Payroll Tax Debt Relief

The IRS requires employers to deduct a part of employees' wages as payroll taxes and contribute an equal amount. Failing to remit all the withheld money within the given deadline can land you and your company's finance department in trouble. 

In most cases, the IRS will impose accruing penalties and tax lien. If declared guilty, the party liable for failing to remit collected amounts may also serve jail time or pay hefty fines. 

It is crucial to clear the payroll tax you owe to avoid such issues. Here, we discuss how you can use various relief programs to repay the IRS and prevent business closure.

Dealing With Payroll Tax Debt

Once the IRS realizes that your business owes payroll taxes, they will assign your case to a revenue officer. This expert will then contact you by sending a notice requesting compliance with tax filing. In the document, they will indicate the reason for reaching out and the amount that you owe. They will also state the fines imposed and the likely consequences of failing to repay. 

When you receive such a communication, it is essential to ensure that the details indicated are correct. Confirm that the amount due is the right one by comparing the document against your tax forms.

After that, respond to the revenue officer to acknowledge receipt of the notice. This measure will indicate cooperation and the willingness to clear your debt. If you cannot repay the amount due in full, contact a tax resolution expert to help you set up a payroll debt relief plan.

Negotiating Payroll Tax Debt Relief With the IRS

The IRS allows employers and business owners to negotiate payroll tax debt. In most cases, the agreed repayment method differs depending on the nature of the liability. It may also vary based on the party liable for not remitting the taxes.

One relief option the IRS provides is an installment payment agreement. This mainly involves clearing the total amount owed, including penalties, within a given period.  During this time, the IRS will still impose penalties on due taxes and any late payment.

You must file all taxes for previous years and pay a processing fee to qualify for installment agreements. Besides, you should pick an appropriate plan depending on the amount owed and your ability to pay. Some of the options to consider are streamlined installment agreement and in-business trust fund.

If your business is still running, the IRS will only allow you to repay using an in-business trust fund. With this program, you can clear debts equal to or less than $25,000. Still, you must repay the total amount within 24 months or the provided collection statute expiration date (CSED).

On the other hand, if the IRS closed down your business due to debt, you can enter a streamlined installment agreement. This program will help you clear debt equal to or less than $25,000 within six years. Once your business qualifies for this plan, the IRS will not file a tax lien.

Benefits of Hiring an Expert for Payroll Tax Debt Resolution

When owing the IRS, it is crucial to consult a tax attorney before seeking debt relief. This can help you determine the best way to resolve the issue while considering your company's goal. They will also guide you in selecting a relief program that will not lead to significant financial straining.

Another benefit of consulting an expert is they can identify when your business is at risk of closure. This way, you can take precautions to avoid it and negotiate for favorable repayment terms.

Contact Tax Industry for Debt Relief

Working with a tax resolution expert allows your company to avoid the consequences of payroll tax debt. At Tax Industry, we have a team of experienced lawyers and CPAs to help you deal with the IRS. With their skills, you can negotiate for installment payments to prevent business closure and lawsuits. Contact us today to enroll for payroll tax debt relief.

How to Negotiate a Payment Installment Agreement with the IRS

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Owing taxes to the IRS often leads to fines, penalties, and, in some cases, financial audits. It may also affect your credit score and damage your business reputation. Fortunately, the IRS provides various programs to help taxpayers repay what they owe.

One popular and convenient tax relief program with negotiable terms is an installment agreement. Applying and qualifying for this plan is an effective way to avoid debt accumulation and clear the entire amount over some time.

When applying for tax relief, it is crucial to determine how to negotiate with the IRS. Here, we discuss the installment agreement options available and their requirements. We will also explain how to confirm if you qualify and mention the methods you can use to boost the chances of qualifying.

Installment Agreements You Can Negotiate With the IRS

The IRS provides several installment payment agreements for different categories of debt. Each of these has specific aspects that you must meet to qualify. The first and most common one is guaranteed installment, available to those who owe income tax equal to or less than $10,000.

Another option is the streamlined agreement used to clear debts of up to $50,000. If you qualify for this category, you have to repay back taxes in 72 months.

