12 Ways For IRS Back Tax Relief When Money Is Tight

Has the pandemic caused created you to fall behind on filing your federal income tax return or paying your federal IRS taxes? If it has, you are not the only one looking for IRS back tax relief.

More than 22 million taxpayers in the United States had either failed to file a tax return or are behind in paying their IRS taxes due and that was before the pandemic hit.

The law says we have to pay federal income tax but this year the IRS unveiled a People First Initiative to provide compliance relief to taxpayers experiencing COVID-19 related hardships.

This relief ranged from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions.

Past-Due tax returns were still due and the IRS "continued its work to secure unfiled tax returns" but told taxpayers' in an official statement that they "should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020" thus moving the April 15th deadline and extending the filing season.

Mission-critical functions continued with certain IRS services such as live assistance on telephones, processing paper tax returns and responding to correspondence was and still are extremely limited.

Tax bills did not go away and unpaid taxes for prior years still accrued penalties and interest.

If things have been tight financially, it can be easy to ignore the task of filing and paying your federal taxes to the IRS. Some might think that they can get caught up “next year” when things get better.

However, unfortunately, for many their financial hardship won’t get better and they will skip tax filing again. And maybe again allowing the situation to snowball.

Initially, one might think they have gotten away with not paying the IRS, but eventually the IRS will catch up with you. While procrastinating, the penalties and interest build up to a dollar amount that is way more than what would have been owed if the returns were filed and the taxes were paid on time.

Letters from the IRS will come eventually and if the non-compliance goes too long, the government may freeze bank accounts and take your cash using a tax levy.

What Else Can They Do If You Fail To Get IRS Back Tax Relief?

The Internal Revenue Service Restructuring and Reform Act of 1998 was a landmark law that put respect for the individual taxpayer back into the system. It forced the IRS to more fully communicate with the public and grant taxpayers "due process" rights.

But make no mistake about, the IRS is not a joke and has almost unlimited power. They can take away your car, your house, garnish wages, clean out your bank account and retirement fund, as well as restrict your travel by seizing your passport.

They will take anything of value – jewelry, precious family heirlooms, art work, your gun collection, even garnish part of your social security earnings.

By then, the penalties and interest will be so high that it will feel like an impossible situation to get out of.

Did you know that some of IRS debt may not forgiven if one declares bankruptcy? This is correct.

Just the anxiety alone is not worth getting behind on your taxes. Especially at a time when everyone needs to keep their stress level low and their immune system in tip-top shape to fight the coronavirus.

For some the added stress could cause a more severe illness. And that’s the last thing that is need becaused in a worst-case scenario, that can lead to lost wages and hospital bills on top of your IRS debt.

Save Your Marriage With IRS Back Tax Relief

You owe it to yourself and your loved ones to begin the journey of coming clean with the IRS. A huge burden will be lifted from your shoulders and you will feel enormous relief when you take the first step toward getting your IRS issues resolved.

Sleep at night

So, let’s see if we can begin to relieve some of that anxiety. We will take a look at all of the steps and options that you have when you get behind in filing or paying your federal income taxes to the IRS.

Facts about IRS Back Tax Relief or Tax Debt Resolution

Here are some facts about resolving your debt with the IRS.

1. The IRS wants to work with taxpayers. 

The IRS is actually on your side, in a way. The agency is typically eager and happy to collect old debts. It truly wants to work with taxpayers, but there are many, many rules you need to know about and a process to follow.

2. Only 3 types of professionals can represent you in front of the IRS.

While you can represent yourself in front of the IRS. It might not be the best idea, especially if your debt is very high or you’ve ignored the situation for a long time.

There are only three types of professionals that can represent your case at the IRS:

1) CPAs, Certified Public Accountants. But be careful: not all CPAs are experienced in IRS representation.

2)  EAs, Enrolled Agents. Again, make sure the EA has experience representing clients to the IRS.

3)  Attorneys. Same story as above. Not all attorneys are tax attorneys, and even not all tax attorneys have a bustling representation practice.

A great question to ask anyone you are looking to hire is “What is your offer-in-compromise acceptance rate?”

3. You’ll probably need to get your bookkeeping caught up.

If you’re behind on your taxes, it can often follow that you are behind on your bookkeeping as well. Anyone you hire is going to need good numbers in order to work with you, so a good first step is to catch up on your bookkeeping.

Often, tax resolution professionals provide bookkeeping catch-up services. They’ll do the minimum you need in order to get you or your business in compliance.

4. You will probably need to open all of your IRS mail.

Yep, we know you. It’s sitting in a stack somewhere in your home. If you haven’t opened the mail, start opening it up.

It’s helpful for tax professionals to know what type of notice you received. In most cases, tax resolution specialists will know the letter by form number, and that will give them an idea of where to start with your case.

Please note: The IRS will never send you an email about any of the above situations.T They always send physical letters. If you get an email, it’s a scam.

