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How To File Back Tax Returns?

How to file back tax returns?  This is a question we get asked all the time.  Data from the IRS tells us that over 7 million households do not filed tax returns every year.  Sooner or later the IRS will come looking for you and there will be bad news at your door.  All the while you are being charged a 5% per month non-filing fee, a 0.5% per month late paying fee.  If that wasn’t enough, you are also being charged interest.

Remember, when you received a W-2 or 1099, the IRS also receives it.  They know how much money you make.  If you don’t file your tax returns, the IRS will eventually file for you.  And trust us when we say, the IRS will NOT give you the benefit of any tax deductions.  You will pay the maximum in taxes if you don’t file your taxes.

Step 1: Gather your tax documents

To file your back tax returns, you will need the W-2s or 1099 forms you received for those tax years to report your income. If you are eligible for deductions and credits, you must also gather any receipts or other supporting records that prove your eligibility to claim them.

Step 2: Request missing documentation

If you are missing any of your tax documents from the last 10 years, you can request a copy from the IRS by filing Form 4506-T, Request for Transcript of Tax Return.

Use this form only to request W-2s, 1099s and even 1098s that may provide support for some of your deductions.

Though you will not receive a duplicate of the original form, the IRS will provide you with a transcript of all relevant information, which is sufficient for filing your back tax returns.

It can take the IRS up to 45 days to process your request.

Step 3: Download prior year IRS tax forms

You must always file your back tax returns on the original forms for each tax year you are filing. You can always search through the IRS website for the forms along with your state department of revenue (if applicable).

Step 4: Prepare your back tax returns

You cannot complete prior year tax forms using instructions from the current tax year.

The tax law changes every year, and using the wrong instructions may require you to prepare the return over again.

Double check to make sure that the instructions you are using are for the same tax year as the tax return you are preparing.

Step 5: Submit your forms

Submit the forms to the IRS at the address listed in the Form 1040 instructions.

If you owe additional income tax for any of the prior years, remember to include as large of a payment as you can to reduce your interest charges.

Unlike tax penalties which stop accruing when the maximum is reached, monthly interest still accrues indefinitely until the tax is paid.

Once the IRS receives your tax returns, you should expect to receive notice of the exact penalty and interest charges you are responsible for.

5-Star Google Reviews Speak for Itself…

Patriot Tax Professionals has a 5-star review rating on Google!  Are you looking for a tax resolution firm with a great reputation for being honest and ethical?  Over the years I have seen a lot of shady business in the tax resolution industry.  This includes misrepresentation, over promises, and most of all unlicensed sales persons giving tax advice.  With that in mind, here are 4 questions any consumer should ask before hiring a tax resolution firm to help resolve their tax debts…

Tax Resolution in Las Vegas

Has the constant pressure from the IRS just taking its toll on you and your family?  Remember, you are one phone call away from getting your tax resolution case started.  Call today and speak to a tax expert at Patriot Tax Professionals.

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Understanding an IRS Audit

Audit!  I think the only word people are more afraid of is death!

 Truthfully, the is no reason to be afraid of an audit, well unless you did something wrong.

 First of all let's start with the basics...  What is the purpose of a tax audit?

 The purpose of a tax audit is to determine the correctness of a tax return.  People make the mistake of believing that their tax return has been selected for audit because they made a mistake on their return.  They're under the assumption that the IRS found the mistake that's why they've been targeted and now they somehow have themselves convinced that they're going to owe more money just because the return has been selected for audit.  The good news is that’s not (necessarily) true.

 There can be some circumstances in which a tax return is selected because of a mistake.  When we're talking about the examination process that's not what happened. What actually happened is the computer looked at your tax return found some question(s), not necessarily a mistake, but a question.  That question is what gave rise to the examination.

 What Type of Audit is this?

 There are two different types of audits.  One is a correspondence audit whereby you will interact with the IRS through the mail and possibly over the telephone.  The second type of audit is a face-to-face audit.

 Before any tax return is selected for audit, every single tax return filed with the IRS goes through a very detailed screening process within the IRS super computer. This screening process looks for a number of things. Many correspondence audits can be generated through the math error program, where there's just a simple math error on the tax return.  Yes, simple math such as addition and subtraction errors are a giant cause of IRS correspondence audits.

 The automated under-reported program is responsible for millions of notices every year to taxpayers.  These notices basically  that say that the IRS has information in their super computer that shows you made X dollars.  However, the information on your income tax return is different (meaning lower) than the amount of income other entities reported paying you. For example, if you file an income tax return that says you earned $50,000 last year but the information provided by other institutions shows $70,000 was reported under your name and social security number.  That is going to be a problem for you in the future.  You can expect to receive an under-reporter notice from the IRS in a the foreseeable future.

 The substitute for return program, also known as SFR program, is a similar program for people that do not file a tax return at all.  The IRS received information that you earned income but didn't file a tax return. The IRS will be notifying you that income was reported and you are expected to file your income tax return.

 The IRS also has a what they call an electronic fraud detection system that looks at various elements of tax returns to determine whether there's a potential for fraud.

 Remember, the correspondence examination program is a program specifically designed to audit tax returns by correspondence only and not face-to-face.  Ultimately, the IRS computer system for some irregularity in your income tax return. It is the computer that flagged your return for audit and not a live human being sitting in some dark room with no windows that is out to get you.

 Face-to-Face Audits

 The face-to-face audits make up the smallest component of the IRS audit system that take place throughout the year. The entire IRS audit department may select tens of millions of tax returns to be audited. The large majority of those are audited through the electronic process and only a small percentage of those are actually face-to-face.  

 When the IRS talks about its audit coverage it's always referring to face to face audits and not the correspondence program audits. Correspondence program audits are up in many cases by three and four digit percentage increases over the past number of years.  Meanwhile, face-to-face audits continue to decline in actual numbers. Through budget cuts, retirements, etc., the IRS doesn't have the manpower and or the resources required to audit face to face.  Simply put, the IRS can cover a lot more ground through the through the correspondence audit program than it can through the face-to-face program.

 Of the tax returns selected through the face to face program, about 65% of those or  just about two-thirds of them are selected through a program called the discriminant income information system also known as "The Diff Program". This program compares every line of your tax return with national and regional statistical averages per person in your same income category and profession. If any one line of the return is out of sync with those the difference is scored.  This is called ”The Diff Score” and the higher the score, the more likely you are to be audited by the IRS.