The IRS also provides a partial payment installment agreement for those who cannot afford the minimum repayment amounts for the other packages.

Negotiating Payment Installment Agreements With the IRS

Before contacting the IRS, you should first understand the requirements for each installment agreement plan. This way, you can prepare the needed documents and set up costs for negotiation.

To qualify for guaranteed installment, you must not have any tax debt for the last five years. Besides, you should prove that you cannot pay the entire amount at once.

If the IRS accepts your application, you will have a maximum of three years to clear the debt. Moreover, they will require a setup fee of $31 when you make a direct debit agreement through OPA(Online Payment Agreements). You must also pay an additional $149 for OPA. If you don't use this tool for the application, the fees will increase to $107 and $225, respectively.

When applying for a partial installment agreement, you should be able to prove that you cannot pay the debt in full. Further, you need to clear any past tax or fine and ascertain you are not bankrupt. The IRS will require fees similar to those charged for the guaranteed installment option to set up this plan.

If you are interested in the streamlined installment agreement, you must have a total tax debt, including penalties of less than $50,000. Unlike in other relief programs, the IRS does not require you to provide any verification of your assets during the negotiation process.

You will pay $105 to create a new agreement and $45 to reinstate an existing one when setting up this plan. But, if you use a direct debit agreement, the IRS will charge you $52.

Tips for Negotiating a Payment Installment Agreement

Understanding how to apply and negotiate for tax relief can increase the chances of qualifying. If you have an online payment agreement, use it to set an installment payment plan. Alternatively, apply by mail by printing out form 9465 and filling in all the needed details.

In the application, mention how much you can repay each month. However, ensure that the amount you state will allow you to clear the balance within the provided period. Other items to include are:

  • Payment date
  • Any needed documents
  • A cheque for your set up fee

Since selecting the right payment installment plan and negotiating with the IRS may be challenging, it is advisable to contact a tax liability expert. This will guide you in the entire process and help you pick the most convenient plan for you.

Contact Tax Industry to Negotiate an Installment Agreement

Getting professional help when negotiating for debt relief with the IRS can increase the chances of qualifying. At Tax Industry, we offer reliable tax resolution services. Our experts can help you work out the right installment agreement plan to avoid debt accumulation and penalties. Reach out to us today to schedule a consultation.

6 Ways to Reduce Your Chance of an IRS Audit

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Failing to abide by various tax laws can lead to a financial audit by the IRS. While the causing error may be minor, the process can be costly and time-consuming. Such procedures can also halt your business if the IRS freezes your accounts, leading to significant losses and a lower client retention rate.

While it is not a guarantee, taking some precautions when running a business and filing taxes can reduce the chances of an IRS audit. Here, we discuss six of those factors to help you protect your business and avoid penalties.

1. File Taxes Within the Provided Time

Sometimes, you may not have enough money to pay all the taxes you owe the IRS. Regardless, it is essential to ensure you provide your revenue information by filing back taxes. This step indicates that you acknowledge owing money and will pay when possible.

It also allows you to apply for various IRS programs to stop penalty accumulation. These may include an offer in compromise, installment payment, and currently not collectible.

If you do not file past taxes before the provided deadline, you may raise suspicion with the IRS leading to a financial audit. It also affects your chances of qualifying for relief programs to help you repay what you owe in the long run.

2. Claim the Right Deductions and Exemptions

Claiming a higher deduction or an exemption you do not qualify for can cause trouble with the IRS. Protect yourself from tax bills and penalties by ensuring the exemptions you claim are correct.

If you have limited knowledge about this procedure and its requirements, consult a professional. By taking this measure, you can determine what you qualify for and avoid an IRS audit.

These experts will also ensure that all the details you provide when remitting taxes are correct. For instance, they will counter-check your W2 and Form 1040 to ascertain that the information provided by your employer matches yours.

3. Submit Payroll Withholdings

If you are an employer, it is essential to remit all employee tax deductions to the IRS. Besides that, ensure you submit payroll reports to indicate how much your workers earn and their total tax payable.

