The New Tax Year Resolution You Must Make Right Now

calculator-1019743_1280Ignoring that past due tax debt will get your new year off to a stressful start

2015 will be history in a matter of days. If looking back on 2015 also includes an outstanding tax debt, addressing that tax debt needs to be at the top of your New Year’s resolutions list.

Penalties and fees

If you have not  yet paid your 2014 taxes, you’ve been racking up penalties and fees for each month of non-payment. The IRS assesses a non-payment penalty of 1/2 of 1 percent of the balance for each month after the initial due date. It may not sound like much, but it can penalties can add up to as much as 25 percent of the balance due.

That’s a lot if you’re on a tight budget, and penalties can add up quickly, not to mention past due notices from the IRS.

Don’t panic, and don’t ignore the IRS

Don’t assume the IRS will forget about those outstanding taxes, because their role is to collect tax payments from citizens. If you’re ignoring their written notices in hopes the IRS will forget and move on, it will never happen.

The IRS will become more aggressive with each passing month of non-payment. Regardless of where you are in this collection cycle, the IRS won’t forget. If you are facing asset seizure for non-payment of past due taxes, you need to take action immediately to protect your bank account and other assets.

Your best defense against the IRS

The bad news is you owe back taxes. The good news is that there are tax professionals who can help you. A qualified tax pro can determine if you’re eligible for an installment agreement, Offer In Compromise or Currently Non-Collectible status. A tax pro such as an Enrolled Agent or tax attorney can represent you in negotiations with the IRS.

One key advantage to hiring a tax pro: they know the complex IRS tax code inside and out, so you won’t have to. A qualified tax pro will also ensure your rights are upheld throughout the collection proceedings. They will also explain each step to you in terms that you can understand.

You won’t hear jargon or “legalese,” but you will hear an honest assessment of your financial circumstances and your options. Your tax pro can work with you in arriving at a payment arrangement you can live with over time.

If you’re facing 2016 with an outstanding tax bill, now is the time to take charge and take back your life. We have qualified tax pros on staff who can help you sort out your options, negotiate on your behalf with the IRS, and advise you every step of the way. Even better, they can translate that complex IRS jargon that might be difficult to interpret and understand.

If you’re ready to face 2016 with a clear plan of action, give us a call today at (888) 224-3004. You can also chat with us by clicking the white “Start Chat” button at the top of our homepage.

Either way, you don’t face to face past due taxes alone. We can help.

 

 

 

What You Need To Know About IRS Collections

Photo: David Playford/freeimages
Photo: David Playford/freeimages

 

Things can happen. An unexpected medical bill, unpaid time away from work or other financial emergency is enough for most people to fall behind on their tax obligations to the IRS. Maybe you really meant to pay your tax bill, but somehow it got pushed aside when an emergency came up that wiped out your savings or other financial reserves earmarked for paying your taxes.

In some ways, the IRS collection process isn’t really that much different than credit card collections or medical collections. Even with that, it’s important to be aware of how the IRS goes about collecting past due taxes from taxpayers.

The IRS places a high priority on past due taxes and is intent on collecting all past due tax debt. If you’ve set aside your IRS collection notices out of fear or hoping the debt will somehow be written off, you could be in for a rude awakening: the IRS places older tax debt at the top of its list and will take action to recover that debt.

IRS debt can linger for years, depending on how much you owe them. You may end up facing years of collection activity, since the IRS makes it a priority to recover “old” tax debt. The IRS will continue to pursue you until the debt is paid off. Like credit card companies and hospitals, the IRS means business and wants the money that is owed to them.

You could be stuck making payments for years and living on a very lean budget while paying off your tax debt, including the balance due and any interest and penalties.

While it can seem like you’ll be forever saddled with IRS debt that will never go away, there is a legal time limit, or statute of limitations on IRS debt. Tax debt that is more than 10 years old is off-limits to them. If your tax debt is outside the statute of limitations, this could help you in deciding which course of action to take, or whether or not to take any action to pay off the debt.

