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Frequently Asked Questions

General Questions

How much do your services cost?

Our fees are based on the workload that it will take for our team of tax professionals to resolve your case. Our tax consultants will quote you a fixed fee for our services once we have completed a consultation and have explained what we can do to help.

How long will the process take?

Every case is different. It truly depends on the tax payers individual scenario.

Can the IRS take my SSI income?

Yes. The IRS can levy part of your SSI income.

If I die, does my tax debt pass on to my children/ spouse?

No, tax debt is not transferable to your descendants upon your death. If you have any assets or money in your estate, your estate would be required to pay off any outstanding liabilities with the IRS or state taxing authorities before the estate could be disbursed.

Can you get rid of the penalties the IRS is charging?

The IRS will abate penalties if a tax payer has a reasonable cause argument. The timing of the event must correlate to the tax years involved; and supporting documentation is essential for success.

FBAR

What is FBAR?

FBAR stands for Foreign Bank Account Report. It is now known as FinCen 114 formerly TDF 90-22.1.

Who has to file it?

Citizens or Residents living in the United States, with a financial interest of signature authority over accounts overseas with combined balance(s) of over $10,000. Certain exemptions apply.

Why does an FBAR from have to be filed?

The IRS requires that the FBAR be filed to properly report any foreign assets and potential income generators.

When does it have to be filed by?

The deadline to file the FBAR is June 30th of the following year. For example, the 2015 FBAR (FinCen 114) is due on June 30, 2016.

Can I file an extension?

Yes, beginning in 2015 an extension can be filed for the FBAR through October 15th

How is it filed?

The FBAR is filed electronically.

Offer In Compromise

What if I cannot afford the monthly payments requested by the IRS?

If you cannot afford to make payments in the amount requested by the IRS, you may submit a financial statement to demonstrate what lower payments you can make. If your financial statement shows you cannot pay the liability within the time the IRS has to collect, you may also qualify to settle your debt with the IRS through an Offer in Compromise Doubt as to Collectability.

What is an Offer in Compromise Doubt as to Collectability?

An OIC allows a taxpayer to settle the tax liability owed for less than the full amount owed when it can be shown that the taxpayer cannot pay the liability within the time the IRS has to collect it. The program is designed for taxpayers experiencing a demonstrated financial hardship, as defined by the Internal Revenue Manual.

If an Offer is accepted, the tax liabilities existing at the time of the acceptance are considered paid-in-full after payment of an agreed upon Offer Amount. Ultimately, all outstanding balances are eliminated after the Offer is accepted and paid.

How do I know if I qualify to settle my debt with the IRS?

An Offer in Compromise analysis is highly fact-driven and dependent on your personal financial circumstances. To determine if you qualify, you should speak with a professional about your current financial situation. It is best to have information readily available regarding your income, personal expenses and assets at the time you speak with a professional to make the most of your consultation.

What happens after my Offer is accepted?

After an Offer is accepted and you make payment on your Offer Amount, your remaining tax balance is eliminated. Any outstanding federal tax liens on your former balances will be released within approximately 45 days of your Offer being paid.

Wage Garnishment

I owe back taxes; when can the IRS garnish my income?

The IRS is required to issue you several collection notices to notify you of your outstanding tax balance. After the IRS has issued all of its required notices, it can take enforced collection activity against you, such as bank levies and garnishments of income. A professional can help determine if and when you are at risk for collection activity for a particular balance owed.

I am a wage earner and the IRS has issued a Notice of Levy to my employer, how can I get it released?

If the IRS has issued a levy to your employer, you may be able to have the levy released or modified upon demonstrating that you are in a financial hardship or you fit other criteria set forth in the Internal Revenue Manual.

When the IRS issues a Notice of Levy to your employer, your employer is required to notify you and provide you an opportunity to notify the IRS of your household size. The IRS can garnish all, but a certain exemption amount from your wages each pay period until the levy is released. Your exemption amount depends on the size of your household.

If you can demonstrate your circumstances meet the criteria set forth in the Internal Revenue Manual, you may be able to have your garnishment released or modified. A professional representative can help make an effective case to the IRS quickly and assist in resolving your financial emergency as expediently as possible.

I am self-employed and the IRS has issued a Notice of Levy to a source of income, how can I get it released?