 About two-thirds of all the returns are selected for face-to-face audits come through “The Diff System.”  The rest of the face-to-face audits come through very specific compliance initiatives.  That is to say these are these are specific programs that the IRS is looking for a particular type of tax return for a particular reason.  For example, non-filers (of course) are always at the  top of the list. The IRS is always looking for Non-filers. Additionally,  the IRS is looking to conduct audits to get non-filers back into the system and get these delinquent returns filed.   

 The IRS continues to look at flow-through entities such as subchapter-S, LLC's and Partnerships. To be clear,  the IRS is looking at the income on the entity return vs. the income on the taxpayer return. With a flow-through entity the taxpayer doesn't report the gross income of the entity, the taxpayer only reports the net income and that's what shows up on his tax return.

 Profit motive issues of always been a high-profile for the IRS when they're looking at schedule C businesses that report a loss year after year.  Schedule C Business is always at risk of an audit.  The IRS is going to look at gross income and deductions of the business.  

 Employment tax enforcement is another thing that generates face-to-face audits with businesses looking for employment tax compliance. Offshore audits are a big thing as well I also spent the last ten years or so screwing itself into the ground trying to track down all of the people that have offshore assets and so these offshore audits.

 What about Appeals?

 The final point to know and fully understand is the decisions of Tax Auditors is never final.  The tax auditor does not have the power to put anyone in jail, he doesn't have the power to lien and/or levy any assets, he doesn't even have to have the power to change the tax return without the consent of the taxpayer!  All this examiner can do is make recommendations that this or that deduction be disallowed for whatever reason and that is subject to appeal process.

 Your right to appeal is absolute and not conditional.

 Furthermore, your right to appeal applies to every tax situation and not limited to tax audits. For more information you can reference the Bill of Rights Act of code section 7803 which is the taxpayer Bill of Rights is not codified into law and that gives you the right to challenge the position of the IRS, to be heard, and to appeal the decision of the IRS in an independent Forum.

 If you have a tax debt to the IRS and/or the state including an audit? Contact me at 877-782-9383 or visit our website to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.

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Strategies for Stopping IRS Collections

Before the IRS Levy any kind of assets before they can touch a nickel's worth of your client assets the IRS must first send a final Notice of Intent to Levy. This is a very important notice because there are  critical rights that attach to the receipt of this letter.  There are three different versions of the same letter and they all look very similar to each other.

 The first letter is called a letter 1058 and it's titled final notice of intent to Levy and notice of your right to hearing.  The IRS sends letter 1058 to notify you of your right to a hearing on the matter as your final notice of intent to levy your property, potentially including your paychecks bank accounts,  state income tax refunds and more.

 The second letter is IRS letter CP 90.  Notifying you of our (meaning IRS) intent to levy certain assets for unpaid taxes.  You have the right to a Collection Due Process hearing.  

 The third version in this is probably the most common version of all… the LT11 it looks very similar to the CP90 but of course it's got a different identifying number that being the LT11.

 You want to make sure what you're dealing with when you're receiving computer notices.  Too many people do not understand what the notices mean that they're getting.  A final notice letter only takes the form of one of these three letters.  

 The IRS mails out a CP 501, CP503,  CP504 (to name a few) these are all various collection letters but they're not a final notice letter.   The IRS cannot Levy a bank account a paycheck any assets whatsoever until they mail a Final Notice of Intent to Levy.  Additionally, a notice of your right to a hearing in this process is critical in the collection process.  It is important that you understand exactly how that works so when a final notice is sent out you have 30 days to file a collection due process appeal.

 You cannot get an extension of the 30-day period of time on the final notice.  That 30-day period of time to file is what's called a collection due process appeal is statutory there is no exception to that.  If you call the IRS and say that you can't pay in 30 days and ask for an extension they'll give you an extension on payment.  That's true, but you will not get an extension on your ability to file a collection due process hearing.  That 30 days is hard and fast and cannot be extended.  

 The reason it is important to submit a collection to process  is because this does two (good) things for you.  First of all it stops all collection activity from the IRS immediately.  Basically, it is an injunction against the IRS from collecting from you.  You have taken the case out of the hands of the collection department and put it into the hands of the appeals.  Oftentimes, we get more favorable outcomes from the appeals department.

 The appeals department will give you an opportunity to propose, for example, an installment agreement, offer compromise, or perhaps uncollectible status, or perhaps you can get some penalties abated.  

 The other important thing is when you file this appeal in a timely manner you've got the right to a Tax Court Appeal.  If you can't reach an agreement you can take your case to Tax Court.  

 So now what happens if you missed the 30-day deadline?

 We often have clients come to our office and they have a shoebox full of unopened mail from the IRS.  For some unknown reason, they been collecting mail from the IRS.  It is only when their paycheck finally gets hit with a garnishment that they give us a call and it is an emergency 5 alarm fire drill.

 It just so happens there is a second appeal available to taxpayers.  This appeal is called an Equivalent Hearing and you use the same form… IRS form 12153.  This form can be filed within one year of the final notice date.   This will take your case to the appeals office where you have an opportunity to sit down with an appeals officer.  The difference here is that decisions by the appeals officer are final in Equivalent Hearing cases and not subject to Judicial Review.  This is a very important limitation however, the good news is that the IRS will stop collection activities while the Equivalent Hearing is pending.  This gives you an opportunity to make a proposal to the appeals officer without the impact of levies or asset seizures.

 The context of this article is emergency measures to stop collection the single best way to do that is file a timely CDP request.  You don't always have that luxury because it depends on what stage in the collection process you are at.  If you’ve already missed your opportunity to file a Collection Due Process Hearing you next best strategy is to request an installment agreement.  IRS revenue code states that the application for installment agreements stops enforced collection action.   The request for an installment agreement operates as an injunction against the IRS from levying or seizing assets.

 Depending on the amount owed to the IRS, you may be required to provide a full financial statement with your application for an installment agreement.  

If you owe less than $50,000 to the IRS and can pay within 72 months you do not have to provide and financial information… this is more commonly known as a guaranteed installment agreement.  Recently the IRS has increased this threshold to $100,000 and 84 months.  

 On amounts greater the $100,000 you will be required to provide the IRS a complete financial disclosure with substantiation of all assets, income, and liabilities.  An IRS will evaluate your financial disclosure and determine how much you can afford.  It is also worth noting that you can pay your balance down to $100,000 and no financials will be required.

 A common strategy in this instance is to establish an installment agreement and set the first payment date for 59 days.  This will 1. Stop any collection activity such as a wage garnishment of bank levy and 2.  Give you time to evaluate your complete financial profile and determine if you are eligible for an offer in compromise.

