Colorado Springs: Can I Really Settle My Tax Debt for Pennies on the Dollar?

The simple answer to the question in title of this blog is "maybe".  Why do I say that?

 

The IRS provides a lifeline for those who either cannot pay or who doubt they actually owe the tax  through the Offer in Compromise (OIC) program, governed by Section 7122 of the Internal Revenue Code. This program allows taxpayers to settle their tax liabilities for less than the full amount owed for those who qualify.  Taxpayers have to be patient as this process can take at least a year to complete.

 

To qualify for an OIC a taxpayer must calculate their RCP using guidelines provided by the IRS that include both actual expenses and nation standards.  Once RCP is calculated the determination is made whether a taxpayer qualifies for the OIC or has to set up an installment agreement and full pay.

I recently completed a case that took over a year for the IRS to send us the OIC acceptance letter.  The taxpayer was unable to pay the tax in full after calculating the RCP.  This was a doubt as to collectibility offer.  We were able to settle an $80,000 plus debt for $100.  The taxpayer has two responsibilites now: 1) To make the $100 payment and 2) Stay tax compliant for the next five years, including making estimated tax payments if required.  If these two conditions are not met, the taxpayer can become liable once again for $80,000 tax debt.

We cannot settle every case for such a small amount.  Each taxpayer's facts and circumstances are unique.  Only a full analysis of your situation can determine what the best course of action will be.  Using a local Enrolled Agent(EA), CPA, or tax attorney who will complete such an analysis is highly recommended.

Section 7122 on Offer in Compromise is a valuable tool for taxpayers in distress.  However, this path requires careful preparation and a clear understanding of the obligations involved. Consulting with a tax professional can enhance the chances of a successful application.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

Colorado Springs: What is an IRS Tax Levy? What is the Purpose

What would lead to the IRS to levy your bank accounts or other property?  The legal seizure of your accounts or property is an extreme measure the IRS could take to satisfy a tax debt.  If you have been ignoring the IRS when it comes to filing tax returns or making payments on your taxes, this extreme measure may be used to get your attention.  Nothing will quite get your attention as your bank stating that your accounts are essentially frozen due to an IRS levy.

How many letters did you receive from the IRS? If you failed to open the letters and respond to the IRS, the levy process most typically begins with the IRS assessing the and sending a Notice and Demand for Payment.  With no payment made or contact initiated to the IRS, the next notice possibly sent through certified mail, is a Final Notice of Intent to Levy and Notice of Your Right to a hearing at least 30 days before the levy action.

Most commonly I have heard of bank accounts being subject to an IRS levy.  I some cases the frozen funds can be made available for you the taxpayer.  Each taxpayer's circumstances are unique.

The best solution for an IRS levy is to never get an IRS levy. Stay compliant and make your tax payments in a timely manner.

However, if you do receive a levy notice taking quick action is highly advised. I recommend you do any or all of the following:

1. Hire a tax professional (EA, CPA, or Tax Attorney) to assist you through this process
2. Collect documents and records to build your case
3. Request a Collection Due Process hearing or
4. Prepare to make a payment in full, arrange a payment schedule, or if qualified file for an offer in compromise.

Ignoring a tax levy can lead to severe financial consequences. Immediately working to resolve the issue with a tax professional will help you quickly resolve the issue.  As you work with a tax professional toward a resolution, you will be able to sleep better an minimize the impact on your financial well-being.

 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

 

 

 

 

 

Colorado Springs: Am I or Am I Not an Innocent Spouse?

 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Why Did the IRS File a Lien on My Assets?

How would you answer the following questions:

1. Did you fail to file your tax return? 
2. Did you fail to pay your tax full? 
3. Or, did you fail to arrange to make payments on your taxes if you were unable to pay in full?

If you answered "yes" to any or all of the above questions and you owe the IRS more than $10,000, then that is probably why you received the notice of an income lien on your assets. What makes it possible for the IRS to file a lien.  Under the Internal Revenue Code Section 6321, the IRS has the authority to protect the governments interests by filing lien.  When a lien a placed, the IRS then has a legal claim to your property when you neglect or fail to pay your tax.