When it comes to debt less than 10 years old, however, the IRS employs many of the same tactics used by credit card companies and hospitals: wage garnishments and levying assets. At the same time, there is one key difference: the IRS does not require a court order to do so. This will typically happen if you haven’t responded to any of the IRS’s correspondence regarding your tax debt.

If you want to avoid the nightmare of finding your bank accounts and other liquid assets frozen, or having a lien placed against your home and other assets, you must respond to any communication from the IRS. Failing to do so signals to the IRS that you have no intention of satisfying your tax obligation, and they will resort to stronger tactics such as wage garnishment or asset levy.

The IRS, like credit card companies and hospitals, takes debt seriously. They will prioritize unpaid debts; the older the tax debt, the more aggressive they are when it comes to collecting that debt. If you are tossing their notices in the trash out of fear or in hopes the debt will eventually be written off or forgiven, the IRS can and will initiate collection action against you.

Tomorrow: More about the IRS collection process.

 

True or False? Get The Facts About Wage Garnishment

 

Photo:DodgertonSkillhaus
Photo:DodgertonSkillhaus

We’ve all heard those horror stories about the IRS randomly draining bank accounts, seizing houses and assets, and garnishing wages. Wage garnishment and asset seizure  just don’t happen on a whim; it is usually a measure of last resort for the IRS when all other means have failed. Here’s a look at some of the myths behind wage garnishment in particular.

1. I won’t receive any notice at all. Although the IRS isn’t legally obligated to inform you when they will begin garnishing wages, you will have received several notices from the IRS at this point. A Notice of Intent to Levy is issued beforehand, warning you of intent to levy income and assets if an outstanding tax debt isn’t paid or if payment arrangements haven’t been made.

2. My manager has to tell me if my wages are going to be garnished. Once your employer receives instructions to garnish your wages, they must comply immediately.  Your employer is under no legal obligation to let you know if/when your wages are being garnished.

3. The government has to allow enough room in my paycheck so I can cover my expenses. Unfortunately, the government doesn’t have to take your other expenses into consideration. As a rule of thumb, you can legally be left with $200 on each paycheck if you’re single or $300.00 if you’re married.

4. I can get fired if my wages are garnished. You’re safe if you have just one garnishment. However, if you have two garnishments, your employer can legally terminate you if they choose to.

5. I’m toast. I can’t stop wage garnishment from happening once I get a final notice. Good news. You have up to 30 days to respond to the final notice. If you haven’t done so already, now is the time to line up a qualified tax advisor who can review your case, determine your eligibility for repayment arrangements, and represent you in negotiating with the IRS and state tax boards.

Don’t wait until the last minute to respond. Contacting the IRS or state tax board can be nerve-wracking, but if you demonstrate a good faith effort to take care of your tax debt, that can go in your favor. Be proactive, contact the IRS or state tax board that issued the notice, and begin to put that chapter in your life behind you.

A qualified tax pro can help. Don’t go it alone. We have Enrolled Agents who can help. Get started today by clicking the white “Start Chat” button at the top of your screen.

 

Can Overdue Taxes Affect Your Credit Score?

Tax Debt

It seem that everything–from mortgages, to car loans and even some types of employment–is tied to your credit score. There’s no doubt you’ve heard about friends or complete strangers who couldn’t get the car, house, apartment, or job of their dreams because of a low credit score.

We also know that delinquent credit card debt and past due student loan payments can affect your credit, but what about past due taxes? Can they impact your credit score?

The short answer is “yes.”

If you owe past due taxes, and decide to pay them off with a high-limit credit card, your score could drop by as much as 100 points since you’ve reached the maximum credit limit for that card.

If you are paying your tax bill at the expense of your other debts (e.g. student loans, car loans, credit cards) your credit score will also drop since you neglected the other debts in favor of paying your tax debt.

Let’s suppose you owe $10,000 or more in taxes and you haven’t contacted the IRS to make payment arrangements. The IRS will impose a tax lien as a way to recover the money you owe.

The tax lien will appear on the “Public Records” section of your credit report, where it’s visible to lenders, employers and potential landlords. In addition, that one tax lien will cause your credit score to drop by 100 or more points….which could be just enough in some instances to impact your ability to qualify for any credit.