The Internal Revenue Service, state tax agencies, and local entities will send a letter if one of the following happens:

• You miss a payment deadline for payroll taxes.
• You miss a deadline for filing payroll tax reports.
• You miss a deadline for filing your personal or corporate income tax returns.
• You miss a deadline for paying tax due from your personal or corporate income tax returns.
• You miss a deadline for filing and/or paying corporate franchise tax due.
• An amount paid is short or over what the IRS or another tax agency calculates as due.
• The agency notices a discrepancy on any of your tax returns and needs an explanation.
• You have been selected for an audit.
• You fail to respond to previous correspondence.

Getting into Compliance for IRS Back Tax Relief

Here is what you need to do to get into “compliance” with the IRS. You can’t have any debt forgiven until you get into compliance.

5. You should almost always file your past due tax returns, but there are some exceptions and filing needs to be done carefully so additional debt is not triggered.

Before any debt can be forgiven, the taxpayer needs to get into compliance.

This means all past due returns must be filed. You don’t have to pay off all your debt at this time; we’ll talk about what you need to pay in the next item.

However, there are a couple of really big “if’s” when it comes to this step. In rare situations, filing can trigger more debt. Also, filing a particular way can also trigger more debt.

That’s why it just makes sense to get a tax resolution professional involved in every step of this process, so they can keep you out of more trouble than you’re already in.

6. Pay your current taxes.

While you don’t have to pay all of your old IRS debt, you do have to be paying in your current taxes. This is part of getting into compliance. You need to be able to show IRS that you can pay your taxes that are current.

This means that if you have a job as an employee, withholding is being withheld from your current paychecks. Or, if you’re an entrepreneur taking draws, that you are currently making your estimated tax payments.

Paying Off Your IRS Debt: Options for IRS Back Tax Relief

Here are the options you have for paying off your IRS debt.

7. Pay off the entire amount, including penalties and interest.

If you can afford to, just pay it off. You will save on legal fees, but if you’re a first-time offender, you may be paying penalties and interest that you might have gotten out of if you hired someone.

8. If the IRS has made an error, get the error corrected.

For this you need a Tax Resolution Professional – they can get into the RIS files and find what they have on you. It can be scary to talk to an IRS person directly.

Review return for errors, amend return, file paper return to IRS.

IRS errors usually refer to when the IRS files a return on your behalf (called a "Substitute For Return" or SFR) and only uses the info they have on hand. Therefore, no deductions are used.

9. Spouse issue

You may also have a special situation with your spouse if they promised to file and did not or they do not file correctly, or they don’t pay.

In some cases, you can claim that you were the “innocent spouse” and get your account corrected. If you are injured or innocent spouse the debt might not be yours to pay

10. First-Time Penalty Abatement

Fortunately, the IRS has also created the FTA – first-time penalty abatement administrative waiver. As a business or individual taxpayer, you may receive a penalty on top of what you owe to the IRS. It allows compliant taxpayers to request abatement or remove certain penalties.

A penalty abatement is a tax problem resolution designed to fully eliminate or lessen the degree of IRS penalties. The IRS penalties can roll out penalties that range from imprisonment to civil fines.

Those fines can be over 25 percent of the total owed to the IRS.

If you have tried applying for an offer in compromise and it was rejected, penalty abatement is the next best tax problem resolution to consider.

You can use it when negotiating repayment terms or an installment agreement.

These agreements are payment plans, and allow you to pay your debt over a time you establish with the IRS.

There are several types of installment agreements:

• Guaranteed;
• Streamlined;
• In Business; and
• Routine.

11. Understand RCP: Reasonable Collection Potential

One of the key concepts in getting IRS back tax relief can be Reasonable Collection Potential or RCP. It is the basis for making an offer to the IRS as to what you can pay. RCP is a complicated formula based on the assets and income you currently have.

A tax representation professional can work with you to create a personal budget that can be used to present an offer to the IRS.

We will discuss offers a little later in this article.

When good, hard work is performed to create the budget, the taxpayer’s chances of getting their offer accepted by the IRS improves.

12. Offer in Compromise for IRS Back Tax Relief

One of the most popular yet misunderstood programs the IRS has for settling an outstanding tax debt is the Offer-in-Compromise, or “OIC” for IRS Back Tax Relief.

An Offer-in-Compromise is where the IRS accepts less than the total owed by a taxpayer to settle the taxpayer’s outstanding tax debt.

What many taxpayers do not understand is the OIC program, at its core, is a formula.

Hence many Offers filed by taxpayers and practitioners are not accepted because they fail to consider the formula, thereby filing

Offers with the IRS that stand no chance of success from the moment they are filed.

Whatever your situation, we are here for you when you are ready to get caught up, and the sooner, the better.

We can help you relieve that huge psychological burden, so you feel lighter and free from all that stress.

The IRS is very aggressive about coming after non-filers and non-payers. So even if you do not owe that much, you’ll want to file right away to stop the penalties and interest from adding up.

If the letter says you have penalties and/or interest due, it is very important to respond quickly so the penalties and interest will not accumulate and grow to a higher amount due.

If you do not respond, the IRS & other tax agencies can apply liens, levies, garnishments, and seizures to collect payment.

For example, they have frozen bank accounts so that the owner cannot access their money.

You do not want it to escalate to this level.

Call 844-888-1040 or click here to schedule a meeting with Keith today.

Posted in IRS, Tax, Tax Debt Relief, Tax Resolution