 So how do we get a Levy Released?

 It’s on thing to stop a levy before they have hit your bank account or employer’s payroll department.  It’s another thing if the Levy has already hit and you are trying to prevent from happening again.  

 First, you will need to contact the IRS office that issued the Levy.  If it came from the collections office you will simply call the 800 number.  If the Levy came from a local Revenue Officer,  you will have to contact that person.  In most instances, your case will not hit a Revenue Officer’s desk unless you owe more than $100,000 or you have an Employment Tax Liability.

 In order for the IRS to release the levy you will need to prove that the levy is causing you a financial hardship.  For IRS purposes, a hardship simply means that you are having difficulty paying for your basic living expenses.  Once again, you will be required to submit a full financial profile on IRS for 433-A and provide supporting documentation such as paystubs,  bank statements and copies of bills.  If this is a business debt, you will complete form 433-B.  

You financial statement must show that you do not have the ability to pay you basic living expenses because of the levy.  For example, if you make $5,000 and your living expenses are $4,800 you cannot afford to make a $1,000 payment to the IRS.  In this example, the IRS will accept a monthly payment of $200.  It does not matter with the expiration date of the debt is.  It is very possible that you could pay the $200 for the time remaining on the expiration date and then be clear of the remainder of the balance due.  This is more commonly known as a Partial Pay Installment Agreement.  

 In the case where your monthly living expenses exceed your monthly income, you may be eligible for a Currently Non Collectible status whereby you do not make any monthly payment.  Once again, you will be required to provide a full financial with all supporting documentation.  Additionally, any balance over $10,000 and the IRS will place a lien on you.  The IRS will, from time to time, reevaluate your ability to start making payments on the debt.   

 So what about an Offer in Compromise?

 Remember, the topic of today’s article is Emergency Strategies for Stopping Collections.  The key word there being emergencies.  

 We submit successful Offer in Compromises all the time.  However, the Offer in Compromise takes time to gather information, prepare completely, and will sit in line at the IRS for months before an IRS Offer Examiner actually looks at it.  In many instances, these offers can take over six months to complete.  While the IRS is an excellent permanent resolution, it is NOT a quick solution to stopping collection activities.  Surely you do not want your wage garnishment for 6 months.  

 If all this seems overwhelming, confusing or you are just in plain “panic mode” give me a call to discuss your personal situation.  I will always give you an honest assessment and you most like permanent outcome. I will never “sugar coat” the situation and I will tell you like it is.  You can call us at *877) 782-9383 or my personal cell phone at (714) 876 - 4702

Respectfully,

Dave

www.patriottaxpros.com

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Patriot Tax Professionals

Never speak to a guy that sits in a cube and reads from a script.  Speak to a licensed professional that can give you personal attention help you resolve your problems.  www.patriottaxpros.com

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Preparing Your Offer In Compromise Correctly - IRS Form 656

Tips for Filling out IRS Form 656, Offer In Compromise

First of all, this is a form you definitely want to get right the first time.  Any mistake you make could result in a whole list of problems for you (or your client).  Problems may include delaying your offer by months or possibly even an outright denial.

What is IRS From 656 and Who Should Use it?

Form 656 is one of the forms required by the IRS for requesting an Offer in Compromise (OIC). This form, along with IRS form 433 (OIC) allows the IRS to evaluate your client's complete financial profile and ability to repay the tax debt and determine if they will accept the offer.

Form 656 is where you report the details of your proposed OIC.  These details include important information such as the amount of the offer and the proposed timeline for repayment.  This is alos where you explain your case for why it is in the best interest of the IRS to accept less money than the taxpayer owes.  The same form is used for either an individual or business that is requesting a Doubt as to Collectability or Effective Tax Administration.  (Side Note: Doubt to Liability Offers are submitted on IRS form 656-L)

DATC vs. ETA

(Doubt as to Collectability VS. Effective Tax Administration)

Doubt as to Collectability or Effective Tax Administration, which is better for your client?  Doubt as to collectability exists in any case where the taxpayer's assets and remaining monthly income are less than the full amount of the assessed liability.  Simply said, the Doubt as to Collectability OIC is for clients that don't have enough disposable income and assets to pay their tax debt.  Full disclosure on this type of offer in compromise is collected on IRS form 433-OIC.  Supporting documentation such as paystubs, bank statements, and mortgage statements will be required.  If you client simply cannot afford to pay their tax debt, Doubt as to Collectability is the best offer for them.  

On the other hand, Effective Tax Administration is for client who can technically afford to pay their tax debt, but doing so would cause undue harm to the taxpayer (such as financial hardship) or undermine public faith in the IRS.  In this instance, you have to be able to convince the IRS that not collecting the tax is more beneficial to them than collecting the tax debt.  For example, the IRS is NOT going to seize the assets of senior citizen living on Social Security or force a disabled person to sell his home that has been specially equipped to accommodate his disability.

How Do you Determine Repayment Terms?

Section IV of IRS form 656 requires that you choose between two different payment options:  Lump Sum and Periodic Payment.  A lump sum offer is for clients who can afford to pay their offer amount in 5 months or less.  A 20% initial deposit of the offer amount is required at the time you apply for a lump sum offer.  The deposit will be applied to the tax debt regardless of whether or not the IRS accepts the offer.  IF the offer is accepted by the IRS the taxpayer will be required to pay the remaining balance in five or fewer monthly payments.

The Periodic Payment is for offers with a payment plan greater than 5 months but not more than 24 months.  This option requires that you include your initial payment at the time you submit your application.  Monthly payments in the same amount must continue to be made while the IRS is the process of considering your offer (which may take 6 months, maybe longer). If the IRS accepts you offer, the taxpayer will be required to pay the remaining balance of the offer over the remainder of the 24 month period.  

Ultimately, the payment plan that you should choose depends on how much you (your client) can afford to pay monthly as well as their ability to make the 20% down payment that is required with the lump sum offer.    

If you have any questions about IRS form 656, be sure to visit our website www.patriottaxpros.com or call us on our toll free line at [phone].  I will always give you a free, HONEST assessment of your likely outcome and never mislead you!

Respectfully,

David Krausse

Enrolled Agent, Patriot Tax Professionals

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Resolving Payroll Tax Debts with the IRS

Whether you own a dry cleaning business, restaurant, landscaping, whatever as a small business owner, you have a lot of responsibility to simply remain in compliance... sales tax, income tax, payroll tax, bookkeeping.  And this isn't even what your business is about.  