An open tax lien will remain on your credit report for up to seven years, and you’ll be stuck with higher interest rates or deposits on any loans or rental agreements you do manage to get.

What You Can Do

Don’t let your tax debt get to the point of having to sacrifice your other financial obligations in order to pay the IRS. Same goes for larger tax debt. Don’t let fear stop you from contacting the IRS to make payment arrangements. Reaching out to the IRS will put you back in control and will preserve your hard-earned credit score.

You will have the opportunity to apply for an IRS Installment Plan, which will allow you to pay off the tax debt over time.

However, if paying the tax debt will affect your ability to pay for basics such as rent, utilities, transportation and food, consulting a tax pro is your best option. He or she will assess your overall financial situation and will be able to advise you of programs that can help you to chip away at your tax debt with a payment that won’t leave you short of rent money.

Your tax advisor will also inform you of your rights in dealing with the IRS.

Regardless of your individual circumstances, tax debt has far-reaching consequences in terms of your credit rating and your ability to obtain credit in the future. You could be facing a tax lien if you owe $10,000 or more in unpaid taxes, especially if you haven’t contacted the IRS to make payment arrangements.

Don’t let tax debt ruin your  good credit standing. Take steps today to settle your tax debt with the IRS. We have qualified tax pros on staff who can help. Just click the white “Start Chat” button on our website or give is a call. Don’t go it alone. We can help.

 

Inside Scoop: The IRS CP523 Letter

David Playford/freeimages
David Playford/freeimages

You’re chipping away at your IRS Installment Agreement payments faithfully. Then the car breaks down and needs several hundred dollars in repairs. Shortly afterward, you get hit with the co-pay for your kid’s late-night ER visit. Your work hours suddenly get cut.

These things happen. Unfortunately, the IRS wants their money…now.

Here’s what can happen if you fall behind on your installment agreement, and fail to contact the IRS.

The CP523 Letter

The language of the CP523 letter is no joke. It informs you that unless you pay the full amount due (so much for the installment agreement), you run the risk of either a tax lien, asset seizure or both.

A good thing to keep in mind is this: the IRS issues the letter after you’ve missed several installment payments. If you miss one or two, you still might have a chance to salvage the installment agreement.

The IRS issues the CP523 when you haven’t contacted them to advise them of your change in circumstances. They assume you’re skipping out on the debt and they want to recover that debt…quickly.

If You Fall Behind…

Contact the IRS immediately. Don’t wait for the CP523 to land in your mailbox. By being proactive, you are demonstrating to Uncle Sam that you want to keep up with your installment payments.

If the thought of dealing with the IRS intimidates you, think about hiring a tax advisor. They deal with the IRS for a living and are able to effectively communicate with them on your behalf.

If You Get The Letter

At this stage you’ve missed several payments and have not contacted the IRS. The chances of salvaging your installment agreement are slim, but you should put forth the effort and contact the IRS at the phone number printed on the letter.

The IRS will give you 30 days to respond to the letter. Don’t wait 30 days to contact them. Do it now.

At this stage, you’ll need a good tax pro. They can negotiate with the IRS on your behalf, help you sort out your finances, and help you determine your next steps. If you’ve reached this point the IRS isn’t interested in playing nicely, so you’ll need someone on your side to represent you and to inform you of your rights…and to make sure the IRS respects those rights.

Falling behind on installment agreement payments can happen to anyone. Costly emergencies happen which can drain your finances and divert funds away from your installment payments.

If you receive the IRS CP523 letter, it’s important for you to take action right away in order to avoid getting hit with a tax lien or asset seizure. A qualified tax pro can help you sort out your options and to understand your rights.

Need a tax pro? We can help. We have Enrolled Agents and tax attorneys on staff who specialize in situations such as yours. They can negotiate with the IRS on your behalf, assess your options, and walk you through the process of dealing with the IRS.

Get started today by clicking the white “Start Chat” button or by giving us a call. Don’t go it alone. We can help.

What Is a CP504 Notice?

