The IRS is the worst institution for taxpayers to owe money to. And no one should take comfort in knowing that the IRS clerks working for $9.75-$10.25 an hour have people’s financial fates in their hands, and by them flipping a switch, can generate a tax lien notice or a levy notice to any bank or employer. When I was on the LA Talk Radio show with TJ McCormack last month, we discussed some important concepts regarding being what you can do about resolving IRS debt. Turns out, rather than accepting your fate, there are more proactive approaches you can take to reduce your debt to the IRS.
Listen to the full interview on LA Talk Radio or catch some of the income tax relief tips and highlights below.
Offer In Compromise— How You May Qualify
The IRS is a highly systematic institution. Part of its job is to assess and analyze each taxpayer’s age along with his/her income earning potential in order to determine whether or not the person qualifies for an Offer In Compromise. An Offer In Compromise allows the taxpayer to reduce the amount they owe to the IRS by a certain percentage. (Tax Resolution Services successfully reduces 5-15% for taxpayers).
Due to the methodical nature of the IRS, a young taxpayer may not qualify for an Offer In Compromise simply because he/she has many more years of income inflow than someone who is already sixty years old. Also, it becomes difficult to qualify for an Offer In Compromise once the taxpayer starts earning substantial income. However, a young income earner does not have to accept the fate of paying large monthly sums to the IRS if the following criteria are met:
- Not owning assets
- Monthly living expenses are greater than monthly take-home income
Installment Plan vs. Offer In Compromise
Offer In Compromises offer reductions in the principal owed and thus moots the interest and penalties. Therefore, the interest, tax, and penalties automatically go away.
Installment plans or payment plans can have very high interest rates compared with an Offer in Compromises settlement, but can be a good tax resolution option depending on the individual’s situation. Read more about IRS payment plans to find out if and installment agreement is right for you.
Statue of Limitations—An Important Concept For Taxpayers
The Statue of Limitations is 10 years from the date of assessment. After the expiration date, the IRS can no longer hold taxpayers accountable for payment.
The IRS evaluates a cost-benefit analysis to determine whether it would be worthwhile to go after someone depending on the number of years left on the Statue of Limitations. If there are many years left on the Statue, the IRS may deem it worthwhile to collect money for those years. If there are very few years left, the IRS may decide to take a lump sum now instead of regular periodic payments.
The burden of proof is on the taxpayer to notify the IRS that the 10 years on the Statue of Limitations has expired. IRS will continue to mail invoices and garnish wages* until the taxpayer brings to the IRS’s attention that the Statue ran out on its 10 years. To do this, taxpayers are entitled to their IRS records through the Freedom of Information Act; taxpayers should request the IRS to disclose these records in order to prove the expiration of the Statue of Limitations.
*Wage garnishment: The IRS analyzes an amount of money a taxpayer would need to survive each week based on the number of dependents claimed and what the pay cycle is; this number is the amount of money the IRS will allow taxpayers to keep. Oftentimes, taxpayers are left with nothing but $170/week.
I deal with tax problems every day and this year alone, my firm has successfully negotiated hundreds of IRS settlements at a rate of $0.13 on the dollar. For a free, no-risk consultation, please call my office at 866-IRS-PROBLEMS (1-866-477-7762) or visit the Tax Resolution website.
More Tax Help, IRS News and Tax Relief Tips:
- Learn How to File For Bankruptcy Correctly to Help Solve Tax Problems and Reduce IRS Debt
- IRS Tax Help From Tax Expert: What Individuals and Businesses Need to Know to Avoid Tax Problems
- IRS Debt Relief News: Resolve to Put Your IRS Problems Behind You in 2010
- Your Unfiled Delinquent Tax Return Checklist: Stop the IRS Now and Avoid Steep Interest and Penalties from Accumulating
- Tax Resolution Services, Co., Helps Taxpayer Resolve $150K in Back Taxes and Receive IRS Refund
Tags: Freedom of Information Act, income tax relief, Installment Agreement, ira payment plan, IRS, IRS debt relief, Offer in Compromise, statue of limitations, tax debt, tax help, tax lien, tax resolution