Since processing this information manually is challenging, it is advisable to get payroll software. Such platforms can reduce the chances of making tax errors related to payroll, protecting your company from audits.

4. Provide the Right Documents

When claiming a tax refund or deduction, you should attach supporting documents to avoid fines, penalties, and audits. Some of the needed items are:

  • Form W-2 for the employed
  • Form 1099-G for the unemployed
  • Records of additional income
  • Records of expenses

Other than that, it is advisable to attach canceled cheques, receipts, and explanation letters. While these documents may not be legally necessary, they can significantly reduce the chances of an audit.

5. Confirm Your Figures

One aspect that may raise a lot of suspicion with the IRS is submitting wrong tax calculations. Prevent such mistakes by double-checking your tax forms before sending them. Moreover, consider filing your taxes electronically since it notably reduces the chances of making errors.

Another way to ensure you provide the correct figures is by gathering all your financial details before starting the filing process. This way, you prevent including unconfirmed information about your income or expenses.

6. Avoid Rounding Off

While working with whole numbers when filing taxes may appear simpler, it may land you in trouble. Truncating or rounding off your figures can lead to inconsistency between your tax forms and financial documents.

Reduce the chances of an IRS audit by using figures as indicated on your payslip or receipts.  This measure will increase calculation accuracy and ensure your supporting documents match the information provided to the IRS.

Contact Tax Industry Today for Professional Services

Filing your taxes without professional help can increase the chances of errors, leading to audits. At Tax Industry, we offer professional filing services to help you avoid issues with the IRS.

Our experts will use your financial documents and information to calculate what you owe and ensure they submit the correct information. Reach out to us today for reliable tax preparation and tax resolution services.

6 Common Back Tax Mistakes

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Each year, the IRS requires citizens to remit a certain amount of taxes based on their revenue. Unfortunately, when facing financial challenges, you may find it hard to pay what you owe. In some cases, you may also make mistakes when calculating your taxes and remit a lower amount.

If you owe taxes from previous years, it is essential to clear them as soon as possible. Besides, take various precautions to protect yourself and your business from audits and asset freezing.

Are you wondering which mistakes to avoid when owing to the IRS? Read on to discover six common blunders people make with back taxes and how you can prevent them.

1. Failing to Confirm Details on the Notice Letter

Once the IRS notices that you owe them taxes, they will send a notice explaining the reason for the contact and instructions on handling the issue at hand. Most people often fail to confirm the details indicated then end up repaying an amount higher than what they owe.

After receiving notice, confirm if the details indicated are correct. You can do this by comparing it with tax forms from the year in question. This way, you can correct an erroneous tax bill and prevent paying higher fines and penalties.

2. Not Responding to the IRS

Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation.

Most IRS notices often indicate that you should respond by a certain date. Failing to do this can cause wage garnishment and bank account or asset freezing, worsening your financial situation.

3. Delaying to Select a Payment Plan

The IRS offers payment plans to help clear back taxes when facing financial problems. Still, most people delay selecting a suitable tax debt relief program, leading to interest accumulation. Waiting too long to start repaying the debt also affects credit scores and financial credibility.

The best way to avoid this issue is by picking a suitable repayment plan quickly. Some of the programs to consider are installment agreement, offer in compromise, and IRS Fresh Start.

4. Paying Taxes with Credit

Another common mistake with back taxes is borrowing money to repay it. While you may want to clear your debt faster, it is crucial to consider your financial situation. Taking out a loan or paying tax bills with a credit card charging a high-interest rate will further affect your finances.

In the long run, you will end up spending a significantly high amount. Avoid further damage to your assets by applying for a suitable IRS repayment program. This way, you have more time to clear the debt with limited straining or financial pressure.

5. Failing to Seek Professional Help

While you may find it less expensive to deal with the IRS alone, it may lead to costly mistakes. Without professional help, you may reduce the chances of qualifying for a repayment program. Moreover, you increase the chances of higher penalties and fines after failing to abide by IRS policies.

Working with a tax resolution expert can help you deal with back taxes more efficiently. These experts will ensure you select a payment plan that is suitable for your financial status.