 

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If you’re struggling with a tax debt, chances are you’ve already received the CP 501 and CP 502 notices from the IRS. Both of those notices advised you of the total amount due, including interest and penalties. What if you blew off those notices, or put them in the “read later” pile? The IRS then issues the CP 504 notice, or Notice of Intent to Levy. It’s the IRS’s way of saying, “We mean business.”

The CP504 is only sent if you haven’t responded to any previous correspondence from the IRS regarding your tax debt, either by phone or by mail.  The IRS is essentially asking you to pay up or run the risk of asset levy or asset seizure.

Consequences of Ignoring the CP504

If you don’t respond to the CP504, the IRS can begin to take action against you in order to recover the money you owe to them. This can include:

  • Levying your state tax refund. If you will be getting a refund on your state income taxes, the IRS can seize that money in order to recover the money you owe them.
  • If your state tax refund isn’t enough to cover the balance owed and interest penalties, the IRS can place a federal tax lien on any profits you receive from selling a major asset such as land or a home. A federal tax lien is also considered a public record which will show on your credit report.

Other actions

The IRS can also seize bank accounts, investments, autos, RVs, and insurance policies in order to recover the debt you owe them. The IRS can also garnish your wages. In other words, ignoring a CP504 notice has serious long-term consequences that could jeopardize your financial well-being.

What You Can Do

Contact the IRS the day you get the notice in the mail. On the letter you’ll find a phone number for the IRS and any other contact information. Contact them immediately as a show of good faith that you’re working to resolve the tax debt.

If you disagree with the amount due, you can file an appeal. It may not resolve the debt altogether, but it does demonstrate that you are being proactive in resolving the debt.

Request an installment plan. There is no charge to set up an installment plan, but it is imperative that you make those payments on time without fail.

Better yet, get in touch with a qualified tax advisor who can inform you of your rights in dealing with the IRS. A qualified tax pro can also correspond with the IRS on your behalf, which is to your benefit if the thought of dealing with the IRS leaves you feeling intimidated or tongue-tied.

Your tax pro can also assess your financial situation to see if you would qualify for an installment plan, Offer In Compromise or any other abatement program. By understanding your rights and options, you and your tax pro can map out a strategy for addressing and eventually resolving your tax debt.

The IRS CP504 notice is sent after you don’t respond to any of their earlier notices. Ignoring a CP504 notice can result in result in asset seizure of levy as the IRS attempts to recover the debt you owe them.

If you receive a CP504 notice, don’t ignore it. Contact the IRS yourself, or enlist a qualified tax advisor to walk you through the process. We have Enrolled Agents and tax attorneys on staff to assist you in dealing with your outstanding tax debt and the IRS.

Why go it alone if you don’t have to? Get started today by clicking the white “Start Chat” button at the top right-hand corner or by giving us a call. Don’t let the IRS get the upper hand.

What Are CP501 and CP502 Notices?

 

Young Tran/freeimages
Young Tran/freeimages

 

If you owe past due taxes to the IRS, chances are you’re dreading that trip to the mailbox. Uncle Sam can and will issue a notice of taxes due. Time is on  your side in the sense the IRS will issue several written notices before taking legal action against you in collecting any tax debt. At the same time, that doesn’t mean you can disregard any notices that are sent to you by the IRS. Here’s a look at the CP501, and CP502 notices.

A Not-So-Gentle Reminder

The CP501 is the first written statement you receive regarding your tax debt. By the time you receive this notice, your taxes are already past due, and the IRS is reaching out…just is case you forgot. On this letter, you’ll find the tax year(s), the amount you owe, the payment due date, and the suggested course of action for you to take to avoid further action from the IRS.

Additionally, you’ll also find a breakdown of the interest and penalties have accrued since the original due date for the taxes.

If At First They Don’t Succeed…

The IRS will undoubtedly try again, this time in the form of a CP502 notice. The language in this notice is stronger than in the CP501; you’ll be instructed to pay your tax balance immediately. As with the CP501, you’ll be advised of your total balance due, plus any interest and penalties that have accrued since the date of the first letter.