For a self-employed individual, the IRS can issue a Notice of Levy to a source of the taxpayer’s income. You may be able to have the levy released or modified upon demonstrating that you are in a financial hardship or you fit other criteria set forth in the Internal Revenue Manual.

When the IRS issues a Notice of Levy to your source of income, 100% of the funds due to you at the time the notice is received can be seized by the IRS.

If you can demonstrate your circumstances meet the criteria set forth in the Internal Revenue Manual, you may be able to have your garnishment released or modified to a different amount. A professional representative can help make an effective case to the IRS quickly and assist in resolving your financial emergency as expediently as possible.

Innocent Spouse Relief

What is innocent spouse relief?

Innocent spouse relief, separation of liability relief and equitable relief are various ways to get relief from a tax balance from a jointly filed return with your spouse.

Will my spouse be notified of my request?

Yes, the IRS is required to notify the spouse with whom you filed the joint return that you have requested relief.

How do I know if I will get innocent spouse?

There are various factors that the IRS will review in determining if you are an innocent spouse.

Some, but not all, include your marriage status, whose income the liability stemmed from, did you sign the return, did you know, etc.

Tax Prep

Why should I file my tax return?

In order to settle your liability with the IRS it is a requirement that all tax returns be filed. There can be no negotiation without the filing of the return. Also, if you wait to file your tax return, then you may lose your right to a refund.

What happens to my refund if I already owe the IRS money?

If you already have a balance with the IRS, then your refund will be applied to the tax debt first. If there is are any funds remaining the IRS will send you a check.

Can I file my tax return without paying?

Yes, the IRS will accept your tax return even if you cannot pay. The IRS charges penalties for failure to file and failure to pay. Thus, if you file your return timely, then you can avoid this penalty.

Tax Liens

What is a Federal Tax Lien?

A federal tax lien is a government claim against your property for a balance due that has gone unpaid. The government files tax liens to protect its interest in your property. Liens can be filed after a tax liability is assessed, the IRS issues you a notice of the balance due and the balance is not paid timely.

How does a lien affect me?

A lien attaches to your current and future assets, such as real property. Liens can also affect your creditworthiness. Liens frequently will continue to exist after a taxpayer files bankruptcy.

How can I release my lien?

Liens will be released upon the full payment of the tax liability secured by the lien. The IRS will release your lien within 30 days of payment of the tax liability. Settling your tax liability through an Offer in Compromise can also serve as a means to release your liens if all Offer terms are met.

How is Lien different from a Levy?

Liens and levies are both collection tools for the Internal Revenue Service; however, they operate differently. A lien is a claim to a taxpayer’s property because the taxpayer owes a tax debt. A levy involves the actual seizure of a taxpayer’s property to pay the tax liability.

What other options are there to minimize the impact of my tax lien?

If you can show that it is in the best interest of both the taxpayer and the government, liens can also be discharged, subordinated or withdrawn. If your circumstances qualify, these methods can help you sell your home, refinance your mortgage or simply improve your creditworthiness.

Collection Statute Expiration Date

What is a CSED?

CSED is a Collection Statute Expiration Date. This is the date in which a Taxpayer’s liability will expire, and the IRS must stop collecting on that certain liability.

How long is a CSED for each year’s balance?

Usually, the IRS only has 10 years (120 months) to collect on a liability from the date of assessment.

Can the CSED be extended to give the IRS more than 10 years to collect?

Yes, under specific circumstances, the IRS can toll the statute date, so that the CSED is extended. A few examples are if you file an Offer in Compromise (OIC), or file an Appeals Hearing.

Once the CSED has passed, can the IRS collect on that year’s liability?

No, once the CSED has passed on a specific year’s liability the IRS is not allowed to collect on that year. However, the IRS will rarely tell you about the CSED, and its best to consult a representative to ensure the IRS has the correct CSED date in place.

Can you give a couple examples?

Example 1. Taxpayer files the 2011 Tax Return timely, on April 15, 2012. When he files, he has an unpaid balance of $10,000. The IRS will have until April 15, 2022 to collect on the balance for the 2011 Tax Year.

Example 2. Taxpayer files the 2012 Tax Return late, on July 20 2014. When he files, he has an unpaid balance of $14,000. The IRS will have until July 20, 2024 to collect on the 2012 Tax Year.

Bank Levy

I own back taxes; when can the IRS levy my bank account?

