Tax Relief Solutions

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. 

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.

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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.

    ct-irs-tax-audit-mistake-problem-0306-biz-2014-001

    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.

    Get Tax Relief With Earned Income Tax Credit

    Annually, the Internal Revenue Service (IRS) reaches out to taxpayers across America who earned $49,078 or less to offer a little tax relief by way of the Earned Income Tax Credit (EITC).

    The EITC varies according to your income, family size and filing status. Basically, it is a federal refund for taxpayers with low to moderate incomes. And eligible taxpayers may still get a refund even if they don’t owe taxes.

    Eligible workers often miss out on it because they either don’t claim it or don’t file a tax return. This is especially true if their financial situation has changed; something that has happened to a lot of Americans over the last few years.

    You can easily find out if you qualify just by visiting IRS.gov and answering a few questions using the EITC Assistant.

    To get your EITC refund, you have to:

    • Have had earned income through employment, self-employment or farming
    • Have a valid social security number
    • Be a U.S. citizen or resident alien, or a non-resident alien married to a citizen or resident alien
    • Be 25 years or older
    • Have investment income of less than $3,150
    • Not be claimed on someone else’s tax return
    • File a tax return

    There are additional stipulations with regard to how you file (single or married) and whether you have filed Form 2555 (foreign income). However, in this climate of continuing financial struggle, taking the time to determine if you are eligible for some tax relief from the IRS is well worth the time investment.

    And if taxes aren’t the only financial obligation that has you struggling right now; if other unsecured debt like credit cards, student loans or a car note have you wondering how you will make ends meet, take the time to ask us about debt settlement. It’s our specialty.

    IRS Fresh Start Initiative to Allow More Consumers to Settle Tax Liabilities

    The IRS brings good news this week to middle-class Americans who continue to struggle with tax debt by expanding their Fresh Start Initiative.

    Loosened guidelines for the Offer in Compromise program, which forgives a portion of a taxpayer’s debt, will allow more Americans to qualify as well as eliminate their tax debt in as little as two years, compared with four or five years.

    The adjustments to the program come after the IRS recognizes that many taxpayers are still struggling to pay their bills. They wanted to apply a common sense approach to reflect real-world scenarios.

    Changes to the program include:

    • Revising the method of calculating taxpayer’s future income.
    • Flexibility in repaying student loans.
    • Flexibility in paying local and state delinquent taxes
    • Expanding the Allowable Living Expense allowance (expenses such as credit card payments and bank fees can now be taken into account).

    The changes will allow many more consumers to qualify for tax relief under the Offer in Compromise program. Specifically, when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years.

    “This phase of Fresh Start will assist some taxpayers who have faced the most financial hardships in recent years,” said IRS commissioner Doug Shulman. “It is part of our multi-year effort to help taxpayers who are struggling to make ends meet.”

    The IRS, having a reputation of rigidity, surprised many Americans with this welcomed announcement of increased flexibility. Full details of the announcement are available at theIRS website.

    How to Remove an IRS Levy

    A IRS tax levy is the toughest collection tool in the IRS arsenal.  An IRS tax levy means that the government has the right to seize your property and assets in payment for unpaid tax debt.  Unlike a lien, a tax levy actually gives the IRS the right to take and sell your property to settle your debt.  If you have been issued a tax levy, don’t give up:  you can still settle your tax debt.

    There are several ways you can remove an IRS levy:

    • Pay the tax debt in full.  Once the debt is paid, the IRS will immediate halt the collection process.  If you don’t have the funds available to pay the entire debt, options might include taking out a loan, borrowing money from friends or family, or refinancing your home.  The IRS agent might be willing to put a temporary hold on collection procedures if you have a reasonable plan for coming up with the money.
    • Set up a payment plan.  This may be the simplest and easiest option.  If you owe less than $25,000 in back taxes, the IRS will typically stop the tax levy once you have agreed to an IRS payment plan.
    • Set up a partial payment plan.  Similar to the installment plan, in a partial payment plan you will agree to pay the IRS what you owe over time.  The main difference is that your payments will be smaller than with the installment plan and you must be able to prove that you don’t have the financial resources to make the payments required under the installment plan.
    • Submit a compromise offer.  If you submit an offer in compromise the IRS will automatically halt collection proceedings until the offer is reviewed.  If the offer is accepted, you must pay the amount of the offer.  If the offer is rejected, the IRS will resume collection proceedings unless you can set up a payment agreement.
    • Prove that the levy is causing undue financial hardship.  The conditions on this are stringent and the IRS is the final judge.  If you can prove that the levy is making it difficult to provide for your families basic needs such as food and shelter, the IRS will lift the levy.
    • Prove that the IRS is trying to collect on assets with no equity.  If you can show the IRS that it’s not worth their effort to collect, the IRS may lift the levy.  This would only apply in situations where you have little or no equity in your assets, such as a home with a mortgage large enough to offset the selling price.
    • Let the statute of limitations expire.  There is a 10 year statute of limitations on IRS tax debt.  If the 10 year limit is drawing near, the IRS may try to extend the time limit by getting you to agree to a payment plan or other settlement.  If you are on year nine of the ten year period however, you may be able to let the statute of limitations expire without payment.

    The post How to Remove an IRS Levy appeared first on Debt America.