Three conditions must be met for a tax lien to attach to your property:

1. The IRS assess your tax liability of $10,000 or more.
2. The IRS sends you a bill explaining how much you owe.
3. You either neglect to make payment or refuse to pay in full within 10 days

After each of these conditions is satisfied, the lien attaches to all your assets including real estate, personal property, and financial assets.

An IRS tax can have a significant impart on your credit score.  Thus, you may find it more challenging to qualify for loans or credit.  If you want to sell or refinance your home, an IRS tax lien will make it more challenging to accomplish, but not impossible.  With the tax lien the government has an interest in your property as security for the tax debt.

In what ways can you address a tax lien:

1. Pay the debt in full
2. Request a payment plan, which the IRS may agree to and withdrawal the lien
3. You may qualify for lien subordination, to allow other creditors to move ahead of the IRS

If facing an IRS tax lien, prompt action is necessary. I recommend consulting with a tax professional who can provide you with the needed guidance to resolve this issue as quickly as possible after they take a complete look at all your facts and circumstances.

 

 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

 

 

Professionals Have Standards - Marcelino Dodge - The Revenue Maze - Epis...

Colorado Springs: What Exactly is the IRS Collections Process?

 

How many of us desire to be contacted by a collection agency?  I would say none of us want to be contacted by a collection agency, especially if the collection agency is the Internal Revenue Service.  If we failed to file an income tax return and/or failed to pay our income taxes you can count on getting the series requesting payment of your taxes.

Why is it important to still file my tax return, even if I cannot pay the tax?  One reason is that you want to start the statute of limitations on your tax return and the payment of your taxes.  If you do not file your tax return, then the statute has not started and essentially you give the IRS a longer period of time to collect the taxes due.

Under IRS Code Section 6502,  the IRS has ten years from the date of assessment to collect outstanding tax liabilities. This why it is important to file your return and to start the 10 year clock.  For example, if you wait three years to file than you just gave the IRS an extra 3 year to collect from you. Under some circumstance this period can be extended.  Also, if the IRS does not collect the debt within this 10 year period, the liability is typically no longer enforceable.

The IRS Collection Process begins when a taxpayer fails to pay their tax bill. Initially, the IRS sends a series of notices and demands for payment. If the taxpayer does not respond or set up an installment agreement, the IRS can take more aggressive actions. Some of the options include liens on property, levying bank accounts, or garnishing wages.

Taxpayers have a right to have an Enrolled Agent (EA) represent them though this process. An EA can help the taxpayer to setup an installment agreement, prepare an offer in compromise, or speak to the IRS on the taxpayer's behalf. 

Having a tax professional help you during the collection process is vital for you to understand the processes and timelines.  An EA will help you to be informed and to mitigate the impact of IRS collection efforts. 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Can I Appeal This IRS Collections Notice?

Few pieces of mail cause as much stress as a certified letter with the Internal Revenue Service in the return address area.  Then, when you open the letter you see a large balance due that you did not expect.  What can you do to navigate this challenging situation?

1. Hire a tax professional: An Enrolled Agent (EA) can represent you before the IRS, review your tax records, and provide expert guidance on how navigate the appeals process

2. Understand the Notice: An Enrolled Agent will carefully read the collections notice and help you to understand the amount owed, the reasons behind it, and the  deadline for responding, which is crucial to avoid further penalties.

3. Gather Documentation: An EA will help you to identify the relevant documents, including tax returns, payment records, and any correspondence with the IRS. The proper documentation is essential to building a case with the IRS.

4. File a Written Protest: After careful review of all the information and if you disagree with the notice, an EA will prepare to file a written protest.  The protest will clearly state the reasons for disagreement and provide supporting evidence.  The more comprehensive the protest the better.  Make sure the protest is timely filed. 

5. If Needed, Request an Appeals Conference: An EA can represent you in an appeal conference. The IRS Independent Office of Appeals operates separately from the collections division and aims to resolve disputes impartially. During the conference, your EA will present your case and any additional evidence.

6. Explore Alternative Solutions: If appealing the notice is not feasible, explore other options like installment agreements or an offer in compromise, which allows you to settle your tax debt for less than the full amount owed. 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: What If My Colorado Income Taxes are Unpaid and Not Filed?

