After exhausting all efforts to resolve your tax debt, you have come to the conclusion that the only thing that is available to you is to pay the darn thing off. If that is you, and this conclusion was helped met by talking with a licensed professional, there are some smart options for you to take moving forward. One of those options is to enter into a payment plan where it doesn’t matter how much money you may have left over after bills are paid and one in which liens are removed and new liens won’t be filed. This is called a Streamlined Payment Plan.
First, do you owe less than $50,000?
In order to enter a streamlined payment plan, you have to owe less than $50,000 to the IRS. Thankfully this amount was raised from the recently previous amount of $25,000. This amount is the assessed tax liability amount, not the actual amount that you owe including interest and penalties. Therefore, you could possibly really owe about $52,000 and still qualify. If you owe more than $50,000 in assessed tax liability, then this payment plan is not an option for you until you get to that threshold. The IRS will normally ask if it is possible for you to pay the debt down to get to that level, either in lump sum or in payments. If you owe more than $50,000 you have to negotiate a payment plan and go through finances with the IRS.
Your payment amounts are calculated on a 72 month payment plan. This is true unless the tax debt will expire before then. If that is the case, then the calculations are met by how many months are left on the statute period for the IRS to collect. If it comes to the point that they are higher because of this fact, you should talk with a licensed professional about your options in doing a partial payment plan or even a high offer in compromise. So for most, if you owe let’s say $10,000, your monthly payments would be about $140 a month, regardless of your amount of income, expenses, or equity in assets.
The beauty of this type of payment plan really lays with the lien protection. If no liens have yet been filed against you, by entering this type of plan, no liens will be filed as long as you remain in the plan. If a lien has already been filed, then you can petition to have the lien removed through a lien removal process. This falls into qualifying criteria as we discussed in a previous blog article.
Do I need to hire someone to do this?
Most simply, no. If you know you don’t qualify for relief of any kind, and have scheduled to hire someone down the road for penalty abatement, and don’t have any live liens filed against you, you don’t need to hire any company to setup a payment plan for you. It takes about an hour, most of which is because you’ll be on hold waiting for the IRS on the phone. Ask for a streamlined payment plan, and you’ll be set. If you want to talk with someone about penalty abatement, lien removal, or to make sure you don’t qualify for other relief types, then call 619-352-4188.
There are a lot of people that owe tax debt to the IRS. Recently a spokesperson from the IRS stated that an estimated 8.2 million Americans owed back taxes. That’s a lot of people. Most of these people owe a minimal amount and don’t qualify for a settlement of any kind with the IRS. However, what a lot of these 8.2 million have in common can be found on their credit report. Normally accompanying tax debt is a tax lien, and this shows its ugly head on a credit report, glaring at lenders, landlords, and credit companies. So what can be done?
First, how to qualify to have your lien removed at the IRS
In order to qualify to have a tax lien removed, your balance must be paid in full, through a settlement or in full payment, or you must be in a streamlined payment plan. There are of course ways around a lien temporarily, but the focus of this article is to get it removed completely from your credit report. If you paid the balance in full, then of course the lien is eligible as there is nothing to back the lien on. If you have reached a settlement with the IRS and that settlement has been finalized and paid in full, then there is no debt remaining and therefore once again you can have the lien removed. If you owe less than $50,000 to the IRS, you can qualify for a streamlined fresh start payment plan and are protected from new liens filed and are also eligible to have your past lien removed after proof of successful payments. Therefore, in order to get the lien removed, the debt must be paid in full or you must be on the right type of payment plan.
Make the right request
While the law says that the release will automatically happen, this is not often the case. What is necessary sometimes is a request in writing to the IRS. You will want to make a request to have the release of tax lien form. Once you obtain this form, this only “releases” the lien, but it will still show on your report. Thus, the next step is normally the most important. You have to request to the IRS to “withdrawal” the tax lien. Prepare a cover letter, the right form, attach all necessary documentation, and even include some IRS publications to help guide them.
You received the Withdrawal letter, now what?
Now you have taken all necessary steps to get the balance situated, the lien removed, and the lien withdrawn. However, it is still showing up on your credit report as “removed”. It can take up to seven years to get this removed through the normal process, so you should take steps to expedite the process. Contact the three credit bureaus, dispute the lien, and provided a copy of IRS communications to make the argument that to have it deleted from your report, NOT show “removed.” Credit agencies will verify the information with the counties the lien is filed with and then should remove from credit report within 60 days.