 Being in the tax resolution business I have seen it many times in the past.  As cash flow dips, the payroll taxes that were withheld from employees paychecks gets used to fund the daily operating expenses for the business. The owner of the business quietly crosses his fingers hoping that next month will get better...and then the next month...and then the next month.

Meanwhile, failure to deposit, failure to pay, failure to file; all the penalties begin to add up. Then one day an IRS Revenue Officer shows up at the front door and wants to talk about payroll tax delinquencies. And now the amount owed is just too big for the business and business owner.

Payroll Tax is the number 1 reason why small businesses end up in tax collection status.

Before the IRS will discuss any type of resolution the business must first get into compliance. All bookkeeping needs to be completed and up to date.  All quarterly filings, payroll tax returns needs to be filed.  Additionally all income tax returns for the business and possibly the owner and all responsible parties must be filed.

If the business cannot pay the debts a Trust Fund Recovery Penalty will be assessed on the owner(s) and all other responsible parties such as the company bookkeeper and anyone that has signature authority on the company bank account.

This can quickly become a very difficult fight on many fronts!

So How do these Cases get Resolved?

Do You Have a Viable Business?

First of all, do you really have a viable business?  A business that cannot pay is payroll and sales taxes is not a viable business.   "But it's really a good business!" says the owner.  If you paid yourself $90,000 last year but owe the government $110,000, do you really have a good business?  It's not a good business if it can't pay its bills and its' bleeding cash. Ultimately, the IRS point of view is that if you can stay current then you need to shut the business down and get a job.

It is also important to remember, that a bad business can ruin other assets.  A bad stock that you own can only go to $0.  A bad business can absorb other assets beyond just the business.  We've people lose their homes, liquidate their retirement accounts, mortgage other assets in an effort to save a dying business.  Determine that you have a viable business.

Okay so you have a viable business... now what?

If the business is a C-corp. and the owner(s) take a reasonable salary then the debt is set up on an installment agreement and paid in full.  Simple.

What about a sole proprietorship?  The IRS will first request a 433(B).  A 433 (A) will also need to be included because the business owner will still need to pay his standard living allowances.  For example, the 433(B) says the business can pay $100,000.  Now the owned needs $72,000 to bay his bills.  So the company starts paying $28,000 on the past due payroll tax.  

So what do you do if the business is a partnership?  Are all the partners equally responsible?  In the beginning all the partners are friendly and just want the case to get resolved.  Then they go home and tell their spouses how much it's going to cost.  "Why do we have to pay?  You were out selling and bringing money into the business.  Your partner was in the office.  He was supposed to be balance the books.  He should've known.  Not you!"  says one of the spouses.

Now everyone is pointing the finger at one another and things are about to get ugly, uglier than they already are.  As a tax resolution professional you also have potential for a conflict of interest problem.  It is our company policy to only the business or one of the partners.  Never both.

Keep in mind that if a business can afford to pay the IRS will expect to establish an installment agreement.  If the business can't afford to pay, the bushiness is headed for permanent closure.   A business can seldom settle debt through an offer in compromise and still remain in business.

So the Business can't pay and shutdown is inevitable...

By now the IRS will have placed a lien on the business assets.  Even if the lien has not been formally filed, it is in place by way of statute. All assets that have liquidation value will in fact be liquidated and the money received will be applied to the outstanding payroll tax debt.

A Trust Fund Recovery Penalty will be assessed on the owner(s) and all responsible parties.  At this point the IRS will handle the case on an individual level and the IRS will attempt to collect the debt from all parties until the entire amount of the TFRP has been recovered.

To sum it up, payroll taxes are serious business at the IRS.  These funds are held in trust by the business owners and payroll tax is used to fund the daily operating expenses of the US government.   These cases can quickly become ugly and very complicated.

If you have a tax debt to the IRS and/or the state, contact me at 877-782-9383 or visit our website to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.                       

 David Krausse

Enrolled Agent

Patriot Tax Professionals

[phone]

www.patriottaxpros.com

[patriottaxprofessionals]

California Franchise Tax Board Offer In Compromise Program

If you are an individual or business taxpayer that does not have the income, assets, or means to pay your state income tax liability to the California Franchise Tax Board (CAFTB) now or in the foreseeable future, you may be a candidate. The Offer in Compromise program allows you to settle your debt to California for less than the amount owed.

 Generally, the state of California will approve an Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.  The term "reasonable" is not precisely defined and the state does not have a 10 statute expiration like the IRS does. Therefore, "reasonable" may be longer than 10 years.  

Although we evaluate each case based on its own unique set of facts and circumstances, we give the following factors strong consideration:

·         The taxpayer's ability to pay.

·         The amount of equity in the taxpayer's assets.

·         The taxpayer's present and future income.

·         The taxpayer's present and future expenses.

·         The potential for changed circumstances.

·         Whether the offer is in the best interest of the state.

 Eligibility for the Offer in Compromise

The CAFTB will only process your Offer in Compromise application if you have done all of the following:

·         Filed all of the required tax returns and you agree on the amount you owe. If you have no filing requirement, note it on the application.

·         Fully completed the Offer in Compromise application and provided all supporting documentation.

·         Authorized the Franchise Tax board to obtain your consumer credit report and to investigate and verify the information you provided on the application.

Collateral Agreement

Upon approval of your offer in compromise, the CAFTB may require that you to enter into a collateral agreement for a term of five years. Generally, a collateral agreement will be required if you have significant potential for increased earnings. A collateral agreement requires you to pay the California Franchise Tax Board a percentage of your future earnings that exceed an agreed upon threshold. If your earnings do not exceed that threshold you will not have to pay any additional money.

  Collection Actions May Not Be Suspended

Unlike the IRS, collection activity is not automatically suspended at the CAFTB. If delaying collection activity jeopardizes our ability to collect the tax, we may continue with collection efforts. Interest will continue to accrue as prescribed by law.

 How Long Does it Take to Get a Decision?

The CAFTB website says"Generally, we will have a decision within 120 days of your account being assigned to a specialist. If your account is more complex, it may take longer than 120 days."  However it has been my personal experience that these take much longer... even as long as one year.

If you offer in compromise is accepted, you must make a lump sum payment of that offer amount.  You will not be allowed to make payments on the offered amount.  Additionally, prior payments cannot be applied to the offer amount.

The CAFTB will not accept a zero dollar offer.  Your offer must represent the most the Franchise Tax Board can expect to collect from you over a "reasonable" amount of time.

