Tax Relief Solutions

How IRS Installment Agreements Work

how irs installment agreements work

When most people first examine tax relief options, they might have their hopes set on an offer in compromise – or their tax debt settled for less than what they owe. Unfortunately, OICs are more often denied by the IRS than they are accepted. When tax debt becomes too much to manage, an IRS installment agreement might be your best option. Here’s an overview of how IRS installment agreements work. 

What Is an IRS Installment Agreement? 

An installment agreement is a payment plan set up with the IRS to pay your tax bill over a set period of time. The installment agreement will bundle all taxes owed if you owe tax for more than a year. That said, you cannot have two installment agreements with the IRS. During this time, the IRS will generally stop levying. Collections are typically ceased or prolonged while the installment agreement is pending until it can be approved or rejected. However, the IRS will typically keep any tax refunds you receive and apply them to your tax bill. If the installment agreement request is rejected, collections will be suspended for 30 days. Every taxpayer has the right to appeal a rejection, in which case collections will be suspended until a decision is made on the appeal.  

What IRS Installment Agreements Are Available? 

The IRS offers both short-term and long-term installment agreements. Let’s review the eligibility criteria, terms, and costs for both. 

Short-Term Installment Agreement 

With a short-term installment agreement, you will need to pay your full tax bill within 180 days or less. This option is available to taxpayers who owe less than $100,000 in combined tax, penalties and interest. To qualify, you must be current on all tax returns. Individual taxpayers, including sole proprietors and independent contractors, can apply online, over the phone, via mail or in person for free. It’s important to note that interest will continue to accrue while you’re making payments. The current interest rate is 7% per year, compounded daily. Some penalties will also still apply. 

In general, the IRS will ask how much you can afford to pay each month. Once a monthly payment is finalized, payments can be made through automatic bank account withdrawals, also known as a Direct Debit installment agreement. You can also make non-automated payments online or by phone, or via check, money order, or a debit or credit card. Payments made with debit or credit cards will also be charged with a processing fee. Debit card processing fees are about $2-4 per payment while credit card processing fees can be up to 2% of the payment. You can review your installment agreement details through your online IRS account. You can also make some changes to your agreement online including your monthly payment, monthly due date, bank information, and more.  

Long-Term Installment Agreement 

With a long-term installment agreement, you can pay your full tax bill in over 180 days. This option is available to taxpayers who owe less than $50,000 in combined tax, penalties and interest. To qualify, you must be current on all tax returns. Individual taxpayers, including sole proprietors and independent contractors, can apply online, over the phone, via mail or in person for free. It’s important to note that interest will continue to accrue while you’re making payments. The current interest rate is 7% per year, compounded daily. Some penalties will also still apply. 

The fees for a long-term installment agreement are more substantial. If you want to pay monthly through automatic withdrawals, there is a $31 online setup fee, or a $107 setup fee to apply by phone, mail or in person. If you are considered low-income, you might be able to get this fee waived. If you want to make monthly non-automated payments, you will need to pay a $130 online set up ($43 for low-income taxpayers), or $225 to apply by phone, mail or in person. There is also a $10 fee to revise an existing installment plan or to reinstate after defaulting. This fee may be reimbursed for low-income taxpayers.  

Businesses are also eligible for long-term installment agreements if they are current on all tax returns and owe $25,000 or less in combined tax, interest and penalties. The same setup fees apply to businesses. 

For debt less than $50,000, you will typically have a maximum of 72 months to pay off your tax bill. Your minimum payment can be found by taking your tax balance and dividing it by 72 months. If you find that you won’t be able to pay this calculated amount each month, you’ll need to complete Form 433-F, Collection Information Statement, which obtains your current financial information to determine how to pay your tax bill. 

For debt greater than $50,000, you will usually need to submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, which obtains your current financial information to determine how to pay your tax bill. The IRS will also examine any meaningful assets you have that can be sold to pay down your balance and then set up an installment agreement. 