6. Inadequate Documentation

If you do not keep proper records of your interactions with the IRS, it may be hard to provide evidence for a claim. Besides that, following up on your application may be challenging and time-consuming.

Avoid this back tax mistake by keeping copies of all documents shared by or with the IRS. Further, ensure you note the name of the personnel you converse with for simplified follow-up. If possible, record these conversations as you may need them for future reference.

Contact Tax Industry to Help Deal with Back Taxes

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Tax Industry, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today for back tax filing and tax relief services.

Everything You Need to Know About the IRS One Time Forgiveness Program

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When you owe the Internal Revenue Service (IRS), you may wonder whether there is a way to avoid accumulating penalties and fines. Besides that, you may want to invest but fear that your tax lien will damage your financial credibility.

Luckily, the IRS offers a One Time Forgiveness program to help people deal with tax liability. Using this initiative, you can evade the negative consequences of owing taxes. You may also get enough time to organize your finances and repay the debt without causing significant financial problems.

Read on to discover several things you need to know about the One Time Forgiveness program. We will also explain how you can determine the most suitable tax relief program based on your needs and financial status.

How Many Options Does the One Time Forgiveness Program Have?

The IRS offers several options under the One Time Forgiveness program. These include Innocent Spouse Relief, Installment Agreements, and Currently Not Collectible. Innocent Spouse Relief allows you to avoid paying penalties, taxes, and interests if your current or former spouse provided wrong information when filing taxes.

For instance, if they did not disclose some of their income sources, which led to a penalty, you may apply for relief. This initiative is applicable if the IRS can only collect the amount due from the spouse. Besides that, you can only qualify if:

  • The penalties are from self-employment taxes
  • You can prove you did not know about the inaccuracy
  • You and your spouse have not transferred money in a fraudulent scheme

Sometimes, your financial situation may make it very challenging to pay the taxes you owe. In such a case, you may apply for a Currently Not Collectible status. In case you qualify, the IRS will stop penalizing your debt and refrain from collection activities.

An Installment Agreement is a tax forgiveness program that allows you to repay your debts with a schedule. If you cannot remit the entire amount due to various issues and owe a debt of less than $50,000, you may benefit from the initiative.

Offer in Compromise (OIC) Tax Relief Option

OIC is a One Time Forgiveness relief program that is rarely offered compared to the other options. This initiative is an ideal choice if you can afford to repay some of your debt in a lump sum. Once you qualify, the IRS will forgive a significant portion of the total taxes and penalties due.

They will then provide a payment schedule allowing you to clear the remaining amount in installments. The payment period is usually a maximum of 72 months, whereby the IRS will require you to remit a specific figure without fail or delay for the entire period.

How Does One Time Forgiveness Work?

The One Time Forgiveness program you qualify for will mainly depend on your financial situation. However, determining the most suitable option may be challenging without professional help. It is advisable to consult with a tax resolution expert before applying for any relief program. By taking this step, you enhance the chances of qualifying and ensure you provide the IRS with correct information.

Once you apply for One Time Forgiveness, the IRS will assess your situation and evaluate eligibility. If they accept the application, they will provide a detailed repayment schedule.

Depending on the program you chose, you may send the amended debt in installments or lump sum. The IRS will also require you to remit all your taxes within the stipulated time moving forward. Other than that, they may perform periodic assessments on your financial status as needed.

Contact Tax Industry to Apply for Debt Relief

Each option in the One Time Forgiveness program has several qualifications you must meet to be eligible. Unfortunately, gathering all the details you need to apply for this initiative may be frustrating if you do not have extensive knowledge about taxation.

At Tax Industry, we offer professional tax resolution services to help you deal with debt. Our experts can assess your situation to help you apply for the most suitable One Time Forgiveness option. Reach out to us today for reliable tax debt relief services.

5 Important Things to Note About the IRS Fresh Start Program

irs fresh start program

Paying taxes to the Internal Revenue Service (IRS) may be challenging when facing financial problems. Unfortunately, failing to remit can lead to the accumulation of debt and fines. If you owe the IRS, you may be wondering if any tax relief programs can help you repay and avoid further consequences.

