IRS announces Taxpayer Relief Initiative to help those financially impacted by COVID-19

The IRS is following up on their People First Initiative from summer 2020 with some new administrative program changes to make life a little easier for taxpayers that owe back taxes and are not in a position to immediately repay those tax debts. While these are not new programs, the IRS is attempting to make it easier for taxpayers to take advantage of the existing programs, by increasing access to relief.

Under this new initiative:

  • Taxpayers now have 180 days to pay tax debts on a short-term payment plan, up from 120 days.
  • For taxpayers already paying on a previously accepted Offer in Compromise, the IRS is now offering some flexibility on the payment terms of that accepted offer.
  • Individuals with an existing payment plan on a tax debt will automatically have new tax debt balances tacked on to their existing payment plan.
  • As per March 2020 changes to the Internal Revenue Manual, certain individuals with income tax debts less than $250,000 no longer need to submit financial documentation in order to obtain a payment plan. This option is only available via call center staff, not cases that are assigned to field agents.
  • For individuals that only owe 2019 tax debt, and owe less than $250,000, the IRS may agree to not file a Notice of Federal Tax Lien (NFTL) against the taxpayer.
  • IRS is now allowing some individuals with existing Direct Debit Installment Agreements to use the IRS website
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Federal Economic Impact Payments – Frequently Asked Questions

In response to the COVID-19 pandemic, Congress recently passed legislation authorizing stimulus payments to most Americans. These payments, called Economic Impact Payments, are being processed by the Internal Revenue Service (IRS) at the current time. Many people have questions about these payments, so this FAQ has been assembled to help you find answers.

Is the Economic Impact Payment considered to be taxable income?

No, this payment is not considered “income” by the IRS and you will not need to pay income tax on it. This payment will not effect your refund, or increase the amount you owe when you file your 2020 tax return in 2021. This stimulus payment will also have no impact on your eligibility for other federal assistance programs that use income to determine eligibility.

How can people who receive a Form SSA-1099 or RRB-1099 check their payment status?

Taxpayers can use the IRS Get My Payment tool to check on the status of their stimulus payment. This will require you to verify your identity by answering a set of security questions.

If my bank account information has changed since the last time I filed a tax return, how do I update my direct deposit information?

The Get My Payment tool at irs.gov does not allow you to change your direct deposit information. This is a security precaution to prevent these payments from being stolen by changing this information.

If the IRS sends your payment using the … Read the rest

The Simple Truth About IRS Offer in Compromise Fees

Most tax resolution companies give you a quote for services based primarily on three things:

  1. How much you owe the IRS
  2. What kind of taxes you owe
  3. How much the sales person thinks you can afford to pay THEM

Here’s a dirty little secret of the tax resolution industry that nobody else will tell you: The actual WORK required to resolve a case has very, very little to do with how much you owe or what kind of tax it is, and obviously nothing to do with how much of a fee you can pay for representation.

What makes a tax resolution case more complex has much, much more to do with other factors, such as:

  • the existence of other creditors
  • the status of your assets
  • whether or not there are existing levies or wage garnishments
  • how long you’ve been accruing a tax liability
  • your past efforts (or lack thereof) to resolve the issue
  • your ability to file missing returns quickly
  • whether or not your accounting is up to date
  • whether or not you are able to “stop the bleeding” and become current with present day filing and payment requirements (this is actually the single biggest factor)

Most companies have a minimum fee quote for doing an Offer in Compromise for you, and it’s generally higher than for doing a payment plan, because the OIC process takes 6 to 12 months from start to finish. Most reputable firms will charge … Read the rest

10 Tips to Help You Choose a Tax Return Preparer

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully. Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer.

1. Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.

2. Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For Certified Public Accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For Enrolled Agents, check with the IRS directly.

3. Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return. Make … Read the rest

Common Sense Advice Regarding Offer In Compromise Scams

By now, everybody with a tax bill has heard the “pennies on the dollar” promises on radio and TV. Before handing over thousands of dollars to some Slick Rick salesman over the phone, here are some things you need to know about the Offer in Compromise program.

First and foremost: You probably don’t qualify. What’s that? How can I say that without even knowing you or your situation? Because the IRS statistics show that most people that apply don’t qualify, that’s why. In 2018, the most recent year for which data is available, the IRS outright rejected 59% of all Offer in Compromise applications that were submitted.

Secondly, the Attorneys General of several states, the Federal Trade Commission, and multiple class action lawsuits have been won over the common sales practice of promising tax relief, and not being able to deliver. More often than not, clients in those situations are sold an Offer in Compromise program for many thousands of dollars, and are then converted to an Installment Agreement (monthly payment plan to the IRS) with no refund of the price difference. This has been going on for years, and and many tax debt resolution companies have been sued for this and other egregious sales practices that are designed to do nothing but part you from your money.

There are probably tens of thousands of other OIC settlements sold by these companies every year that are never actually filed, … Read the rest

Can’t pay your 2019 tax bill by July 15, 2020?

If you have a tax bill for 2019 that you can’t quite pay, you do have options.