Tax Help for Those Seeking an Installment Agreement 

If you know you won’t qualify for tax debt settlement, an IRS installment agreement may be your best option to help manage your tax debt. An IRS installment agreement can truly be helpful to many taxpayers struggling with their tax debt. The most important thing to remember is to always make your installment agreement payment. If you default on your agreement, it may be terminated, and the IRS may begin enforcement actions. Be sure the installment agreement terms are viable for your own financial situation. Optima Tax Relief has over a decade of experience helping taxpayers get back on track with their tax debt. If you need tax help, contact us for a free, no-obligation tax consultation today. 

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How Tax Relief Works

how tax relief works

Owing the IRS can be one of the most stressful situations a taxpayer can face. Recent data shows that American taxpayers owed over $114 billion in back taxes, penalties, and interest in 2020. Much of this debt can be attributed to late filing, mathematical errors, and underreported income. Whatever the reason for owing taxes, many taxpayers may find themselves considering tax relief when their tax bills get too large to pay. Here’s an overview of what tax relief is and how it works. 

What Is Tax Relief? 

The phrase “tax relief” can mean many things. When speaking of tax debt, tax relief is when your tax debt is managed, settled through negotiations, or paid down with payment plans. Tax relief programs were created for taxpayers who cannot afford to pay their tax bills, as well as those who have overwhelming and overdue tax bills. 

How Does Tax Relief Work? 

Tax relief is not a “one-size-fits-all” program. Every tax relief program works differently, and the process will also differ depending on the individual taxpayer’s situation. Here we will review the most common tax relief policies and programs. 

Offer in Compromise (OIC) 

An OIC is the most popular form of tax relief as well as the least likely option for taxpayers since most OICs are denied by the IRS. An OIC allows you to settle your tax debt for less than what you owe. When selecting OIC candidates, the IRS will examine your ability to pay your tax bill, your income and expenses, and the value of your assets. There are some basic requirements for an offer in compromise including: 

  • Must pay a $205 nonrefundable application fee 
  • Must make a nonrefundable initial payment 
  • Must be current on all tax returns 
  • Must not be in an open bankruptcy proceeding 

If the IRS deems that you cannot afford to pay your tax debt, or that paying your tax debt will result in financial hardship, then it may accept your offer in compromise. If this happens, they will cease collections. 

Currently-Not-Collectible (CNC) Status  

In some cases, you cannot afford both your tax bill and your expenses. If this happens, you can request a CNC status on your account, which delays collections. The IRS will request information regarding your income and expenses to determine your eligibility. If approved, the CNC status will temporarily cease collections on your account. However, they will continue to assess interest and penalties to your account. They will continue to review your income each year to determine if you are still eligible for CNC status. They can also still file a tax lien against you during this time and keep your tax refunds to apply them to your tax bill. 

IRS Installment Agreement 

An IRS installment agreement allows you to pay your tax bill, plus accrued interest and penalties, over a set period of time. A short-term payment plan must be paid in 180 days or less. To qualify for a short-term installment agreement, you cannot owe more than $100,000 in combined tax, penalties and interest. A long-term payment plan can be paid over 180+ days. To qualify for a long-term installment agreement, you must not owe more than $50,000 in combined tax, penalties and interest. While an installment agreement does not reduce your tax bill, or exclude you from penalties and interest, it might be your next best option to pay off your tax debt.  

Penalty Abatement 

Sometimes life gets in the way of responsibility. Maybe you didn’t file your taxes for one year, or you forgot to pay your tax bill. If you have an otherwise clean record with the IRS, you can request a first-time penalty abatement, which waives a tax penalty or refunds you for one already paid for. Typically, if you meet three requirements, you should qualify for this tax relief option. 

  1. You are current on your tax return filing. Tax extensions are fine.  
  1. You are current on your tax bill or have a payment plan in place. 
  1. You have a clean record with the IRS. This means no penalties during the three tax years before the year you received a penalty.  