Course of Action

The IRS expects to see a serious effort on your part at this stage. You’ll be given three options:

  • Set up an installment plan
  • Pay the full balance owed, including any penalties and interest
  • Dispute the balance due. If you disagree with the amount due or with the IRS’s decision, you can contact them at the phone number provided on the letter.

While these notices are written in less threatening language than later notices, it makes sense to take care of the matter early, either on your own or by enlisting in the expertise of a licensed tax advisor. If you ignore any correspondence from the IRS, they may see no alternative other than levying your assets in order to clear your tax bill.

If the thought of dealing with the IRS leaves you cold, contact a licensed tax pro as soon as possible to avoid any further interest, penalties and/or collection action. A qualified tax pro can represent you when dealing with the IRS. and can determine whether or not you qualify for programs such as an installment agreement or Offer In Compromise.

Receiving a notice from the IRS is never anyone’s idea of a good time. It’s imperative to understand notice, and what is being asked of you as the taxpayer. Ignoring CP501 and CP502 notices is never a good idea.

Gather all of your documentation, take a deep breath, and contact the IRS as soon as possible. If the thought of that makes you break out in a cold sweat, we have licensed and qualified tax pros on staff to help you sort your your options. Get started by clicking the white “Start Chat” button or by giving us a call.

After all, wouldn’t it be nice to not dread that walk to the mailbox each day?

 

Can The IRS Levy My Accounts Receivable? Tips For Small Business Owners

freeimages.com
freeimages.com

If you own a small business, there is plenty to worry about: payroll, production, meeting client and customer expectations, and meeting your financial commitments. If you also owe back taxes, you run the risk of the IRS levying your accounts receivable unless you take prompt action.

Last Resort

If you have received correspondence from the IRS and have either not responded to their notices or have not taken any action in clearing your tax debt, the IRS has the authority to levy your accounts receivable in order to recover the outstanding tax debt.

This just doesn’t apply to an outstanding business tax obligation; if you have an outstanding tax debt for your personal taxes, your accounts receivable is an asset that can be levied by the IRS.

Levying assets is the last resort for the IRS. If you haven’t responded to any prior communications or notices from the IRS, including a Notice for Demand of Payment and Final Notice of Intent to Levy, the IRS sees no alternative but to levy your assets, including any business assets.

What Will Happen Next

Once the IRS has begun to levy your accounts receivable, your clients and customers will receive a notice instructing them to re-direct their payments to the IRS rather than paying your company.

This is not only embarrassing for you, the business owner, but it can create problems in the future. Even after your tax debt has been cleared, clients and customers may mistakenly continue to mail their payments intended for your business to the IRS.

How To Avoid This Scenario

By now, you’re reading this thinking, “This could end badly.” Not so fast. There are ways you can avoid an IRS levy of your personal and business assets.

  • Since your accounts receivable is an asset, be diligent in managing your personal and business tax debt. The minute you realize your tax debt is more than you can handle, enlist in a qualified tax professional who can help you negotiate with the IRS. Don’t wait.
  • If you do receive a notice from the IRS regarding your tax debt, don’t ignore it. Instead, reply quickly to the address or phone number provided on the notice.
  • File your business and personal returns on time to avoid penalties.
  • You may want to consider filing an estimated business tax return each quarter. Your tax pro can help you decide if this is a viable option.

Facing an IRS levy of your accounts receivable is a nightmare that you would never want to face. After all, running a small business is stressful enough without having to worry about the IRS seizing your hard-earned accounts receivable.

By understanding the consequences of not responding to IRS notices regarding business and/or personal tax debt and taking a proactive approach in responding to any IRS correspondence, you’ll be less vulnerable to an IRS levy.

First and foremost, get in touch with a licensed tax professional who can advise you of your rights and responsibilities should you be facing delinquent personal or business taxes. Don’t delay. We have fully licensed and qualified Enrolled Agents and tax attorneys who can help you navigate the tax debt process.

Get started today by clicking on the white “Start Chat” button at the top right-hand corner of any of our webpages. We’re here to help.