The IRS is required to issue you several collection notices to notify you of your outstanding tax balance. After the IRS has issued all of its required notices, it can take enforced collection activity against you, such as bank levies and garnishments of income. A professional can help determine if and when you are at risk for collection activity for a particular balance owed.

The IRS has seized the funds in my bank account, how can I get it released?

If the IRS has issued a levy to your bank, you may be able to have the levy released or modified upon demonstrating that you are in a financial hardship or fit other criteria set forth in the Internal Revenue Manual.

When a bank receives a Notice of Levy from the Internal Revenue Service, it is required to remove all of the available funds from your bank account. However, the bank is also required to hold onto your funds for 21 days before it remits the payment to the IRS. If you can demonstrate to the IRS that you are in a financial hardship (or have other grounds under the Internal Revenue Manual to release the funds), you may be able to have the funds released back to you. A professional representative can help make an effective case to the IRS quickly and assist in resolving your financial emergency before your 21 day window elapses.

Penalty Abatement

What is Penalty Abatement?

In summary, “penalty abatement” is asking the IRS to review your situation and see if you qualify for waivers on penalty fees they charged for late filing and/or late payment of your taxes.

How does 1st Time Penalty Abatement work?

Per the Internal Revenue Manual, the IRS permits a one-time waiver of certain penalties based on a taxpayer’s good compliance. The IRS calls this program “1st Time Penalty Abatement” and it allows a taxpayer to request an administrative waiver of one tax periods penalty fees based solely on a history of good compliance. This means you can request abatement of penalties charged to a single tax period provided the three prior tax years [all quarters] were timely filed and paid. This option does not require you to meet any standard of reasonable cause, but instead only looks for a good taxpaying history.

How does Reasonable Cause Penalty Abatement work?

The primary method of receiving penalty abatement from the IRS is to establish reasonable cause as to why you were not timely with your tax returns. The IRS has criteria allowing taxpayers to petition for penalty abatement based on extenuating circumstances, or what the IRS deems “reasonable cause.” To qualify for reasonable cause penalty abatement you must successfully demonstrate there was no willful neglect and that your hardships had a direct relation to the inability to timely file/pay your taxes.

What are some Reasonable Cause Circumstances?

Reasonable cause criteria with the IRS can include events such as extreme medical hardship, fraud perpetrated upon you by a CPA/licensed tax preparer, natural disaster, etc.

Currently Non-Collectible

What is CNC (Currently Non Collectible)?

Currently not collectible (or CNC) occurs when the IRS agrees, after financial review, that you cannot afford to repay the debt that is owed, and doing so would create an economic hardship on you. It is a forbearance by the IRS, a break from enforcement that can last years.

Payroll Taxes

How do I make deposits?

Deposits should be made electronically using a PIN number that is acquired from the IRS and done through Electronic Federal Tax Payment System.

Should I be paying the back taxes or the current taxes?

It is important to pay the current taxes. The IRS will not be able to help resolve any issues, unless you have filed all returns and are making all the required deposits currently.

Can I be held personally responsible for payroll taxes?

Yes, these taxes are known as trust fund recovery penalties. Owners, members and other individuals can be held personally liable for these unpaid taxes.

Installment Agreement

What is an Installment Agreement?

If you are financially unable to pay your IRS tax debt immediately, the IRS will typically allow you to make monthly payments through an installment agreement in the interest of satisfying the debt owed.

What are the different types of Installment Agreements?

The IRS has four (4) different types of installment agreements:

  • Streamlined
  • A streamlined installment agreement has the following requirements:
    • The tax liability, interest, and penalties do not exceed $25,000;
    • The balance can be paid off within 60 months; and
    • The proposed payment is equal to or greater than the “minimum acceptable payment” (the minimum acceptable payment is the greater of $25 or the minimum payment amount reached by dividing the tax liability, interest, and penalties by 50)
    • *The taxpayer must pay a fee of $105 to set up the installment agreement.

 

  • Fresh Start
  • A Fresh Start installment agreement has the following requirements:
    • The tax liability, interest, and penalties do not exceed $50,000;
    • The balance can be paid off within 72 months; and
    • The proposed payment is equal to or greater than the “minimum acceptable payment” (the minimum acceptable payment is the greater of $25 or the minimum payment amount reached by dividing the tax liability, interest, and penalties by 50)
    • *The taxpayer must pay a fee of $105 to set up the installment agreement and installment agreement must be setup as a direct debit installment agreement.

