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The Tale of Two Seasons: IRS Levy Season and the Holiday Season

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With the holiday season literally coming upon us in a few days, there are many stresses accompanying the happy times ahead. If you owe tax debt, one of those stresses should be the IRS. IRS levies rarely put anyone into a jolly mood. However, with the holidays also comes a fever of IRS collection actions.
Coming up to the holidays and shortly after them, the IRS kicks collections into gear and are often more aggressive than normal. This is due to an informal hold that the IRS has done annually referred to as the Holiday Stay of Collections. Technically, for about three weeks around the holidays, the IRS automated collections systems will generally not levy personal accounts or wages. This is not formally announced, but as we actively work with clients to resolve issues, we normally are privy to this information through phone conversations with the IRS. While the IRS claims that they take this time to reboot their computer system for upgrades for the New Year, we know that they are actually doing a kindness in taking three weeks off from collecting against tax debtors.
This sounds great right? Yes and no. The hold is great, but surrounding it is known as the Levy season. This is because the IRS is of course aware of the hold and it is their job to collect funds. However, what we see happen more often is that all the collection actions that should have taken place during those three weeks comes like a freight train once the Holiday Stay is completed. Some people think that they won the lottery because they were warned of serious collection action through notices and then nothing happened so they assume that the IRS forgot about them. That is definitely not the case. Tax debtors beware: we are approaching IRS levy season.
Read your letters:
In order for the IRS to take collection action, they must give you proper notice. This has to be served correctly (normally through the mail). These letters also provide a guide as to when the IRS will actually levy.
The first three mean warnings only, and they are titled as follows: 1) Amount Due Letter 2) Notice and demand, and 3) Notice of intent to levy. It’s the letter that follows this that is one to take note of, the IRS Letter 1058 “Final Notice of Intent to Levy”. On this letter, there is a notice date, and the debtor has 30 days to do something before collection action is taken. If this letter is received any time in the month of November, you could assume no action will be taken in December, however, be sure that after the Stay collection action will occur.
With IRS levy season and courtesy holiday stay of collections right around the corner, now is a good time to look for help. If you have received a letter from the IRS, or if they are threatening collections, today is the day to think about what you are to do with this. When we say today, we mean today, not after you are collected upon. Collections can be stopped and prevented, and the holidays are not the time to get garnished or levied. Give us a call 619-352-4188 to see what your options are during the holidays.

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Owe Tax Debt but Have a Nest Egg? Currently Not Collectible is your Key to Peace

While an offer in compromise is the goldmine for those who owe tax debt, obtaining one with equity in assets is hard to come by.  However, if you have a nest of equity, but are cash broke, there are other options at the IRS that may better suit your needs.

Why don’t I qualify for a settlement?

The Offer in Compromise is the settlement program that allows people to settle their tax debt for less than what they actually owe.  To qualify for a settlement, there is a formula used that looks at disposable income and equity in assets.  While you may not be able to afford a monthly payment to the IRS, because you have equity in assets, the value of those assets may be too high to make a settlement practical.  Therefore, the taxpayer is stuck in a position between an inability to settle and an inability to enter a payment plan.  Rather than suffer through garnishments, levies, and property seizures, the taxpayer has another option: Currently Not Collectible status. 

What is a Currently Not Collectible Program?

The financial hardship status with the IRS known as Currently Not Collectible was established for the taxpayer that at this time could not enter into a payment plan.  Under the 8th Amendment’s cruel and unusual punishment and excessive fees and fines clause, the government has come up with a status for taxpayers to enter in which the taxpayer’s constitutional rights are protected.  In this status, no collection actions will occur and no payments to the IRS are necessary.  Therefore, the taxpayer can protect their nest egg, and not have to enter a financial hardship of which they cannot afford.  So whether it be a 401k account, equity in a home, tied up stocks and bonds, or vehicle values, the IRS will leave your property alone.  The one caveat is that the IRS will place a lien against your overall property in order to secure its interest in obtaining any assets that you may later plan to liquidate.