Sounds easy enough….not really…
There are a lot of moving parts and a lot of agencies that you’ll be dealing with. There are a lot of forms to organize and complete, and some legal drafting on your request/demand letters. Even when a professional takes control, it can be removed on 2 credit agencies and not all 3 and therefore more work is needed. Luckily, we here at Tax Debt Services have had the experience in making these arguments for our clients and are familiar with the language, forms, and processes of removing a tax lien. Call 619-352-4188 to see if we can help get your credit report free from tax liens. www.taxdebtservices.net
One of the worst things about owing the IRS money is that it continues to grow. Not only do you have the actual tax debt that you owe, but the IRS charges interest and it also can charge two different types of penalties. After many years, 25% of your total tax debt can be penalties. You may have entered into a payment plan and filed all missing returns, but the penalties and interest continue to grow. Let’s go through some common questions about this bad situation:
What stops interest and penalties from accruing?
The only thing that stops interest and penalties from accruing on your tax debt is to not have tax debt. That means it must be paid in full, either through a one-time payment, making multiple payments over years, or by having an offer in compromise settlement accepted and then paid in full. Beyond this, those interest and penalties will continue to enlarge your debt to the IRS.
Can you have the interest accrued waived?
Unfortunately, the answer is no. The IRS will not remove interest unless there is an extreme unique situation. However, if you have an offer in compromise accepted, it can indirectly remove the interest as that is part of the settlement. Beyond that, you will be paying back all interest accrued on the debt.
Can you have the penalties accrued waived?
Yes! Penalties accrued for failure to pay in full and penalties for failure to file can be removed. This can be done through what the IRS calls Penalty Abatement. Your penalties are there for two purposes, failure to file and/or failure to pay in full. In order to get these penalties removed, you have to show reasonable cause to the IRS of why you failed to file on time or why you failed to pay it in full.
My favorite answer to these questions is when people tell me “well…we just didn’t have the money.” Unfortunately, that is not reasonable to the IRS. The IRS is not friendly or kind, their job is to collect tax revenue for the country and if they cannot do that, they will penalize you for it. However, if there was a natural disaster, if there was a death in the family, if there was a period of sickness, then the IRS would say…”well…that’s reasonable, we’ll waive your penalties, but you’re still paying interest!”
If you are paying on your tax debt, and its been years of paying but the debt is staying solid, and you have a reason of why you owed, it may be worth your while to attempt a penalty abatement request. Give us a call at 619-352-4188 to see what our professionals think your options are.
Tax Debt Services
A common question that many of our prospects ask us is what to do in the situation where the IRS is threatening collections against you for tax debt that accrued while married? Many of these people state that they had no idea that there was a tax debt issue, their previous spouse always prepared their returns and did the finances of the house, and now they feel anxious and fearful of IRS collections even though they were in the dark the whole time.
The answer to these similar questions comes in the form of an Innocent Spouse relief. The IRS has created a category of debtors who owe tax debt as a joint couple, but where one spouse is not liable based upon the facts of the situation and an equitable argument. There are many subcategories and different criteria to be met under the banner of the Innocent Spouse, but if you do qualify for this type of relief, the tax debt is removed from your name and social. That means that instead of you owing the debt, the whole balance is transferred to the liable spouse.
How do you know if you qualify?
As is stated above, there are many subcategories and criteria to be met in each to see if you do qualify for relief, but some good indicators are as follows:
– You are now divorced, widowed, or legally separated
– You did not handle much of the finances of the home
– You were minimally involved in the preparation of tax returns
– You were unaware of any extra sources of income your ex was making
– You were unaware of any tax debt issues
– You did not receive notice from the IRS of tax issues until recently
If some, or all of these criteria are met, you may qualify for relief under the banner of Innocent Spouse.
I think I may qualify, now what?
If you believe any of the following may sound like you, the best step is to speak to a professional for them to hear your story, make a determination of what your options are, and then seek the relief. Many tax resolution companies do not look for this during initial conversations, so be sure to seek a company that is looking to listen to you and your story, not just interested in earning a profit. Contact us at 619-352-4188 and let our professionals get to work for you.