If interest accrued from a failure-to-pay or a failure-to-file penalty, and you receive penalty abatement, then the interest associated with the penalty abatement will also be forgiven.  

How Do I Proceed with Tax Relief? 

If one of these tax relief options sounds like they can be of help to your tax situation, you should consider pursuing it. Most of these options require nothing to lose, financially speaking. Dealing with the IRS on your own can be intimidating, time-consuming, and stressful. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success. If you need tax help, contact us for a free, no-obligation tax consultation today. 

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Don’t get Taxed twice when making Non-Deductible IRA Contributions

IRA Contributions

Individuals that earned income throughout the tax year have the option to make non-deductible (after-tax) contributions to an IRA and benefit from tax-deferred growth. One of the most common risks that taxpayers take is paying additional taxes when withdrawing their money from their retirement accounts. Before making after-tax contributions to a traditional IRA, it is important for taxpayers to have an understanding of the rules and how to avoid the double tax trap on withdrawals.

There are certain contribution rules and limits that most taxpayers are not aware of with the IRA withdrawal process. Here are the rules taxpayers need to know about when making non-Roth after-tax IRA contributions:

  • Individuals are required to have earned an income.
  • The deductibility phase-out is determined on the filing status, income, and whether or not an individual is eligible to participate in a retirement plan at work.
  • Contribution limits are the lesser of: $6,000 (plus $1,000 if age 50+) or earned income and apply to aggregate additions to IRAs.

Certain financial institutions where an IRA is kept could cause certain issues such as the institution restricting an individual to add more than $6,000 per tax year. Banks also do not track, report, or verify if an individual made a pre-tax or non-deductible IRA contribution. The responsibility is left up to the taxpayer.

For those who choose to make after-tax contributions to an IRA, are required to give the IRS a heads up that they have already paid taxes on those dollars by using Form 8606. Individuals who fail to report, track, and file the form will most likely lose the ability to shield part of their IRA withdrawal from a tax penalty when the money is withdrawn.

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.

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The Complete Guide to Hiring a Tax Professional

Most people require assistance when it comes to preparing and filing a tax return. Some may even find themselves having to provide additional information to the IRS and do not know what it is or where to find it.

Hiring a tax professional could save individuals both time and money when dealing with the IRS. Tax professionals can also prepare tax returns, help file income taxes, and assist taxpayers when it comes to dealing with the IRS, tax notices, tax liabilities, audits, and more.

The Benefits of Hiring a Tax Professional

Types of Tax Professionals

There are various types of tax professionals who specialize in focused areas of tax relief or tax prep and carry specific professional licenses.

  • Certified public accountants or CPAs can provide a variety of services such as:
    • Maintaining financial records.
    • Examining financial statements.
    • Providing auditing services.
    • Preparing tax returns.
  • Some CPAs specialize in tax planning and preparation such as:
    • Tax audits.
    • Payment and collection issues.
    • Appeals.
  • Enrolled agents are trained to find federal tax matters and are licensed by the IRS. Enrolled agents can assist with the following:
    • The preparation of both individual and business tax returns.
    • The representation of clients.
    • Other aspects of being a tax professional.
  • A tax attorney is licensed by the state to practice law. Most states require an attorney to have a law degree and pass a test administered by the state (bar exam). Tax attorneys can assist taxpayer with:
    • The preparation of tax returns.
    • Tax planning.
    • Providing advice to clients on long-range strategies for reducing their taxes.
    • Like CPAs and EAs, tax attorneys have unlimited rights to represent a client before the IRS.

Areas of expertise

There are a range of services that tax professionals can provide to taxpayers that can help them understand their taxes better. Based on what service you need, choosing the right tax professional or tax preparer can help you get back on track with your taxes, small business, and much more.