 

Many times when taxpayers are behind on their federal taxes, they are also behind on their state taxes.  When it comes to tax collections and notices, the Colorado  Department of Revenue can be more aggressive than the IRS.  What is the best action for a taxpayer to take when both the IRS and the Colorado Department of Revenue are owed large sums?  You need to promptly address the issue

To start you will need to prepare the federal return first, because information from the federal return is use in calculating the Colorado tax return.  Depending on your circumstances, you may file the Colorado return before filing the federal tax return.  This determination is made on a case by case basis.

If you owe tax the Colorado Department of Revenue will assess penalties and interest on the tax.  You can calculate the interest and penalties with the tax on the return and include with the payment.  If you are unable to make the full payment, submit the tax return anyway.  The Colorado Department of Revenue will process the return and send you balance due notice.

After the tax, interest, and penalties have been assessed you can make a payment by check, money order, or online.  If you are unable to pay in full, you can setup a payment plan by following the Colorado Department of Revenue guidelines.  In some cases setting up a state payment plan is to your advantage if you also owe federal income tax.  This is why I mentioned earlier the possibility of filing the Colorado income tax return before filing the federal income tax return.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: The IRS is Charging Me a Penalty. How Can I Get the Penalty Abated?

The IRS charging you a penalty?  Did you file your tax return late? Did you not pay your federal income tax on time?  Did you fail to pay your taxes at all?  If you answered 'yes' to any or all of these questions, then do not be surprised if the IRS is charging you a penalty.  The Internal Revenue Code Section 6694 allows the IRS to charge penalties for taking unreasonable positions, reckless conduct, and/or willful conduct.

When the IRS charges a penalty, what options are available?  Taxpayers can request and receive penalty abatement or removal of penalties under conditions.  Consulting with an Enrolled Agent, (EA) is wise to help you navigate through the process of obtaining penalty abatement.

What are the types of Penalty Abatement?

1. First-Time Penalty Abatement (FTA): Available to taxpayers who have a clean compliance history for the past three years and have not previously requested penalty abatement

2. Reasonable Cause Abatement: If you can demonstrate that your failure to comply was due to circumstances beyond your control, such as natural disasters, serious illness, or other significant life events.

3. Administrative Waivers: Sometimes, the IRS provides administrative relief for specific groups of taxpayers or under certain conditions.

A tax professional like Marcelino Dodge, EA, CTRC, can review your tax records and review your eligibility for a specific type of penalty abatement.  After this review, the gathering of documents is required to help with the preparation of the necessary forms for submission to the IRS.  Your request is then submitted to the IRS.  

You will need to follow-up on the request after a reasonable period of time.  Patience is important as the IRS can take a while to process the request.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

Colorado Springs: What Can I Do If I Disagree With the Amount the IRS Says I Owe?

 

You receive an IRS notice saying you owe a large sum.  But, you disagree with the assessment, because there is a legitimate question about the correctness of the assessed tax amount.  What you can do is file a "Doubt as to Liability" Offer in Compromise.

Is this the correction option for your case?  Possibly it is, possibly it is not.  You need to consult with a tax professional, such as an Enrolled Agent (EA) because there are pros and cons to this type of offer. 

Some of the pros are:

• Collections stops
• Forces audit reconsideration
• Can reopen Trust Fund Recovery Penalty Assessment
  

Some of the cons are:

• Must offer something (even if it is a $1)
• Compromises future liability (no refunds)
• Taxpayer must be compliant

Remember, this option is designed for taxpayers who genuinely dispute the accuracy or existence of their tax debt. This could be due to errors in the IRS's calculations, misinterpretation of tax laws, or missing information that could alter the liability. Importantly, this type of offer cannot be rejected simply because the IRS cannot locate your return or verify the liability.

To qualify, you must present a compelling case that reflects what the IRS might reasonably expect to collect if the matter were taken to court. This involves providing substantial evidence and documentation to support your claim. The IRS uses its discretion to determine whether your offer is reasonable, considering the potential outcomes of a court case.

If you believe there is a genuine error in your tax assessment, submitting an OIC based on Doubt as to Liability could be a viable path to resolving your tax issues.
For more detailed information consult with an EA, who specializes in tax resolution to ensure your offer is well-prepared and stands the best chance of acceptance.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com