When You Should Consult a Tax Attorney

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While some tax matters can be handled by a CPA or Enrolled Agent, there are times when you may need to have a tax attorney by your side in dealing with the IRS. Getting an IRS notice in the mail can be stressful, as is dealing with the IRS on your own. A tax attorney will know IRS tax codes and tax law, and is better equipped to represent you in complex tax matters and even in tax court. Here are a few reasons to contact a tax attorney:

IRS Tax Disputes or Audits

In the event you are disputing the amount of tax owed to the IRS or if you are facing an audit, you will need skilled representation before the IRS. A tax attorney can negotiate with the IRS on your behalf in all tax proceedings. Furthermore, you have the  benefit of attorney-client privilege; your tax attorney is bound by this edict and can’t testify against you in court.

IRS Negotiations

A tax attorney can represent you when negotiating with the IRS regarding an Offer In Compromise, for example, or when negotiating an Installment Agreement. A tax attorney can also help in more dire situations–such as tax evasion charges–that an Enrolled Agent and CPA are not qualified to address.

A tax attorney can reassure the IRS that you are taking steps to remedy the situation. They can also represent you before the IRS, negotiate with the IRS on your behalf, and represent you in court if you face charges for a tax-related crime.

Other Tax  Matters

If you refuse to pay taxes, file a tax return, or refuse disclose all sources of income, the IRS could charge you with tax evasion or tax fraud. With those charges come fines, interest on taxes owed, legal fees, and incarceration. The IRS means business and this is not the time to be without legal representation. A tax attorney can represent you and protect your legal rights.

Whatever you do, if you receive a notice from the IRS, don’t toss it aside out of fear or in hopes they will forget and not send another one. They can and will send another notice or warning, so open that envelope. If you are facing a serious tax matter or need someone to represent you before the IRS, contact a skilled and licensed tax attorney.

A good tax attorney will protect your rights, negotiate with the IRS on your behalf, and explain things to you free of IRS jargon. A good attorney will be honest with you regarding cost, timeframe for resolution, and validity of your case. You might even get some peace of mind in the bargain, so it pays to call on a tax attorney sooner rather than later.

Tomorrow: Questions to ask a tax attorney before hiring them.

 

Tax Collections And Older Adults

 

Photo:WallyJr
Photo:WallyJr

The prospect of IRS tax collection is unsettling enough, but even more so if you’re an older adult on limited income or are caring for an older loved one.

An older adult who relies on Social Security retirement income or Social Security disability income may find themselves owing taxes, even if they don’t have the means to pay them. Events such as lump sum distributions or proceeds from selling a home may bump them into a higher tax bracket for the tax year and leave them with the tax bill to show for it.

As with any other outstanding tax matter, older adults could find themselves subject to levy of their income and assets for unpaid taxes. While the IRS does have processes in place to protect low-income older adults from levy of the Social Security income, the system isn’t foolproof. Working with a qualified tax pro is critical to avoid unfair levy of income and assets.

In other instances, up to 15% of Social Security benefits could be levied for non-payment of tax debt.

While contacting a tax pro is crucial under these circumstances, there are at least two options for you to be aware of.

  • Form 433-F and Currently Not Collectible (CNC) status. You will disclose all of your assets, income and expenses. If the IRS determines that you can’t meet your essential expenses AND the text debt obligation, your case will be designated as CNC.
  • Establishing Doubt as to Collectivity: A tax pro reviews your income and assets. If your income and assets combined are less than the tax debt owed, your tax pro will file the necessary paperwork with the IRS. “Doubt as to Collectivity” essentially refers to the unlikely chance of collecting on the tax debt in question.

Tax debt collection at any age is stressful. Older adults who are living on fixed incomes with limited (or no) employment options are especially vulnerable, and are more likely to need third-party assistance in resolving those debts. If you are caring for an older loved one or if you are an older adult facing IRS collection actions, it is critical that you have a qualified tax pro by your side.

Don’t go it alone. We have a staff of  tax pros, including Enrolled Agents and tax attorneys who can help you or a loved one navigate the IRS debt collection maze. Learn about the options available to you or a loved one by calling us at (888) 224-3004 or by clicking the white “Start Chat” button in the upper right hand corner of our webpage.