  • Enrolled Agents are IRS-authorized tax professionals who work alongside the U.S. Department of the Treasury by providing representation to individuals who need tax assistance.
  • Certified Public Accountants (CPAs) have state certifications to practice accounting. These experts can help individuals navigate certain tax situations. CPAs are licensed to represent taxpayers before the IRS.
  • Retirement tax professionals can help individuals know how their retirement options will impact their taxes. These types of tax professionals have received advanced training in tax preparations specifically for retirement plan contributions, distributions, and rollovers.
  • Small Business/Sole Proprietor tax professionals specialize in working with small businesses’ tax returns and educate their clients on how to properly prepare both their personal and company returns. These types of tax professionals have specialized training in sole proprietors, partnerships, and S corporations.
  • Investment Income tax professionals specialize in big or small investments, and gains or losses. These tax professionals also show your current and future tax situations.
  • International Taxation tax professionals assist individuals who have lived or worked abroad. These tax professionals are trained in international taxation which includes, claiming foreign earned income exclusions, the foreign tax credit, or treaty benefits for nonresident aliens.

Professional Licenses

Enrolled Agents (EAs) and Certified Public Accountants (CPAs) are both experienced professionals who maintain high ethical standards. The main difference between an EA and CPA is that an EA specializes specifically in taxation. CPAs can provide a wider scope of tax services for individuals.

Working with an EA would be beneficial for those who have IRS issues such as individuals who are in collections or dealing with an audit with the IRS. An EA would be best suited for someone who needs assistance with the IRS to help them with their tax concerns. EAs are also a great option for those who need tax preparation assistance and planning advice for both individuals and businesses.

CPAs specialize in tax preparation that can help individuals identify both their credits and deductions that can help them qualify for an increase in their refund or help lower their tax bill. CPAs are also beneficial if someone needs their tax information compiled, reviewed, or audited. 

When should I hire a Tax Professional?

You should hire a tax professional if you are short on time, are unsure how to file your taxes correctly, or feel overwhelmed by IRS forms with preparing your taxes. Tax professionals can help answer tax questions that you may have and even resolve most tax issues you may have.

The tax code can be very complicated and if you are unsure on how to handle your tax matters, a tax professional can assist. For example, a tax professional can help reduce the risk of any audit and know how to deal with the IRS on your behalf if you do end up being audited. Tax professionals can also help taxpayers avoid making costly mistakes on their tax return such as missed deductions or triggering an IRS letter. Tax professionals can also review previous tax returns to see if there were any errors and needs to be amended.

How to find the right Tax Professional for you

Individuals searching for tax assistance should follow these steps in order to find a tax professional who best fits their needs:

  1. Confirm your preparer has a tax identification number (ITIN).
  2. Make sure to confirm tax fees to ensure you are not being overcharged.
  3. Avoid tax preparers who do not e-file tax returns.
  4. Make sure that your tax preparer signs their name and provides their Preparer Tax Identification Number (PTIN) on your tax return.
  5. Make sure your tax professional can respond to the IRS. Enrolled agents, CPAs and attorneys that have a PTIN can represent you when it comes to IRS audits, payments, and collection issues.

10 Questions to ask a Tax Professional

  1. Do you have an IRS-issued Preparer Tax Identification Number (PTIN)?
  2. How do you keep up with the latest tax law? Are you regularly taking education courses?
  3. Do you offer a free initial consultation?
  4. Will you be the one preparing my return or someone in your office?
  5. Do you offer IRS e-file, and will my tax return be submitted to the IRS electronically?
  6. Will you keep my records and receipts on file? How long will you keep my records for?
  7. When do you require payment?
  8. When can I expect to receive my completed tax return?
  9. What happens if I get audited?
  10. Do you outsource your tax preparation?

Things to look out for when hiring a Tax Professional

Taxpayers should be aware of any red flags they experience when looking to hire a tax relief professional. Here is what individuals should look out for before hiring a tax professional:

  • Check the preparer’s qualifications.
  • Review the preparer’s history.
  • Ask about services and fees.
  • Make sure that the preparer offers e-filing.
  • Ensure your preparer has open availability if you have additional questions regarding your taxes.
  • Never sign a return if your preparer has added their name or PTIN.

How much does it cost to hire a Tax Professional?