One initiative that has been effective in helping people deal with accrued taxes is the Fresh Start program. If you qualify for this initiative, you can avoid penalties, fines, high-interest rates, and the IRS withholding your salary.

Here, we discuss five essential things you should know about this program before applying. We will also explain how to identify if you qualify and discuss the measures you should take to maintain eligibility.

1. It Offers Extended Installment Agreement

The IRS Fresh Start program offers fixed installment schedules to taxpayers who owe less than $50,000. Using this initiative, you get a maximum of six years to repay the entire amount. Besides that, the IRS will not charge you any penalties as long as you pay using the provided schedule.

They will also refrain from engaging in collection activities such as freezing your assets or holding your wage. When you qualify for an extended installment agreement, you will avoid the debt from building up and get enough time to repay.

2. You Can Opt for Offer in Compromise

If you have standing assets that you can use to clear some portion of your debt, you may apply for an Offer in Compromise (OIC). This program will allow you to repay an amount that is significantly less than what you owe. However, you must deposit an amount equal to 20% of your total debt as you submit your application.

As the IRS considers your offers, you must continue remitting monthly installments. Once they accept it, proceed to pay the agreed amount within the provided time. While it is hard to qualify for OIC, it is an ideal option if you want to clear your tax liability to invest or borrow a loan.

3. Fresh Start Can Release Your Tax Lien

Securing investments and qualifying for credit may be challenging when you owe the IRS. But, with the Fresh Start initiative, you can apply for tax lien withdrawal.

This program involves paying your entire debt through a direct deposit. After that, you can request the IRS not to display this payment on your credit reports and public fiscal information. This way, your debt will not affect your credit score or financial credibility.

4. There Are Qualifications Requirements

Owing taxes does not mean you automatically qualify for the Fresh Start program. Each repayment option has specific requirements you must meet for the IRS to consider your case. First, you should not be bankrupt because the body needs to prove that you can repay the debt.

If you own a small business or are self-employed, you must calculate the amount of tax you expect to pay in the current year. After that, present this information when applying to the Fresh Start program of your choice.

You must also ensure that you filed taxes for previous years, even if you did not pay. Moreover, it should be clear that you cannot remit the total amount you owe due to financial problems.

5. IRS Determines If You Qualify

The IRS receives numerous applications to the Fresh Start Program. As a result, it may not be possible to accept all interested parties. After receiving tax relief requests, the IRS will assess them based on several factors. These may include:

  • History of loan default
  • Case credibility
  • Tax filing accuracy

The next step will mainly involve assessing your financial position to determine if you are more qualified than other candidates. With this information, the IRS can decide if you are eligible and send feedback by mail.

Reach Out to Tax Industry for Resolution Services

Failing to observe some measures when applying for tax relief can reduce the chances of qualifying. At Tax Industry, we can assess your case to help you apply for the right Fresh Start program. Our experts can also enhance eligibility by ensuring all the information you submit is credible. Contact us today for tax resolution services.

Difference between Wage Garnishment and Bank Levy: What you need to know?

If you owe federal back taxes, the law empowers the IRS to take extra-ordinary measures to recover these taxes by claiming your known assets. This is likely to happen if you have not taken steps to explain your circumstances and/or set up a payment plan if you are unable to pay the taxes in full.

Bank levies and wage garnishments are two methods that the IRS can use to recover taxes owed by individuals or businesses. Most people mistake one for the other, and yet they don’t operate in the same way. Learn more about the differences between bank levies and wage garnishments in the article below.

What Is a Bank Levy?

An IRS bank levy is a legal process of seizing an individual’s money (in a bank account) to recover the person’s tax liabilities (tax, interest and penalties). The bank must comply with the IRS and will often freeze your account until you have sorted out the liability with the IRS. The IRS can freeze and enforce a levy on any type of bank account, including overseas bank accounts.

Bank levies are usually a last resort for delinquent tax evaders, and they tend to occur as a one-time event. The IRS will seize the amount that satisfies your tax liability, and they can seize all the funds in your account. If the funds in the account are insufficient, the IRS can move to recover other assets, including homes, vehicles, and other personal property.