How to Qualify

1.  Taxpayer is compliant with tax returns for last six years. 

2. Taxpayer is compliant with tax withholding and/or quarterly estimated tax deposit requirements.

3. Taxpayer fully discloses all financials

What happens to the debt?

The IRS will not collect nor require payments on the debt, so what happens to it? Federal tax debt expires 10 years from the date of assessment.  By entering this program, the clock still ticks and potentially may expire while under this program.  For example, a taxpayer that is on social security and no has ability to make monthly payments to the IRS, but has accessible equity in their home owes the IRS $20,000.  This debt comes from a tax return filed in 2010.  The tax debt is set to expire in 2020, so by entering this currently not collectible program, the taxpayer does not have to make payments, is not collected upon, and as long as there are no dramatic changes to their finances, the taxpayer remains in this status until the tax debt expires in 2020.  

Do I qualify?

Some companies will charge you to see if you qualify, other companies will tell you that you qualify without actually gathering enough information to do the two part test.  Contact us at Tax Debt Services at 619-887-4881 and we can determine if you qualify for free. 

www.taxdebtservices.net 

 

Today’s IRS Offer in Compromise is the Most Generous Program to Date

The recent rule changes brought out under the IRS’ fresh start program has allowed thousands of Americans to now be eligible for tax relief where before they wouldn’t even qualify for a settlement.  So, how does the program work?

What is an Offer in Compromise?

The Offer in Compromise is a program that allows people to settle their tax debt for less than what they actually owe.  There are two main type of offer settlements 1) Doubt to Collectability and 2) Doubt to Liability.  While Doubt to Liability seems like an obvious choice for many, the hard truth is that most people that owe tax debt, truly do owe the tax debt, but just struggle with paying that debt off.  Therefore, the fresh start program implemented by the IRS is focused on the Doubt to Collectible offer in compromise.

What Amount Can I Settle For?

Doubt to Collectability can mean a lot of things.  There are hundreds of court cases, legislation, and directives that build the definitions to that term.  However, it can be simplified into a two part test.

Test 1) Given the disposable income per month, if the taxpayer paid that amount per month every month until the tax debt expired, would the debt be paid in full?

Test 2) If the amount would not be paid in full, then an equation is used:

DISPOSABLE MONTHLY INCOME (MULTIPLIER) + AVAILABLE EQUITY IN ASSETS =

OFFER SETTLMENT AMOUNT.

Tax Debt settlements are very different from other types of settlements where the debtor cannot just offer the creditor money as a percentage of the debt and expect success.  If the two tests fail or show a settlement amount higher than the actual debt, then the Offer program is not right for you.

How to Qualify

1.  Taxpayer is compliant with tax returns for last six years.

2. Taxpayer is compliant with tax withholding and/or quarterly estimated tax deposit requirements.

3. Taxpayer is protected from collection actions.

Why would the IRS do this?

The IRS would rather ensure that you are a good taxpayer from this point forward than destroy your life because of some past mistakes. They are willing to forgive your old debt in exchange for future compliance and a promise to not owe taxes again for at least the next five years.

Do I qualify?

Some companies will charge you to see if you qualify, other companies will tell you that you qualify without actually gathering enough information to do the two part test.  Contact us at Tax Debt Services at 619-887-4881 and we can determine if you qualify for free.

If I do qualify, why would I need to hire a professional?Image

Criminal court cases, lawsuits, corporate mergers, vehicle repair, bankruptcies are all examples of situations where anyone can do things by themselves.  People can represent themselves in court, repair their own engines, and file the lengthy paperwork of bankruptcies by themselves.  How does this normally work out for the person who isn’t a professional? Normally not so swell.

Hire a company that has professionals who do this for a living.  This is tax debt and should be thought of as a serious and urgent concern.  Why would you not want to get it done right?

 www.taxdebtservices.net