The average cost of hiring a tax professional will depend on the complexity of the case that they are working on.

Consequences of not Hiring a Tax Professional

The federal tax penalties you could face by not hiring a tax professional to help you prepare your taxes could far outweigh the cost of soliciting tax help. Here are the repercussions individuals could face if they choose to not hire a tax professional:

  • Filing your own taxes could be time-consuming and confusing if you have never filed before.
  • You can miss out on tax preparation fees that could have been deductible.
  • You could miss out on certain credits or deductions if you are not aware of them.
  • If you get audited, you will not have a tax professional that can assist you through the process.
  • Filing your own taxes could lead to you making avoidable mistakes that could cause you problems with the IRS down the road.

Tax Relief Services at Optima Tax Relief

Optima Tax Relief offers tax relief services to individuals who are struggling with their IRS or state tax debt. Taxpayers that need assistance with tax preparation, setting up a payment plan with the IRS, getting out of collections, resolving an audit, or are looking to see if they qualify for a possible reduction in their total tax debt, should consider using Optima’s services.

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What Taxpayers need to know about Their Right to Finality

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.

For taxpayers who have been working with the IRS, it is important for them to know that they have a right to finality. Specifically those who have had their tax return(s) audited by the IRS should know that there is a Taxpayer Bill of Rights in place to protect them.

For taxpayers currently in the audit process, here is what you need to know about your right to finality:

  • Taxpayers have the right to know
    • The maximum amount of time they have to challenge the IRS’s position.
    • The maximum amount of time the IRS has to audit a tax year or collect a tax debt.
    • When the IRS has finished an audit.
  • The IRS typically has three years from the date that a taxpayer files their return to review for an additional tax for the year in question.
  • There are very few exceptions when it comes to the three-year rule. An exception would be considered if a taxpayer fails to file a return or files a fraudulent return. In either case, the IRS would have an unlimited amount of time to assess tax for the tax years in question.
  • The IRS generally has 10 years from the date of assessment to collect unpaid taxes. It is important for a taxpayer to know that the 10-year period cannot be extended unless a taxpayer enters into a payment plan or the IRS obtains court judgments.
  • A 10-year collection period may be suspended when the IRS cannot collect money because a taxpayer has an ongoing bankruptcy or there’s a collection due process proceeding involving the taxpayer.
  • A taxpayer will only be subject to one audit per tax year. The IRS has the ability to reopen an audit for a previous tax year if the IRS deems it necessary.

If you need tax help, contact us for a free consultation.

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Your IRS Letter Explained: What to Do

man late at work

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. 


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. 


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.


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.

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IRS Fresh Start Program: How It Can Help with Your Tax Problems

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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    What Is an IRS Administrative Appeal?

    courtroomIf you’ve been hit with an assessment from the IRS, for instance, as the result of an audit and you disagree with the results, you are entitled to present your case in Tax Court. However, an IRS administrative appeal may produce desirable results without the need to go to court. As a taxpayer, you are entitled to dispute the results of an IRS assessment through the administrative appeal process for any reason other than religious, moral or political, conscientious objections. The professionals at Optima Tax Relief can determine whether an administrative appeal is the right course for your situation.

    IRS Administrative Appeal Categories

    The IRS Appeals division operates as a separate entity from IRS offices that conduct investigations. The two types of administrative appeals available are Collections Appeal Process (CAP) or Collections Due Process (CDP) hearings. Administrative appeal hearings may be conducted by mail, telephone or in person. You may represent yourself or be represented by an accountant, attorney or individual enrolled to practice before the IRS. If your tax return was prepared by a third party who is not enrolled with the IRS, he or she may be a witness, but may not represent you.


    Submitting Your Request for Administrative Review

    For assessments resulting from an audit of less than $2,500, you may approach the auditor directly or submit your request through the appeals system. Protests involving assessments of less than $25,000 may be submitted as a Small Case Request. Use Form 12203 – Request for Appeals Review, available from the IRS website, or the form referenced by your assessment. You may substitute a written statement including the items to which you disagree and your reasons for disagreement. Assessments of $25,000 or more require a Formal Written Protest including all of the following items.

