Tax Relief Solutions

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.

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.

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.

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