Before enforcing a bank levy, the IRS issues a levy notice to the taxpayer, stating that they have ignored or defaulted on their tax repayment plan. The bank levy may persist to all monies coming into the bank account until you repay your tax liability in full, or the statute of limitations on the debt expires.

What Is A Wage Garnishment?

Conversely, wage garnishment does not happen as a one-time event, although it is also enforced to repay tax liabilities. With this method of tax recovery, the IRS approaches your employer to deduct a portion of your earnings before they even reach your bank account. This recovery continues until your debt is paid in full, or you take steps to prevent the garnishment order/settle the debt.

Unlike bank levies, you can contest a wage garnishment order. If you find yourself facing wage garnishment, it is best to hire a tax relief professional, as they can help you negotiate with the IRS to prevent extreme action. For example, when negotiating an Offer in Compromise (OIC), the IRS must cease collection efforts until the process is complete – whether or not the taxpayer succeeds.

What to Do About Bank Levies and Wage Garnishment

Once you receive a notice from the IRS stating their intention to enforce a bank levy, it is best to contact a tax relief professional and find out your options. Such options include pursuing tax relief programs such as:

  • Tax installment agreement – pay in manageable installments
  • Offer in compromise – pay a fraction of what you owe to clear the debt
  • Currently Not Collectible status – put temporary reprieve until you are in a better financial position
  • Penalty abatement – remove the penalties for nonpayment with valid reasons

A tax professional will assess your current and future financial obligations and advise you on the best way to negotiate with the IRS. They can also make the applications and negotiate on your behalf to maximize your chances of getting a suitable outcome.

Find Help for Your Tax Liability

The worst thing you can do, whether facing a bank levy or wage garnishment, is to ignore the notice and do nothing. Instead, contact our reputable and experienced tax relief professionals to work out the best way to deal with your tax debt.

Call us today to schedule your initial consultation.

Top 5 Best IRS Tax Relief Programs You Need to Know About for 2021

Have you finished preparing your tax returns and found that you still owe some taxes that you didn’t know about? No need to panic.

It isn’t uncommon to find that you have some outstanding taxes when you prepare your tax returns. Luckily, the IRS offers several tax relief options to assist taxpayers to meet their obligations in a way that doesn’t cripple their financial health. Instead of ignoring your tax bill, take advantage of these legal tax relief programs to gain some reprieve and pay with a plan that suits your financial ability. 

Installment Agreements

Installment Agreements are the most common tax relief method for taxpayers who cannot clear their debt in full. It is available to taxpayers whose total tax liability (tax, interest and penalty) does not exceed $50,000. 

The IRS can allow you to repay the outstanding taxes in small installments for a maximum of 72 months. Note, however, that any interests and penalties will continue to accumulate on the outstanding debt, therefore you should try to shorten the repayment period

Innocent Spouse Relief

Through Innocent Spouse Relief, the IRS allows innocent spouses to avoid tax, interest and penalties that arise from a current or former spouse’s tax delinquency (underreporting, fraud, or nonpayment). 

Innocent Spouse Relief can only be requested when filing individual or self-employment tax returns. However, there are tax liabilities that are ineligible for cancellation under this program, such as business taxes, trust fund recovery penalties, Individual Shared Responsibility payments, and Household Employment taxes.

Offer in Compromise (OIC)

The Offer in Compromise is a tax relief option where a taxpayer pays less than the amount that they owe. Usually, the IRS will accept an Offer In Compromise when they assess the applicant’s tax liability and their present and future (potential) income earning capacity.  

To qualify for OIC, you should make the application to the IRS explaining their circumstances and give them your best offer to settle the debt. The IRS only accepts about 25 of all applications, which is why it is critical to use a qualified tax relief professional when making your application. 

If you succeed, you should pay your offer amount in five instalments or less. You may be able to appeal the decision if your OIC application is rejected. 