    • Your name, address, and a daytime telephone number.
    • A statement of intent to appeal the IRS findings to the Office of Appeals.
    • A copy of the letter showing the proposed assessment.
    • The tax period(s) or year(s) involved.
    • A detailed description of each item with which you disagree.
    • The reason(s) for your disagreement for each item.
    • Facts supporting your position for each item.
    • Any law or legal authority that supports your position on each item.
    • The following penalties of perjury statement stated exactly: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
    • Your signature beneath the penalties of perjury statement.

    If your request for appeal is prepared by your representative, he or she must substitute the declaration for penalties of perjury statement for individual taxpayers with a statement that includes each of the following elements:

    • An affirmation that he or she submitted the protest and any accompanying documents, AND
    • A statement of personal knowledge of stated facts in the protest and accompanying documents and a declaration that the facts are true and correct.

    Collections Appeal Processindex

    CAP generally produces faster decisions than a CDP. A CAP filed to protest a wrongful levy may be filed either before or after property has been seized, but must be filed before the property is sold. Filing a request for CAP within 30 days of the rejection or termination of an installment agreement prevents the IRS from issuing or executing a levy until the appeal has been settled. However, you cannot dispute owing additional taxes through a CAP. You are also barred from proceeding to Tax Court if you disagree with the conclusions of the CAP. You must file Form 9423 – Collection Appeal Request to initiate a CAP review. CAP can be used to address the following IRS actions:

    • Prior to or after the filing of a Notice of Federal Tax Lien
    • Prior to or after levy or seizure of property by the IRS
    • Proposed or actual termination of an installment agreement
    • Rejection or modification of an installment agreement
    • Rejection of proposed trust fund recovery
    • Denial of a trust fund recovery penalty claim
    • Denial of abatement request for late payment, late filing or deposit penalties
    • Rejection of an Offer in Compromise

    Collection Due Process

    Unlike the CAP, a CDP hearing allows you to proceed to Tax Court if you disagree with its findings. You must file Form 12153 – Request for a Collection Due Process or Equivalent Hearing, available for download from the IRS website, or a letter containing the same information as Form 12153 to request a CDP hearing. You generally have 30 days from the date you receive your assessment or audit examination report to submit your CDP appeal. After 30 days, you may request an Equivalent Hearing, but collection activities will not be suspended. You will also not be able to request a judicial review of the results of an Equivalent Hearing; you cannot appeal the results in Tax Court. You may request a CDP or Equivalent Hearing to request a review relating to any of the processes listed below:

    • Collection proposals (e.g. installment agreements or Offers in Compromise)
    • Lien subordination (relinquishing priority claim)
    • Withdrawal of Notice of Federal Tax Lien
    • Innocent Spouse defense claims
    • Existence or amount of additional tax assessment ( ONLY if there was no notice of deficiency or other opportunity to dispute tax liability)
    • Claim of economic or other hardship resulting from collection of tax liability

    IRSThe Administrative Hearing Process

    After submitting your request for administrative review, you generally have at least 60 days to prepare for the hearing. Draft a rough outline of the information you wish to include in your presentation. Categorize any other relevant information in spreadsheets or in visual displays, with separate folders for each item.

    It’s wise to request a copy of the auditor’s file under the Freedom of Information Act (FOIA) immediately; FOIA requests can take at least a month to process. The letter should cover all relevant tax years and provide an offer to cover copying costs. Send the letter by certified mail or other traceable means.

    The hearing itself will be fairly informal. You are entitled to take notes or record the hearing if you wish. Be prepared for requests for further information. If that happens, don’t hesitate to ask for more time.

    If you reach a verbal settlement during the hearing, the settlement will be transcribed onto IRS Form 870 – Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, which can require months to show up in the mail. Double check all the figures and do not sign the form unless you understand and agree with everything contained within it. The professionals at Optima Tax Relief can address any questions you may have regarding this process.