 Different Criteria than the IRS

The California Franchise Tax Board offer in compromise program is entirely separate from the IRS program.  It has been my experience that the CAFTB is much more difficult to work with.  The IRS has much more definitive processes and procedures.  The IRS has a 10 year collection statute expiration date (CSED) cannot collect a debt after that date has passed.  The CAFTB does not have the same rules giving them more time to collect on your debt. Additionally, the IRS has formal guidelines on standard living expense allowances.  The CAFTB has no formal guidelines on expenses... sometimes I get the feeling they are just making it up as they are going along over there.

 For more information visit:  https://www.ftb.ca.gov

My name is David Krausse.  I am a licensed Enrolled Agent, admitted to practice before the IRS.  I am an advocate for taxpayer’s rights and believe that everyone deserves a second chance.  

I work hard to represent the taxpayers of California in front of the IRS and California Franchise Tax Board.  If you have a tax problem and need relief from the IRS or California Franchise Tax Board, feel free to call me on my personal cell phone number at [phone], our office at [phone] or my personal email at [email protected].  Also feel free to visit our website at www.patriottaxpros.com

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4 Questions to ask Before Hiring a Tax Resolution Firm...

My name is David Krausse, I am a licensed Enrolled Agent, admitted to practice before the IRS.  I specialize in honest, ethical tax resolution services serving Los Angeles, Ventura, and Santa Barbara Counties.  Over the years I have seen a lot of shady business in the tax resolution industry. This includes misrepresentation, over promises, and most of all unlicensed sales persons giving tax advice. With that in mind, here are 4 questions any consumer should ask before hiring a tax resolution firm to help resolve their tax debts...

 #1: Are you licensed to be providing me tax advice?

Many tax resolution firms use unlicensed sales person to sell their services.  These sales people  do not have the expertise or professional knowledge to be advising you on your tax matters, additionally it is illegal to do so.  Oftentimes, they have no formal education in taxation and have not passed any of the required licensing examinations administered by the IRS or state taxing authorities.  

The only people that can legally advise you on tax matters are Attorneys, Certified Public Accountants (CPAs), and Enrolled Agents (EAs).  It is very important that you ask the person you are speaking to if they are in fact licensed.   If they do not have a license you should probably not take and advice from that person.  Think about it, would you take medical advice from an unlicensed Doctor? Would you take legal advice from an unlicensed Attorney?

We have found that in most instances, these sales persons are actually reading from a script that has been prepared by the sales manager... who also happens to not have a license. In many instances these salespersons will avoid answering your question by giving you some fancy title ("Senior Tax Analyst", "Director of Resolutions").  Remember, any answer other than "Attorney", "CPA", or "Enrolled Agent" means they are not able to legally represent you or give tax advice.

 #2: Are you the person that will be representing me with the IRS (or State)?

Be sure to ask if the person you are speaking with is the actual person that is going to represent you in front of the IRS and/or state taxing agencies.   If the person you are speaking to is not the actual person then ask to be transferred to the person that will be representing you.  You will need a guarantee (in writing) that your representative is an Attorney, CPA, or Enrolled Agent.  

The IRs will not allow a non-licensed representative to negotiate on behalf of a taxpayer.  Some of the large national firms have unlicensed assistants negotiate with the IRS.  Before you sign any retainer agreement or pay any money be sure to see IRS form 2848, Power of Attorney, to see the specific individual(s) that will be representing you. If completed in its entirety, the 2848 will include all proper licensing information.

#3: What is your experience in actually negotiating a tax resolution directly with the IRS?

Has the person you are speaking to actually worked on tax resolution cases as a representative? It’s one thing to be licensed, but quite another to have actual real-world experience.  If so, ask what that persons track record is and what the monthly case load for him/her.  It is reasonable to expect any licensed representative to be working a handful of cases at once.  However, you do not what your representative spread so thin that they haven't given your case all the time and attention it needs.  Any case-experienced representative should be able to walk you through the IRS tax resolution process from start to finish.

 #4 What Exactly is included with the Fee you have Quoted me?

 The tax resolution industry for pricing discrimination and add-on sales for work that doesn't need to be done.  Charging for tax preparation that doesn't need to be done, penalty abatements that do not exist, and "audit protection" are just some of the examples we see commonly.  Many tax resolution companies operate on a "flat fee" basis.  Which means the fee you are quoted should include everything need to successfully resolve your case.  

Make sure your fee includes all of the necessary for your resolution:

● Appeals Representation

● Full negotiation of resolution

● Preparation of missing tax returns for the past 6 years

● Removal of any existing levies or wage garnishments (if possible)

● Representation for all tax types (such as income, payroll, civil penalties), including state taxes if needed

● For business owners, make sure you are covered for Trust Fund Recovery Penalty representation. This is critical to prevent getting personally stuck with your business tax bill.

● Application for penalty abatement if you meet “reasonable cause criteria”

 If the tax firm you are speaking to bills on an hourly basis, rather than a flat fee basis, be sure to see a schedule of service fees and get a copy of their billing policy. Understand that hiring a representative to negotiate on your behalf is not a guarantee that your case will be resolved and always remember that no one can guarantee a particular outcome for your case.

Although your licensed representative should handle just about all interaction with the IRS or state taxing authorities, your participation with your representative is essential to the resolution process.  Be sure to can your licensed representative back in a timely manner and provide all paperwork that is requested.  Also be sure you select somebody that you are going to be able to work with without personality conflicts. Lastly, be sure to get everything in writing.  This includes covered services, responsibilities, and deadlines in case of a disagreement between you and your representative.

If you have a tax debt to the IRS and/or the state, contact me at 877-782-9383 or visit our website to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.

 David Krausse

Enrolled Agent

Patriot Tax Professionals

[phone]

www.patriottaxpros.com

[patriottaxprofessionals]

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Innocent Spouse Relief

My name is David Krausse, I am a licensed Enrolled Agent, admitted to practice before the IRS.  I specialize in honest, ethical tax resolution services serving Los Angeles, Ventura, and Santa Barbara Counties.  

Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows them. When filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Therefore, both spouses on a married filing jointly return are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from being jointly and severally liable.

Types of Relief

Most people generalize by referring to Innocent Spouse Relief as any type of relief from a jointly filed tax debt, however there are actually three types of relief:

1.    Innocent Spouse Relief provides you relief from additional tax you owe if your spouse or (former spouse) failed to report income, reported income improperly or claimed improper deductions or credits.