Even if you can’t pay in full, I’d highly encourage you to file your return on time, which has been extended from April 15 to July 15 this year due to the pandemic and resulting recession. This way, you avoid the late filing penalties that can be added on to your tax liability, which can add up to 25% of your balance due. Also, try to pay as much as you possibly can with your return. If you are going to be filing an extension, pay as much as you can with your extension.

The IRS is currently charging a 5% annual interest rate, compounded daily, on all tax debts. On top of that, you will be subject to a failure to pay penalty, which will further increase your tax debt.

It may be worthwhile to consider using credits cards or a loan to pay your tax bill. When you consider the extensive penalties the IRS charges, your credit card interest rate may actually be quite a bit lower.

If you absolutely cannot pay your tax bill this year, then use either the online payment agreement request system at irs.gov, or complete Form 9465 to request a payment plan. You are not required to wait until the IRS bills you before requesting a payment plan.

The most important thing to remember is that, … Read the rest

Challenging Property Tax Assessments

Your annual property tax bill is based on your county government’s valuation of your property. Assessed values are often very different from the actual fair market value of your home. If your county assessment is too high, resulting in a property tax bill that is more than it should be, you can contest the property valuation in an attempt to reduce your tax bill.

The fair market value of your property is represented by the price that a typical home buyer would be willing to pay for your house. Arriving at the fair market value of your home without actually selling the house is accomplished by comparing your home to other houses that have sold. A proper comparison requires that the other houses be as similar to your house as possible. The best comparable properties will have nearly the same square footage and number of bedrooms and bathrooms as your house. In addition, they will be in the same neighborhood and will have sold within the last few months. This process is very similar to how appraisers determine the vale of your home.

There are two types of assessed value that local governments use to determine your property tax bill: Market assessed value and tax assessed value. Market assessed value is the government’s estimate of the fair market value of your home. This valuation is often based on the last sale price of the property, adjusted occasionally for appreciation. Since … Read the rest

How to Choose a Tax Firm for Complex Needs

Choosing a tax professional isn’t an easy task anyway, but mix in the coronavirus tax extension deadline and current economic recession, and this process just got a whole lot more complicated. Keep reading for all you need to know about how to choose a tax firm for your complex accounting, tax planning, and taxpayer representation needs.

Do I even need an accountant or tax firm?

According to the Internal Revenue Service (IRS), every taxpayer is entitled to representation. The taxpayer may either represent themselves, or with proper written authorization, have someone else represent them. However, this representative can’t be just anyone. They must be a licensed attorney, Certified Public Accountant (CPA) or Enrolled Agent. Each individual may verify a representative’s eligibility.

Why would I want a representative?

You may want a representative (such an accountant or tax firm) to represent you for a number of reasons. These include a specific tax problem, a notice from the IRS or a tax audit. For most taxpayers, the chances of being audited are less than 1 percent. Those most likely to get audited are among those in the highest income brackets and those in the lowest. If this happens to you, your representative can help to interact with the IRS on your behalf as well as provide information and explanations. They can also enter into agreements with the IRS once you reach them. However, it is important to select your representative carefully because, … Read the rest

Quick Guide to Late Filing, Amended Returns, and Late Payment Penalties

In most years, April 15 is the deadline for the majority of Americans to both file their tax return and pay any taxes that are due on that return. If you don’t file on time, you potentially face one set of penalties. If you don’t pay by this date, there’s another set of penalties that applies.

Here’s the good news for individuals that are unable to pay by the normal due date: The late payment penalty isn’t nearly as stiff as the late filing penalty.

The reason for this is because the IRS is far more interested in knowing how much you owe rather than having you pay it on time. They rely heavily on people filing their tax returns in order to make the proper tax assessment (never let the IRS do your tax return for you). Knowing how much you owe them starts a well defined process, but when the IRS doesn’t know how much you owe, they can get pretty grumpy about it.

Of course, the more you pay with your tax return or extension, the lower your penalty and interest charges are going to be in the long run. This is because all of your penalties and interest are a percentage of the unpaid balance due after April 15th.

The penalty for not filing a tax return is typically 5% per month or part of a month. One day is considered “part of a … Read the rest

5 Reasons to Hire a Professional Tax Firm to Represent You In Front of the IRS Collection Division

Over the years, there have occasionally been bursts of media attention placed on the “tax debt relief”. In past years, the FTC has taken down companies such as American Tax Relief, the California Attorney General came down hard on Roni Deutch, and the Texas Attorney General won a massive civil judgment against Tax Masters. In the wake of such regulatory actions, the American consumer is likely left with the impression that all tax attorneys and tax resolution firms are just as bad as used car salesman.

While it’s true that these companies, and numerous others, have created a bad name for the tax resolution industry as a whole, the fact of the matter is that these companies are the exception, not the rule. There are dozens of companies with horrible BBB records and numerous reports on Ripoff Report and other web sites. However, for every one of those bad apples, there are dozens of reputable, hard working firms that are just as big as the con artists, and for every one of those firms there are literally hundreds of independent practitioners out there, including tax attorneys, IRS licensed Enrolled Agents, and state licensed Certified Public Accountants. Any of these licensed professionals are allowed to represent  taxpayers in front of the IRS.

The FTC recently posted a consumer alert telling people to handle their IRS disputes themselves. As an Enrolled Agent myself, I’m obviously biased in opposition to the FTC’s statement, … Read the rest