    Likewise, do not sign the form if you’ve found other mistakes by the auditor or appeals officer. Once you sign the form, you are barred from making further appeal to the Tax Court.

    It’s Worth the EffortLeslie Haviland

    The administrative review process can be daunting, but the odds of winning your case are very good. Investopedia reports that according to at least one edition of the book Stand Up to the IRS, published by legal portal Nolo, claims that taxpayers who appeal their audits have their assessments reduced by an average of 40 percent. With Optima Tax Relief on your side, you have a good chance of achieving favorable results, too.

    Top 10 benefits of working with a professional tax relief firm

    Having an outstanding tax debt is becoming a growing issue that many Americans face. The number of Federal tax liens and levies filed by the IRS has grown significantly in recent years.  In 2011, nearly 4 million tax levies were served on third parties, a 456% increase when compared to the same IRS reports from 2001. Similarly, the IRS issued over one million Federal tax liens in 2011, up 145% from a decade earlier.

    The IRS is usually relentless in their pursuit of collecting outstanding tax debt. The stress and pressure that is often placed on individuals and families can be overwhelming. Professional tax relief firms can be an incredible source of assistance when it comes to dealing with the IRS (or other State Tax Authorities) regarding back tax amounts owed or a wide range of other tax related challenges. Here are the top 10 benefits of working with one of these organizations.

    1.  You don’t have to face the IRS alone

    One of the major benefits of using a tax relief company is the fact that they have many professionals with different educational backgrounds to help you. By having a wide range of experts who understand how the IRS works (such as attorneys, CPA’s, or other specialists), they are able to put that knowledge to work for you so that you can reach the best possible settlement or solution for your tax problems.  After all, when dealing with the IRS or State Tax Authority, you can never have too many professionals working on your side.

    2.  Reduce the overall balance you owe

    The total amount you owe the IRS is often compounded by additional penalties and interest, and may involve more than one tax period or issue. These penalties and interests are automatically assessed to your account by their computer system; however you may not actually have to pay the additional fees.

    A professional tax relief firm can evaluate your situation, and depending on the circumstances behind why you owe the debt, can oftentimes have these penalties removed from the total balance owed. This applies to the interest accruing on your balance as well, which can really add up over any length of time.

    3. Avoid losing your home or other property from an IRS seizure

    In some extreme cases, people have lost their home or other property because of past due tax debts. Although property seizure is one method that the IRS can use to collect amounts owed, it is usually a last resort for them.

    However the number of IRS property seizures has increased dramatically in the last decade. In 2011, the IRS conducted 776 property seizures (compared to 234 seizures in 2001), resulting in a 230% increase in this form of enforcement in just 10 years. An experienced tax relief organization can help you avoid becoming one of these alarming statistics.

    4. Avoid having your bank account levied

    Similar to a property seizure, the IRS can also implement other actions to collect past due taxes. One more common method used is to levy your bank account. This action will occur after the IRS sends several written notices and warnings, yet still takes many people by surprise when they find out their bank account has been cleared out overnight.

    According to the IRS, over $55 billion dollars was collected as a result of enforcement actions in 2011, up 63.3% from a decade before. Imagine the nightmare of waking up one morning only to find that the IRS followed through with their threat of levying your bank account, and realizing that the money in your account that you were going to use for bills, rent, or other items, is no longer yours to spend.

    But this is just another example of a situation that can be avoided by having a professional tax relief service help you. You should contact them the moment you receive that first threatening letter from the IRS.

    5. Stop or prevent an IRS wage garnishment

    Garnishing your wages is yet another tool the IRS can implement to collect past due amounts owed to them. This adjustment to your paycheck can be financially devastating to your household income, usually taking somewhere between 30-75% of your NET paycheck before it makes it into your hands.

    The IRS legally requires an employer to comply with their collection efforts and the wage order stays in effect until the IRS releases it, usually not until the entire amount owed to them has been collected.