2.    Separation of Liability Relief provides for the separate allocation of additional tax owed between you and your former spouse or your current spouse you're legally separated from or not living with, when an item wasn't reported properly on a joint return. You're then responsible for the amount of tax allocated to you.

3.    Equitable Relief may apply when you don't qualify for innocent spouse relief or separation of liability relief for something not reported properly on a joint return and generally attributable to your spouse. You may also qualify for equitable relief if the amount of tax reported is correct on your joint return but the tax wasn't paid with the return.

So now that you've determined which type of relief you are seeking, how do you go about it?

 Innocent Spouse Relief

You must meet all 3 of the following conditions to qualify for innocent spouse relief:

You filed a joint return that     has an understatement of tax (deficiency) that's solely attributable to     your spouse's incorrect item. An incorrect item includes income received     by your spouse but not included on the joint return. Deductions, credits,     and property basis can also be classified as erroneous items if they're     incorrectly reported on your joint return.

You establish (provide proof)     that at the time you signed the joint return you didn't know, and had no     reason to know, that there was an understatement of tax and

Taking into account all the     facts and circumstances, it would be unfair to hold you liable for the     understatement of tax.

My spouse forged my signature to a joint return. Am I eligible for innocent spouse relief?

You may be eligible for relief, but relief does not fall under the innocent spouse rules. If you can establish your signature was forged, and there was not tacit (implied) consent, the joint election is invalid and you will only be liable for your separate tax liability.

How Long Will it Take?

Request for Innocent Spouse Relief, is filed with the IRS, it may take up to 6 months before a determination is made. During the processing time, the Service is requesting your tax information and contacting the non-requesting spouse. By law, the IRS must contact your spouse or former spouse. There are no exceptions, even for victims of spousal abuse or domestic violence.

Note:  providing proof is oftentimes the most difficult aspect of getting innocent spouse relief.  We speak to people all the time that are very emotional for numerous reasons.  We try are very empathetic to each of your situations but need to stay focused and on track... without any proof of you claim, innocent spouse relief will unlikely get approved.

 Separation of Liability Relief

 Under this type of relief, you divide (separate) the understatement of tax (plus interest and penalties) on your joint return between you and your spouse. The understatement of tax allocated to you is generally the amount of income and deductions attributable to your earnings and assets.

To qualify for separation of liability relief, you must have filed a joint return and must meet one of the following requirements at the time you request relief:

You're divorced or legally     separated from the spouse with whom you filed the joint return

You're widowed, or

You haven't been a member of     the same household as the spouse with whom you filed the joint return at     any time during the 12-month period ending on the date you request relief

If you had actual knowledge of the item that gave rise to the understatement of tax at the time you signed the joint return, you don't qualify for separation of liability relief.

  Equitable Relief  

Equitable relief is only available if you meet all of the following conditions:

You do not qualify for innocent     spouse relief or the separation of liability election.

The IRS determines that it is     unfair to hold you liable for the understatement of tax taking into     account all the facts and circumstances.

Note: Unlike innocent spouse relief or separation of liability, if you qualify for equitable relief, you can get relief from an understatement of tax or an underpayment of tax. (An underpayment of tax is an amount properly shown on the return, but not paid.)

 The following factors may be considered, but the list is not all-inclusive:

Current marital status

Reasonable belief of the     requesting spouse, at the time he or she signed the return, that the tax     was going to be paid; or in the case of an understatement, whether the     requesting spouse had knowledge or reason to know of the understatement

Current financial     hardship/inability to pay basic living expenses

Spouses' legal obligation to     pay the tax liability pursuant to a divorce decree or agreement to pay the     liability

To whom the liability is     attributable

Significant benefit received by     the requesting spouse

Mental or physical health of     the requesting spouse on the date the requesting spouse signed the return     or at the time the requesting spouse requested the relief

Compliance with income tax laws     following the taxable year or years to which the request for relief     relates

Abuse experienced during the     marriage. 

 Will the IRS deny me relief if I do not provide them with the information they request?

IRS will base their decision upon all the information available to them. If enough information is not available, it could adversely affect a request for relief.

 For more information on Innocent Spouse Relief visit:  https://www.irs.gov

 If you have a tax debt to the IRS and/or the state, contact me at 877-782-9383 or visit our website to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.

  David Krausse

Enrolled Agent

Patriot Tax Professionals

[phone]

www.patriottaxpros.com

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Stop Wage Garnishments, Fast!

Hello, my name is David Krausse, I am a licensed Enrolled Agent, admitted to practice before the IRS. I am a relentless advocate for taxpayers rights and believe that everyone deserves a second chance.  I specialize in honest, ethical tax resolution services serving Los Angeles, Ventura, and Santa Barbara Counties.  

According to the IRS website, if the IRS levies (garnishes) your wages, part of your wages will be sent to the IRS each pay period until:

You make other arrangements to pay your overdue taxes,

The amount of overdue taxes you owe is paid, or

The levy is released.

Part of your wages may be exempt from the levy and the exempt amount will be paid to you.  In reality the amount paid to you will not be enough to pay your ordinary household expenses.

So What can you do about it?  Well first off it depends on whether or not you are in compliance.  Remember, the IRS wants, and expects, everyone to be in compliance.  For IRS collection purposes, compliance can be defined as:

1.  Filed all tax returns for the previous 6 years.

2.  Paid current this year.  (Either you have adequate withholding taxes taken from your paycheck or you are current on estimated quarterly taxes for self-employed people).

For People in Compliance

The good news is that you are in compliance, the bad news is that you've had a  balance due to the IRS for quite some time now and the IRS has begun garnishing your wages. The first thing the IRS is going to request from you is a completed financial disclosure statement, IRS form 433(A).  

If the IRS determines that you have the ability to repay the debt in full they will place you on an installment agreement.  The monthly payment amount will be determined by the amount you owe, the amount the IRS, the amount of time remaining before the debt expires, and determines you can afford.

Unfortunately this also means the IRS is going to expect you to full pay the debt owed, including penalties and interest.

If you do not have the ability to pay, you are possibly a good candidate for an offer in compromise.  The offer in compromise oftentimes takes a lot of effort to prepare and will take weeks for the IRS to acknowledge receipt.  Once the IRS has receipt of you offer all collection activity will be placed on hold, including wage garnishments.

 For People Not in Compliance

The IRS is still going to request a completed 433(A) from you. Based on the income on record at the IRS and possibly current paystubs, the IRS may request an installment agreement while you are in the process of filing all necessary tax returns.  If you do not have the ability to pay the IRS may temporarily place you into non collectible status while you are preparing your missing tax returns.  While you are in non collectible status penalties and interest on your debt will continue to accrue.  

