by Alexis Hernandez | Jan 14, 2020 | IRS Collections
As a taxpayer, one of the most frightening things you could receive in the mail is an IRS letter. Depending on the notice that you receive from the IRS, it can cause anxiety and fear, and you may even feel unsure about what your next move will be or what tax solutions may be available to you. The IRS does have tools available that taxpayers can utilize for IRS tax help, even if they received a notice that makes it unclear what their next steps would be. Below are some of the most common collection notices sent out to taxpayers every year.
CP501/502
If you’ve received a CP501 notice, it means that the IRS is attempting to notify you of a past balance due. The IRS will request that you take action in order to resolve your outstanding balance. A CP502 notice also doubles as a reminder that the IRS sends about your tax balance. Typically, each notice indicates the interest and penalties that have accrued in addition to what you owe to the IRS.
If you receive these types of notices, the IRS is letting you know of what the current balance, including interest and penalties, is owed. Once you confirm that the balance is accurate, you can either pay the balance for the tax year in question or contact the IRS to get set up on a payment plan.
CP504
A CP504 notice is a secondary notice that the IRS will send to alert you of your tax debt if you owe a tax balance. This notice is to also notify you that they’re preparing to start collection action and to seize any tax refund you may have received. The IRS will continue their collection action against a taxpayer until their balance is paid in full.
To avoid the IRS sending you into collections, it is important to stay compliant. You can do this by paying off your balance in full with the IRS or asking to be placed on a payment plan. It is also paramount that you continue to monitor your mail to ensure that you don’t receive any further notices from the IRS.
LT11/CP90
An LT11 is a notice to remind a taxpayer that they have an overdue payment for overdue taxes.
The IRS will send a CP90 notice if they have attempted to reach out to a taxpayer multiple times about their tax balance and have yet to receive a response. The letter states that the IRS has the intent to seize a taxpayer’s property or rights to their property if they fail to resolve their outstanding balance.
Both these notices are a warning that the IRS will begin to take collection action against the taxpayer and it is up to the taxpayer to either continue to stay in collections with the IRS or settle their debt and get compliant. At this point in time, it is vital that you attempt to rectify the situation and get help with IRS debt by contacting them immediately to resolve your liability in addition to any interest and penalties that you have accrued.
Regardless of what notice you have received, it is important to review the notice and resolve the situation if needed. The IRS typically sends written communication to taxpayers to notify them of their tax balance and to reconcile their liability as soon as possible. If you need tax help and don’t know the first step to resolving your balance with the IRS, a tax relief company may be your best bet. A tax relief company will work with the IRS on your behalf to address your tax issues so you can be compliant moving forward.
Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.
by Optima Financial Group | Jan 3, 2020 | Tax Relief Solutions
The IRS Fresh Start Program Initiative, first announced, February, 2011, has had one goal: to make it easier for individuals and businesses to pay their back taxes and penalties. The Initiative has been expanded since then, but still holds true to its original purpose. How exactly will it affect you if you’re struggling to pay taxes? Here are the four components that Fresh Start Program has changed for your benefit.
What Is the IRS Fresh Start Program?
The IRS Fresh Start Program is a tax relief program that is designed to allow taxpayers to pay off substantial tax debts affordably over time.
Back in the bad old days, the image of the IRS was one of intimidation. Whether deliberately cultivated or not, the IRS did little to dispel this perception. In recent years, the IRS has sought to reboot the way it interacts with taxpayers, with agents receiving training and instruction in how to assist taxpayers who are in arrears rather than torment them. The IRS Fresh Start program combines penalty relief, installment payments; lien releases and a program known as Offer in Compromise that allows some taxpayers to settle their federal tax debts for less than what they actually owe.
How the IRS Fresh Start Program help waive Tax penalties
Originally, when paying and filing your taxes, missing the tax filing deadline meant immediate interest charges and penalties. But with the Fresh Start Initiative, qualifying unemployed taxpayers can apply to have Failure-to-Pay penalties waived for six months. This means that individuals have until October 15th, 2020 to pay their 2019 taxes.
How do you qualify for the IRS Fresh Start Program?
To qualify for the Fresh Start Program, you must:
Have been unemployed or seen a decrease in income
Earn less than $100,000 a year individually
Earn less than $200,000 a year as a couple
Not have a large tax balance from the previous tax year
The IRS Fresh Start Tax Relief program was launched in 2012 to help taxpayers who were struggling from the effects of the ongoing financial crisis. The first aspect of the program provided some unemployed taxpayers with exemption from the failure-to-pay penalty. Under this initial slice of the Fresh Start Initiative, taxpayers received a six-month reprieve from penalties on taxes owed for their 2011 federal tax returns. Although interest was still applied to any unpaid taxes, penalties were suspended from April 17 to October 15, 2012.