    A skilled tax relief firm can appeal to the IRS on your behalf and have the garnishment of your earnings reduced to a more reasonable amount or oftentimes stopped altogether.

    6. Settle your outstanding tax debt for much less than you actually owe

    Oftentimes the IRS is willing to negotiate with tax payers in regards to outstanding debts that are owed. This is true largely because of the fact that they would rather collect a lesser amount than nothing at all. But entering into a settlement negotiation with the IRS can be risky territory, especially if you are not fully aware of all of your rights or settlement programs that exist to reduce your overall debt.

    This is another area where a company that specializes in tax resolution can assist you. By negotiating with the IRS on your behalf, they can usually reach an agreement that not only significantly lowers the total amount you owe, but also makes the terms of payment simple and for a shorter period of time.

    7. Get caught up on past returns

    It is estimated that 1 in 6 Americans (26 million people) is currently struggling with tax problems. Many people let these problems grow and compound over years and end up failing to file new tax returns, figuring they are already in enough trouble with the IRS as it is. Working with a professional tax relief organization can also offer benefits by helping you get caught up on any back tax returns you may still need to file.

    8. Assistance during audits

    One nightmare than many people fear is being audited by the IRS. A reputable tax relief firm will stand by you through this process and make sure that everything you need to have is covered. The chances of being selected for an audit are relatively low with only around 1% of tax returns being selected for this process each year. Furthermore, of those returns that are audited, only about an additional 1% of them are for individual tax payers. So while the odds of being audited are low, it is nice to know you have someone on your side if you need them.

    9. Avoid dings in your credit score due to unpaid tax issues

    While the IRS is not currently providing information to the 3 major credit bureaus about any unpaid taxes you may owe, it is something they have strongly considered recently. Additionally, if the IRS files a lien because of outstanding debt owed, that information could show up on your credit report since it is considered a judgment, and will remain on your credit report for 7 years after you have repaid it or 10 years if you ignore it. This information can definitely affect your overall credit score and sometimes even potential employment.

    10. Enjoy a little piece of mind again

    The stress and pressure that can be placed on an individual or family because of outstanding tax debt can be so overwhelming and can even cause major problems in the lives of people who are struggling with it. It can seem like the easiest solution is to run and hide from the problem, but let’s face it, the IRS is one powerful and relentless authority and when they want their money, chances are they will find you.

    These issues will not go away on their own. The only way to make them disappear is to face them and address them as they arise. Having an experienced tax relief firm on your side to help with all the complicated policies and procedures can help your overall mental health dramatically.

    Although facing the IRS and State Tax Authorities can be a very scary and intimidating experience for many people, it doesn’t have to be so difficult. There are many options to help reduce or sometimes eliminate the debt you owe, but trying to handle it on your own can be equally challenging. Working with a professional tax relief firm is often your best bet. These knowledgeable and skilled individuals can help you handle everything necessary to get your tax related problems resolved once and for all.

    Do I Qualify for the IRS Fresh Start Initiative?

    Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The initiative allows qualified taxpayers to avoid the IRS Failure to File penalty. This penalty is usually placed on unpaid tax balances, with accrued interest. Qualified individuals can request a six-month payment extension in which no penalties will accrue. Late payment penalties will be charged if the balance is not paid by October 15. Secondly, Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens.

    Recognizing the need for tax relief, IRS Commissioner Doug Shulman said, “This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.” Do I Qualify for the IRS Fresh Start Initiative? is the logical question being asked by many taxpayers. Consider the qualifications below.

    • You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15 2012.
    • Married couples filing jointly need to have only one spouse that meets the qualifications.
    • Individuals who are self-employed need to be able to show at least a 25 percent drop in their net income.
    • Taxpayers must not earn more than $200,000 per year for married couples or $100,000 per year for individuals.
    • Fresh Start is also limited to taxpayers whose tax balance was not more than $50,000 at the end of 2011.
    • Taxpayers must file Form 1127A, which is not available electronically.