Advance Child Tax Credit (ACTC)

This is a tax relief program that the IRS offers to families. Many families will receive Advance Child Tax Credit payments up to 50 percent of the estimated ACTC amount (according to their 2019/2020 tax returns). 

Once the IRS processes your 2020 returns, you will receive 50 percent of this credit and from July to December 2021. The remaining half will be paid once your file your 2021 returns. You can learn more about this tax relief program by clicking here.

ACTC payments from the IRS will be paid by direct deposits to make the money easily accessible to the beneficiaries. You should ensure that you provide your correct banking information. Otherwise, the IRS will send checks in the mail beginning July 15 and every 15th of the month after that. 

The Coronavirus Economic Impact Payments

The IRS is also sending out the third round of Economic Impact Payment to the eligible individuals. Some people have already received their payments, but if you haven’t, it doesn’t mean you won’t get it. 

Additionally, the IRS is offering a 2020 Recovery Rebate Credit for those who didn’t get their first or second Economic Impact Payment or those who got less than the full amount. Those who are eligible to receive the payment but don’t usually fill tax returns can use the Non-Filer Sign-Up tool to register. 

Get Help for All Your Tax Concerns

Do you need help filing your 2020 tax returns? Contact our professionals at Finishline Tax Solutions for tailored solutions according to your needs. 

Have an outstanding tax liability? Contact us and let’s help to determine the tax relief program that works best for your needs. 

Five Reasons the IRS Abates Penalties

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Receiving a penalty from the IRS can be devastating, especially when you don’t have the means to repay it on time. A penalty makes it harder to clear your outstanding taxes since it attracts further penalties and interest until you repay the debt fully.

However, it is possible to apply for and get relief/abatement from a tax penalty if you show that you made an effort to comply but could not do this because of circumstances you could not control. Once you get the notice of penalty, check all the details to ensure they are correct and see what you can resolve. You can receive penalty relief for the following tax issues:

  • Failure to pay outstanding taxes on time
  • Failure to file tax returns on time
  • Failure to deposit specific taxes according to requirements
  • Other applicable penalties from the above

After assessing the notice, you (or a tax professional acting on your behalf) can submit a written request seeking penalty abatement. This article discusses the main reasons which IRS accepts for penalty abatement.

Reasonable Cause

If you have reasonable cause for not paying, filing or depositing on time, your application must demonstrate the reasons for the delay/non-payment. Some acceptable reasons include:

  • Travelling abroad/out of the country
  • Being incarcerated
  • Being seriously ill/dealing with the serious illness of a close family member
  • Death of an immediate family member
  • Destruction or theft leading to loss of documents

Depending on your reason above, you should attach proof in the form of insurance claims, doctors’ reports and hospital records, a death certificate, or pictures of floods/hurricanes leading to the destruction of documents.

The IRS evaluates whether the person acted prudently according to the circumstances but could not because of circumstances beyond their control. They will also check whether the taxpayer could have foreseen the event causing non-compliance and what steps they could have taken to ensure compliance.

Statutory Exceptions

Congress may provide statutory exceptions, giving taxpayers relief from tax penalties after major disasters like fires, hurricanes, earthquakes, and floods.

Administrative Relief

Qualified taxpayers can receive an administrative waiver called First Time Abatement (FTA) for penalties for failing to file, pay, or deposit taxes. Eligible taxpayers are those who show all of the following:

  • The taxpayer filed all returns or extensions
  • The taxpayer has paid or made arrangements to pay all outstanding taxes
  • The taxpayer was not required to file returns or was not assessed for penalties for three tax years before the year attracting the penalty

Correcting IRS Errors

The IRS must abate any penalties assessed because of an error in the written advice given by an IRS officer or employee in their official capacity. Where appropriate, the IRS may also consider abatement if the taxpayer shows they relied on an IRS officer’s oral advice.

The taxpayer must prove that they exercised ordinary prudence and business care considering their situation, the advice rendered and the penalty. They will also consider the taxpayer’s filing and payment history and whether they received the correct information in written format.

Relying on a Tax Advisor

A taxpayer may receive limited penalty abatement for relying on a tax advisor – but this cannot be the only reason given. If there is a failure to file, pay, or deposit taxes, the taxpayer is still held liable even if he/she relied on a tax advisor. Only accuracy-based penalties based on reasonable cause may be abated.