In most instances, when you file your missing tax returns and there is a balance due your case will fall out of non collectible status and into collections again.  

Strategies for Stopping Wage Garnishments Quickly

So back to the wage garnishment, the entire payroll department knows about it and among other problems you have, you are really embarrassed at work.  So how can this garnishment be stopped immediately?  

Go on a payment plan... even if you cannot afford to pay.  Sounds crazy right?  Here's why. First of all, the payment plan can be established within a couple of hours.  Once the payment plan is in place all other collection activity will stop. Including wage garnishments.  Additionally, the first payment due on the installment agreement can be pushed out as far as 59 days.  

During that 59 days you and your tax professional can evaluate your overall financial situation and determine if you are eligible for an offer in compromise.  Get the paperwork submitted to the offer in compromise department before your first payment is due and the case will be put on hold while the offer is being reviewed.  This may take somewhere between 4-6 months.

Oftentimes, we are able to stop wage garnishments and get people offer in compromises before the IRS ever gets a penny.

If you are a non-filer, speak to a tax professional about the possibility of going into non collectible status while you file your returns.  Once you have filed, immediately request an installment agreement and follow the steps in the previous paragraphs.

For more information on wage garnishments visit: https://www.irs.gov/

If you have a tax debt to the IRS and/or the state, contact me at 877-782-9383 or visit our website at www.patriottaxpros.com to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.

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The IRS and Penalty Abatements

You hear about them all the time on TV and the radio from those big nation-wide firms.  They sound easy on the advertisement and the salesperson will tell you anything you want to hear just to make a sale.  The truth that is not the way the IRS sees things and every dollar they abate is a dollar they do not collect.

 The penalties are there for a couple of reasons:

  The penalty encourages people to file and pay on time.  If there is not penalty then why should you file?  Ever?

The penalty helps compensate the government for chasing down delinquent taxpayers.  Think about…there is a cost associated with trying to collect the debt.    

 The reality is that, in most instances, people do not file and not pay because they cannot afford to pay.  What people don’t realize is that the penalty for not filing is greater than the penalty for not paying.  The penalty for not filing is 5% per month up to a maximum of 25% of the tax liability.  It always makes sense to file on time even when you have no money to pay the balance due.

Additionally the IRS will assess a penalty for not paying your balance due.  This penalty is 0.5% per month up to a total of 25% of the total ability.

What is the Interest Rate on IRS Debt?

Now it is important to remember that these penalties are in addition to interest on the debt.  Don’t get the penalties confused with the interest. The IRS charges for both… including interest on the penalties.  

 So the question I often get is, ”What is the interest rate the IRS charges?” The short answer at the time of this article is 5.09%, compounded daily.  The long answer is, “The short-term annual rate + 3.00%.”  All things considered, 5.09% isn't all that high.

 So perhaps the real question people should be asking is, “How much is going to cost to not file or pay on time?”  After one year you could calculate it as something similar to this:

 Not filing:         25%

Not Paying:     6%

Interest:           5%  (assuming the rate doesn’t change over the next 12 months)

 Total:               36%

 Ouch!  36% that’s worse that the worst credit card I’ve ever seen!

 But Wait…. There’s more…

 If you are audited and the change in your liability is greater than 20% you then be assessed an additional accuracy related penalty of 20%.  This is quickly becoming a runaway train.

 What Happens if I Don’t Owe?

 Up until now we’ve only discussed the circumstances pertaining to having a tax liability but what happens if you file late and end up not owing any money to the IRS?  Well depending how you look at it this can be good news or bad news. The good news is that if you don’t have a tax liability you will not have a penalty!  Wahhoooo!  

 The bad news is that you only have 3 years to claim a refund.  So, if you file more that 3 years late and you are expecting a refund I regret to tell you, don’t race down to Best Buy and pick out that new 4K Television, you will never see that refund.  You have forfeited it.  

 If you file late, but not more than 3 years late and you are entitled to a refund, you will receive your refund.

 Requesting that Abatement...

 So now that you have filed your returns and penalties have been assessed, how do you get those penalties abated?  Generally speaking you have 3 different ways:

  Request through audit appeals- assuming you have your facts straight and substantiation to get an abatement you can request an abatement immediately through the appeals department once your audit appeal has been heard.   

Seek a First Time Penalty Abatement- To be eligible for a FTPA you must have filed and paid on time for the three previous tax years.  Remember here, never having a problem does not mean the same     as never having a penalty assessed.    

Apply for a Reasonable Cause Penalty Abatement- You have showed due diligence as a taxpayer and were still unable to pay the debt because of circumstances beyond your control.  Think natural disaster or family medical emergency.  As a rule of thumb, an event that is short and intense is easier to explain to the IRS rather than a long, drawn out.  We have experienced that the majority of these initially get rejected at which point we will request an appeal and actually get the opportunity to speak to a live human being.  We have a much better success rate once the request reaches appeals.

 Remember, a penalty will be abates as of the date it is requested.  If you still have not paid off the balance in full the penalties will continue to accrue until the balance is paid in full.  It is best to request the abatement when the balance is almost paid off in full.

 My name is David Krausse.  I am a licensed Enrolled Agent, admitted to practice before the IRS. I am an advocate for taxpayer's rights and believe that everyone deserves a second chance.  I serve the taxpayers of Los Angeles, Ventura and Santa Barbara Counties.  If you have a tax problem and need relief from the IRS or California Franchise Tax Board, feel free to call me at [phone] or visit our company website at www.patriottaxpros.com.

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Non-Collectible Status, When (and when not) to use it...

We often get questions about non-collectible status when we discuss tax resolution options.  Many people have heard of this resolution option but are not sure when to put it to use.

First of all, non-collectible status is not a permanent resolution, but rather a temporary status(also known as hardship status).  Non-collectible status could be better defined as a holding period until a permanent resolution can get established.

Remember, the IRS wants all tax payers to 1. be in compliance and 2. have all tax debt resolved. For our purposes here, compliance simply means having all tax years filed and having paid in the current year(such as adequate withholding taxes or current on estimated quarterly payments).  The three most common ways to get permanent tax resolution are an installment agreement, offer in compromise, and bankruptcy.   We will not discuss bankruptcy here, as it is handled through bankruptcy court and not the IRS.  Everyone knows what an installment agreement is and the offer in compromise is settling your debt for less than you owe.