Easy Installment Agreements
The IRS Fresh Start Program also raised the maximum tax owed for taxpayers from $25,000 to $50,000 to qualify for streamlined repayment plans. Under the streamlined installment payment agreement program, taxpayers may establish payment plans online through the Online Payment Agreement page located on the IRS website. Taxpayers who owe more than $50,000 may still establish installment agreements but must either file a Collection Information Statement (Form 433-A or Form 433-F) or make sufficient payments against their past-due tax balance to bring the total tax owed below the $50,000 threshold.
How To Withdraw Notice Of Federal Tax Lien
The Fresh Start Initiative raises the minimum threshold for filing an IRS Notice of Federal Tax Lien on taxes owed from $5,000 to $10,000. The new standard is not retroactive, and the IRS may still impose liens against taxpayers who owe less than $10,000 when the agency deems that circumstances warrant doing so. To request that the IRS withdraw the Notice of Federal Tax Lien against liens that have been released, taxpayers must file Form 12777 – Application for Withdrawal, available on the IRS website. When citing a reason for the request, taxpayers should check the last box which states “the taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”
How To Make use of ‘Offer in Compromise’ and settle for less Tax
An Offer in Compromise, according to the IRS Fresh Start Program allows taxpayers to settle their obligations to the IRS for less than the total amount owed. The IRS only allows taxpayers to obtain relief under the Offer in Compromise program in circumstances where requiring repaying the full back taxes owed would constitute an undue burden or in cases where taxpayers demonstrate that they will be unlikely ever to be able to pay the full amount owed. Traditionally, the IRS has been stingy about accepting Offer in Compromise proposals from taxpayers; as a result, very few taxpayers were able to qualify for the program.
The IRS Fresh Start Initiative has established more flexible standards in evaluating the financial standpoint of taxpayers who request relief under an Offer in Compromise. As a result, more taxpayers may qualify. To be eligible for this IRS tax relief program under the Offer in Compromise program for grounds other than Doubt as to Liability, taxpayers must meet all of the following conditions.
Requirements to qualify for the Offer In Compromise program:
- Cannot have an open personal or business bankruptcy petition
- All required tax forms must have been filed
- All required tax payments for the current year must be paid
- Business owners with employees must have made current quarterly tax payments
An Offer in Compromise may be either for a single lump-sum payment or for installment payments. To request an Offer in Compromise, taxpayers must submit Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses along with either $205 to cover the application fee and either a payment of 20 percent of the proposed lump-sum payment or an amount equal to the first proposed monthly installment payment. Individuals and sole proprietors who qualify under Low Income Certification guidelines set by the IRS are exempted from paying the application fee.
New Installment Guidelines according to Fresh Start Program
Installment agreements allow a person to make monthly payments on their tax debt if they can’t afford to pay the total at once, and/or aren’t eligible for an Offer in Compromise. In the past, once an individual’s tax balance reached $25,000, the IRS began conducting a financial analysis of the person’s income and expenses to determine how much the taxpayer would pay per month. Additionally, a Notice of Federal Tax Liens was filed.
Under Fresh Start, more taxpayers will be able to avoid this invasive process altogether, as the tax balance threshold has been raised to $50,000. At that point, once the installment agreement process is started, you’ll now have six years to pay the debt off. If you are considering entering an installment agreement, let us know and we’ll make sure you qualify.
Notice of Federal Tax Liens and the Fresh Start Program
If an individual fails to pay their tax debt the government can file a claim against that person’s property with a federal tax lien. “Property” includes everything an individual owns, including real estate, vehicles and financial assets. The Notice of Federal Tax Lien alerts creditors that the government has a legal right to a taxpayer’s property. This may limit your ability to get credit.
Similar to installment agreements, FSI has raised the Notice of Federal Tax Lien filing threshold to $10,000 from $5,000. The IRS might still choose to file at an amount less than $10,000, but it’s not as automatic as before.
How the IRS Fresh Start Program can help with your Tax problems
While none of these alternatives represents an easy tax solution, each of them does provide a viable avenue for tax relief. If you have been struggling to pay your federal income tax burden, investigating possible assistance under the IRS Fresh Start Tax Relief program is definitely worth your while, either on your own or with the assistance of a tax professional. You may find that your overall tax burden is significantly reduced.
Wondering if you’re eligible for the Fresh Start program? Give us a call.
Do you need tax relief help? If you’re struggling with paying your taxes, don’t know how to fill out an Offer in Compromise or don’t know which forms to file, contact us today. We’ll help you take advantage of the Fresh Start Initiative, and deal with the IRS so you don’t have to.
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