Get Professional Tax Liability Advice from Finishline Tax Solutions

If you have received a notice of tax penalty from the IRS, you may be able to get penalty abatement. There is no guarantee of abatement even when you have reasonable cause, but you can improve your chances by getting Finishline tax professionals to help you apply for an abatement. Even if the abatement is rejected initially, our professionals can help you to file an appeal, during which the IRS agent will assess the totality of your circumstance.

Contact Finishline Tax solutions today to fix your taxes once and for all.

Offer in Compromise – Is this a good tax relief strategy?

An Offer in Compromise (OIC) is a helpful tax relief strategy since, if successful, it clears your outstanding tax debt completely. Most other tax relief options have an outstanding amount that may continue to accrue penalties and interest. However, before the IRS accepts your OIC application, you must go through various steps that include submitting extensive documentation to support your claim.

The IRS determines whether or not your application will be accepted, but you can improve your chances by submitting a compelling application. In this article, learn how Offer in Compromise works as a tax relief solution and how our tax professionals can help you make your application.

What Are Offers in Compromise?

An Offer in Compromise (OIC) is an effective method to eliminate your tax debt. It is a federal program where the taxpayer settles the outstanding debt for cents to every dollar owed. Low-income families can pay their debt for considerably less than they owe.

OIC is open to all income levels and ages, but the IRS does not accept all applications. Their acceptance rate changes from year to year, but it has accepted 25-45% of applications in the last few years.

Eligibility for Offers in Compromise

Several strict pre-qualifiers make a taxpayer eligible for tax settlement through OIC. First, the IRS looks at your reason for requesting OIC tax settlement, and they only consider applications where:

  • It is not certain that the IRS correctly assessed your outstanding taxes
  • It is not certain that the IRS will be able to recover the full amount, e.g. if you owe more than your assets and income
  • Paying off your tax debt in full will cause the taxpayer undue economic hardship – called effective tax administration

For reasons 2 and 3 above, the IRS also considers the following:

  • Whether you can pay and how much you may be able to pay
  • Your current income
  • Your current assets
  • Your current expenses

The IRS will generally accept OIC that meets the maximum amount you can pay within a reasonable period. You are ineligible for OIC settlement, however, if:

  • You have ongoing bankruptcy proceedings
  • You have not been paying your required installments/payments
  • You have not filed your federal tax returns
  • If self-employed with employees, you have not submitted the requisite federal tax deposits

Generally, the IRS only accepts offers in compromise greater than or equal to a tax liability’s collection potential.

How to Submit an Offer in Compromise

The smallest offer the IRS accepts as OIC depends on your financial ability. Businesses use form 433-B to reveal their financial state, while self-employed or employed wage-earners should use Form 433-A. You should reveal the following:

  • Income and expenses
  • If you declared bankruptcy
  • Whether you own a safe deposit box and its contents
  • If you have benefited from an estate, trust, or life insurance policy and its details
  • Any bank account balances, investments, available credit, and cash life insurance policies
  • Any tangible and intangible assets

College or private school expenses and charitable and voluntary retirement contributions are not allowable expenses. Once you have these details, it’s important to get a tax professional to help you assess the minimum offer value.

Apart from the offer, you must submit several forms, including collection information statements, the application fee, and proof of payment of the first instalment of your offer. If you wish to pay a lump sum, the first payment should be at least 20 percent of the total offer. If the IRS accepts your OIC, you must pay the remaining amount in no more than five payments.

Get Help with Your Offer in Compromise at Finishline Tax Solutions

You can use the IRS OIC pre-qualifier tool to check whether you are eligible for OIC. However, note that eligibility does not translate to acceptance. For example, if you can pay your outstanding taxes through an instalment agreement, you don’t qualify for an OIC tax settlement.

There are many steps to filing an OIC application and even appealing upon rejection. Our Finishline Tax professionals can help you with these steps to maximize your chances of a favorable outcome.

Contact us today to get started.