When?

If your tax debt is approaching the Collection Statute Expiration Date (CSED) and is about to expire, this may be an perfect time to move your IRS debt into non-collectible status. Non-collectible status does not place your CSED date on hold.

Many people are not in compliance with the IRS and cannot be placed into a permanent resolution.  If this is you, a non-collectible status will stop all collection activities from the IRS so that you can get time to get into compliance.  Use this opportunity to get into compliance and then immediately seek a permanent resolution.

Finally, if you currently are being levied from the IRS moving your debt into non-collectible status will stop a levy immediately.  

 When not to place your debt in Non-Collectible status

If your balance to the IRS is over $10,000 the IRS will place a lien on you when you move your debt to non-collectible status.  A lien will negatively effect your credit score and your ability to borrow money. Do not place your debt into non-collectible status is you expect to apply for a loan.

In certain circumstances, the IRS will suspend your passport if you are in non-collectible status.  If you owe more than $50,000 this is a likely circumstance while your debt is in non-collectible status.  Do not place your debt into non-collectible status if you plan on leaving the country in the foreseeable future.  

 If you own real property. As stated above, the IRS will place a lien on you if you owe more than $10,000 and place your debt into non-collectible status.  If you owe a large balance and keep your debt in non-collectible for a long period of time it is possible the IRS could obtain a judgment from that lien and force you to sell your home.  Realistically speaking, this will not happen if your balance is less than $50,000 or you move your debt out of non-collectible status within a couple months.

My name is David Krausse, I am a licensed Enrolled Agent, admitted to practice before the IRS.  I specialize in honest, ethical tax resolution services serving Los Angeles, Ventura, and Santa Barbara Counties.  If you have a tax debt to the IRS and/or the state, contact me at 877-782-9383 or visit our website to discuss your circumstances.  I will always give you a free, honest assessment of your most likely outcome and how your case can be resolved.

[patriottaxprofessionals]

Qualifying for an Offer In Compromise

Hello everybody!  My name is David Krausse.  I'm an Enrolled Agent, specializing in honest, ethical tax resolution services for individuals and small businesses here in Thousand Oaks, CA.  Our company serves people throughout Los Angeles, Ventura, and Santa Barbara Counties.  Today I am here to write about the Offer in Compromise program. Everybody who has ever had a debt to the IRS wants to find out about the IRS Offer In Compromise program.  By now you've heard all the commercials with some unlicensed salesman promising "pennies on the dollar" for your case.   Here in Los Angeles we are bombarded with advertising 24 hours a day.  Then you get on the phone a call only to speak to a sales person that has not formal education or training in taxation.   Now, more than ever, you need to speak to a licensed tax professional that is admitted to practice before the IRS.

The simple fact is that not everyone is eligible for an Offer in Compromise. 

Before the IRS will agree to settle your debt for less than the balance owed they want to know several things about you.  Ultimately the IRS will analyze your ability to repay the debt using several variables.  Let's take a look at each of these one by one...

Part I:  The Asset Test

The IRS is going to look at all your assets and determine if you have the ability to repay the debt in full.  How much money do you have in the bank?  Do you own a home and have equity in it?  Same thing with an automobile.  What is the total value of your household goods?  Do you own stocks, bonds, mutual funds etc.,?  Do you own a life insurance policy that has a cash surrender value?  If you have the ability to pay the IRS debt in full from the Net Equity in Assets you will not be granted an offer in compromise.

Part II:  Remaining Income Test

The IRS wants to know how much remaining (also called disposable) income you have at the end of each month after all your bills have been paid.  First, the IRS will determine your monthly gross income from all sources.  This includes wages, self employment income, Social Security Income,  dividend and interest income, disability income and more.  Remember, the IRS already has all your income data on record so don't waste your time here by trying to under disclose your income.

Your IRS allowable expenses are a little more difficult to calculate.  First of all the IRS will grant an allowance for food, clothing, household good and other miscellaneous items.  The allowed expense for this based on the number of people you claim on your income tax return.  Housing and utility allowances are also limited based on the number of people you claim on your tax return and the county you live in.  (Think for a moment that the standard cost of living is more in Beverly Hills, CA than it is in Kansas City, MO).  The IRS allows for a automobile expense of up to $497 per automobile or the actual car payment, whichever is less.  Additionally, they IRS allows for vehicle maintenance expenses, health insurance, out of pocket medical expenses.  FICA that you are currently paying every month is allowable, so is dependent care expenses, court-ordered expenses, and payments made to the state for delinquent taxes owed to the state.  Other expenses are allowed in rare cases such as union dues, costs with work uniforms and some student loans.  Keep in mind that the IRS will require that you provide proof of these expenses.  Credit card debt and unsecured loans are NOT considered allowable monthly expenses to  the IRS.Once the Income and allowable expenses have been determined, the expenses are subtracted from your income to determine your monthly remaining income.

Part III:  The Expiration Date of the Debt

All IRS debt has a 10 year expiration from the date of assessment.  This is formally known as the Collection Statute Expiration Date (CSED).   So, if you filed your 2015 taxes on April 15, 2016 the IRS has 10 years from that date to collect, April 15, 2026.  If you filed late, had an audit or something else delayed your date of assessment, the expiration date begins from that point.  If a person filed his 2015 debt on April 15, 2016 then was audited in 2017 and an additional amount due was determined on September 17, 2017 then that debt would expire on September 17, 2027.

Putting it all Together

Now that we have all the data collected we can determine how much the IRS will accept  to settle the debt using the following formula:

(Remaining Income X Number of Months Remaining to Collect) + Net Liquidated Value of Assets

Sound Confusing?  Let's go through a real life example:

Amount Owed to the IRS:  $87,000

Gross Monthly Income:  $6,500

IRS Allowable Expenses:  $6,150

Remaining Monthly Income:  $350

Months Until CSED:  54

Net Liquidated Asset Value:  $12,000IRS Offer:  ($350 X 54) + $12,000 = $30,900

The IRS will determine the reasonable collection potential on this example is $30,900 on the current balance of $87,000.

If you run this mathematical formula and you and the end result is greater than the amount you owe, the IRS will NOT approve you for an offer in Compromise.

For more information, watch this video or speak to a licensed tax professional (like myself) at 877-782-9383. Patriot Tax Professionals

Honest, Ethical Tax Resolution Services

www.patriottaxpros.com

Proudly serving Los Angeles, Ventura, and San Barbara Counties with honest, ethical tax resolution services to individuals and small businesses.