 

  • Partial Payment

A partial payment agreement allows the IRS to enter into agreements with taxpayers for the partial payment of a tax liability. To qualify for this arrangement, the taxpayer must complete a financial statement using Form 433-F to report income and living expenses. The IRS will review and verify the information. If the taxpayer has assets that can be sold to pay some of the tax debt, the IRS will require the taxpayer to provide additional information. If approved, the taxpayer will be required to participate in a financial review every two years. This review may result in the increase in installment payments or the termination of the agreement.

 

  • Full-payment

If a taxpayer can make monthly payments to the IRS, a non-streamlined agreement is an option. The IRS will not automatically approve this agreement; instead, the taxpayer must negotiate with the IRS. The taxpayer must file Form 433-F, Collection Information Statement. This form collects information about income, debts, living expenses, assets, accounts, and allows the taxpayer to propose an installment payment amount. It will usually take a few months for the IRS to review a proposed payment plan. The IRS may refuse a proposed agreement if it considers some of the taxpayer’s living expenses unnecessary, if untruthful information was provided, or if the taxpayer failed to complete a prior installment arrangement.

Will Liens be filed when I am on an Installment Agreement?

It depends. Liens can, and often will, be filed by the IRS once a taxpayer’s debt has exceeded $10,000. The IRS engages in this practice as a routine security measure to protect its interest in the monies owed to them by the taxpayer. However, in certain cases, where the IRS has yet to file a lien and the taxpayer has established either a Streamline or Fresh Start installment agreement, the IRS will refrain from filing any tax liens.

Will bank levies or wage garnishments be issued while I am on an Installment Agreement?

Once a taxpayer has established an installment agreement the IRS no longer pursues enforced collection action (bank levies, wage garnishments, etc.). This is predicated on the fact that the taxpayer will keep up with the payment arrangement and comply with all future filing and payment responsibilities.

How long will my Installment Agreement last?

The duration of any installment agreement will be determined by the type of payment plan established (see above). However, it is important to note, a payment plan will never exceed the Collection Statute Enforcement Date (or CSED) — all payment arrangements are limited by the corresponding CSED.

Audit Representation

Why am I being audited?

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What are my options during and after an audit?

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Do I have to pay the amount they say I owe right away?

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Will the taxing authority take possession over any of my assets?

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How long does the Audit process take?

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What types of Audits does Tax Defense Partners Defend?

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What happens if a Tax Court Petition is filed on my Behalf?

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Will I have to be involved once your team is handling my audit?

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Transcript Analysis

What’s an IRS Account Transcript?

The IRS keeps a database of information regarding each Tax Identification Number (TIN). The information is recorded on Account Transcripts, that show activity on the TIN for each tax year.

What is Transcript Analysis?

To the untrained eye, these Account Transcripts can seem to be in a different language. Tax Defense Partners has over 18 year of experience with transcript analysis and will decipher your IRS taxpayer history so that you are well informed and can take the necessary steps to resolve your IRS tax matter. Our Transcript Analysis service includes a breakdown of active IRS demand letters, penalties and interest you’ve accrued, any tax liens filed or released, the Collection Statute Expiration Date (the Government’s right to pursue timeframe), your IRS payment history and if you are under audit or will be in the near future.

Why is Transcript Analysis important?

The Transcript Analysis is a gateway into the IRS’s current and future actions with taxpayers who have years of unfiled tax returns or have a heavy tax burden. It provides the exact information that the IRS has – critical information that is useful in developing the key components to a permanent resolution to a personal or business tax problem. As the IRS states, “IRS transcripts are often used to validate income and tax filing status for mortgage applications, student and small business loan applications, and during tax preparation.” Clearly, Taxpayer transcripts contain very useful information, and you should know what the IRS knows about you.

How can a Taxpayer of obtain their IRS Transcript (or Tax Record of Account)?

Anyone can obtain their taxpayer transcript from the IRS government website, however, obtaining it quickly and deciphering it can be complicated. The best course of action is to obtain your transcript with the help of experienced tax resolution experts such as Tax Defense Partners. With your authority, our certified tax professionals will immediately pull your record and inform you on what the IRS is most likely to do next regarding your tax problem. We’ll step into your shoes and head-off the IRS from actions that could inhibit the continuance of your economic life.

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