not go away - hope is not a strategy to resolving your tax problems.
There is no bigger debt collector in the country than the IRS and they have a serious set of tools in their toolbox that they will use to get what they are owed.
When you fall behind on your taxes, it’s just a matter of time before the IRS will begin its collection process. The collection process begins with sending you nastygrams - they will also be calling you at your home or work. If they don’t get your attention and if you don’t pay, they will then file a notice of Federal Tax Lien in the county where you reside that attaches to your assets and publicly announces how much you owe the government. Next, they will garnish your wages, siphon money from your bank account or retirement account, and can even seize your assets such as your home, boat, RV, vehicle, or even your business.
Luckily, despite the fact that the IRS is the biggest badest debt collector around, they do have to operate within the laws and we as tax resolution experts have the tools and expertise to:
Stop the IRS from calling you at home or your work;
Make the IRS talk with us, and not you about resolving your tax problems;
Get you back on track by implementing a resolution strategy!
The main strategies that we use to combat the IRS to resolve your tax problems are:
Offer In Compromise - An Offer in Compromise is a settlement with the IRS that will reduce your tax debt to an amount you can afford and can often be a fraction of what you owe. We will always evaluate your case to see if you qualify for an Offer in Compromise as it is typically the largest reduction of tax debt. If you work with us to fix your tax issues, we will evaluate your current financial situation including your assets and monthly cash flow, and if you qualify for an Offer in Compromise, we will prepare an offer in the most favorable manner allowed by law in an effort to get you the lowest settlement possible. The offer will be presented to the IRS and will often require several rounds of negotiations and possibly an appeal process, which we will perform on your behalf.
Installment Agreement - An installment agreement is essentially a payment plan and can give you up to 72 months to pay your outstanding tax debt. The key to entering into an installment agreement, from our point of view, is making sure it is properly structured - our job when you retain us is to advocate for your agreement to be structured in a way that will allow you to be successful in paying off your debt. The key to setting you up for success is proposing a payment plan that doesn’t leave you completely out of money left at the end of the month.
Remember, the IRS wants their money as fast as they can get it and left up to the IRS, they will take every penny they think you have left so they can get paid off. We feel that it is important for you to be able to realistically pay your payments, along with all of your other expenses, and not be caught in a situation where you default on your agreement with the government. Missing payments will nullify your agreement and put you back into the bad graces of the IRS - not a place you want to be!
Partial Pay Installment Agreement (PPIA) - A partial pay installment agreement is a payment plan just like the installment agreement described above, with one key difference - your payments will never add up to what you owe. Taxpayers who based upon their current financial situation cannot pay the full balance due within 72 months or before the date when the IRS can no longer collect the tax debt (the date is called the CSED - Collection Statutory Expiration Date) may qualify for lower payment that when paid in full does not fully re-pay the total amount due.
The largest issue, we have with a partial pay installment agreement is that there is a lack of finality, especially when compared to an offer in compromise. Typically, when the CSED is more than two years from the date the IRS agrees to a PPIA, the IRS will require a review of your financial situation every 24 months, and if your financial situation improves, the IRS will require that your monthly payment be adjusted upward to accommodate your “ability to pay more”. The IRS can also require you to borrow against assets that have increased in value over this time.
When you agree to a PPIA, you are agreeing to let the IRS look under the hood of your finances every few years.
There are certainly benefits (but also drawbacks) to a PPIA and we are happy to guide you through the options.
Penalty Abatement - If you have already received a letter from the IRS due to back taxes, you know how quickly penalties can add up! The IRS assesses penalties for:
Failing to file a tax return, and
Failing to pay the taxes you owe.
The penalties for failing to file are larger than the penalties for failing to pay and when added together are substantial.
Individuals, who fail to file a tax return, are subject to a penalty that is generally 5% of the total owed for each MONTH the return is unfiled, up to a maximum penalty of 25% of the total tax due. In addition to the failure to file penalty, you will also be assessed a separate penalty for failing to pay; this penalty is generally 0.5% of the amount you owe for each month, again up to a maximum of 25% of the amount due.
It’s easy to see how penalties can snowball FAST and don’t forget, the IRS will also be adding on interest to your balance due until your tax debt is resolved. The fact that penalties and interest keep growing, is why it’s imperative to start working to resolve your tax issues as soon as possible - doing so can save you thousands of dollars!
As an example: You forgot to file an extension and then filed your tax return two months late. When you filed late, you owe $6,000 and pay that full amount at the time you filed your return. The IRS will assess you with $660 in penalties | $600 penalty for filing late and a $60.00 penalty for paying late.
Luckily, the IRS does have programs in place, that we can help you with that may reduce or eliminate the penalties you owe. When you hire us to help you solve your tax problems, we will always evaluate the various options of requesting that the penalties on your account be abated (removed).
And, if you have already paid the IRS for penalties, and didn’t request that they are removed from your tax debt, we may be able to request a refund of the penalties on your behalf, so long as we request the refund no later than:
Three years from the date you filed your tax return, or
Two years from the date you paid your penalty.
Finally, if you owe state taxes as well, we can help you to navigate the best way to settle your tax debt with the state. An article about the tax relief options that are available in New Mexico is available here.
We hope that this information was helpful and encourage you to contact us today at 505-353-9610 or 833-StopIRS to schedule a free, no-obligation case evaluation. You will be under no pressure what-so-ever to retain us. There is no risk and you have nothing to lose. The worst case is that you spend an hour of your time with us and leave the conversation with greater clarity and insight into your tax problem.