Why You're Paying Interest

I would say that one out of every four phone calls that I receive is a taxpayer requesting that we help them eliminate the penalties and interest that have piled up against them. What really gets me is that they believe the interest shouldn't be there. The IRS is not a bank. They are not loaning you money and they firmly believe that all money due to them should have been paid since day 1.

"But why do I have to pay interest on the money I owe the IRS?" When you owe someone or some institution money and you do not pay in full, interest is going to be tacked on. It's no different than a credit card. If you make that minimum payment, there's going to be interest. When it comes to backtaxes though, you will have interest and penalties.

Concerning your backtaxes, the interest is compounded daily and is charged on any unpaid tax from the due date of the return until the date of payment. There's no getting around it. The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months. If you would like to know the current interest rates, you can visit News Releases and Fact Sheets and find the most recent Internal Revenue press release entitled Quarterly Interest Rates.

You cannot abate the interest, but there are effective programs if you choose to abate the penalties and there is reasonable cause. When taking this route, it would be best to seek out professional help. A tax resolution firm will have a staff of experienced tax consultants who know how to negotiate penalty abatements with taxing authorities.

Cheers!
Taxus

As always, you can find an array of articles by perusing this site or by checking out my coworkers' individual sites:

IRS MIND
Tax Negotiation
Tax-Thoughts
Little Miss Tax Lass
Tax Settlement

And if you need the assistance of a tax resolution firm, seek out the best: Effectur, Inc.

The IRS Repossessed My Car...

I was busy putting my trash cans by the road since tomorrow was garbage day. Then I hear the slurred voice of my neighbor and before I know it, I am trapped talking to him. It was already 2pm so he was well lit by this point. "Hey guess what? I am finally getting my car back. I settled up with the IRS and they are going to give it back to me. I would of had it sooner, but it takes forever to get a hearing with them."

Now, to know my neighbor would mean that you know he is an alcoholic and a habitual liar. First off, the Internal Revenue Service wouldn't have repossessed his car...the bank or lender would have. The IRS could have placed a federal tax lien against my neighbor and that would have prevented him from buying or selling a car, but they certainly did not repossess it. It's just not their style. Second, to get that car back once repossessed, my neighbor would have had to fork over some serious dough and that was not possible for a man who wasn't working. No, once again my inebriated friend is lying to my face. I know this because as I said before, the IRS isn't going to repossess the car. I also know this because the owner of the house my neighbor was renting told me so. You see, the car is the house owner's, and he gave it to his renter to get around town in. He took the car because he noticed my neighbor was behind on his rent, wasn't keeping up the house, and remained in an intoxicated state. So the real reason my neighbor was getting back his "repossessed" car was because apparently the owner had a change of heart. Again, something uncharacteristic of the IRS.

Cheers!
- Taxus

As always, you can find an array of articles by perusing this site or by checking out my coworkers' individual sites:

IRS MIND
Tax Negotiation
Tax Thoughts
Little Miss Tax Lass
Tax Settlement

And if you need the assistance of a tax resolution firm, seek out the best: Effectur, Inc.

The Need for Compliance

When dealing with the IRS and more specifically, a tax liability, it is extremely important to be in compliance with the IRS. In order to be in full compliance with the IRS, all taxes must be paid up to date and all returns required to file must be filed to date. Obviously, full compliance should be a goal for every taxpayer.

It’s a requirement to be moving towards compliance with the IRS when submitting an Offer in Compromise, Installment Agreement, or Currently Non-Collectible (Status 53). The past tax debt does not necessarily need to be paid off at that time, but the taxpayer must have all estimated tax payments paid to date and all returns filed. If you are going to submit an OIC or IA for a business, you are going to need to have paid all taxes for the past 2 quarters and filed all returns. The IRS will not even begin to have a conversation concerning a tax settlement or installment agreement until all returns have been filed.

I suggest consulting with a tax professional before your tax liability gets out of hand. A tax resolution firm will be able to help you get back into compliance with the IRS and bring you some peace of mind.

Cheers!
Taxus

Tax Negotiation vs. Tax Argument

Contrary to what some may believe, there is a difference between negotiating with the IRS and arguing with the IRS. It's common sense that when you negotiate, you are trying to resolve an issue by utilizing a "win-win" approach. This is advantageous when attempting to settle a debt with the IRS. But all too often, an angry and misinformed taxpayer will try to argue their way to some type of resolution...utilizing the "lose-lose approach".....or maybe the "lose-now we are going to put a levy in place and take your paycheck" approach. Whatever you want to call it, it is not the path to be taken. When it comes to tax negotiation, remember what your mother probably told you: "You get more bees with honey than you do with vinegar."

Here is one of many common tax arguments: “Filing a tax return is ‘voluntary.’”

The word "voluntary," as used by the IRS , refers to the fact that the U.S. tax system is a voluntary compliance system. This means that the taxpayers are able to determine the correct amount of tax pursuant to law and complete the appropriate returns, rather than have the government do this for them. This system of self-reporting does not make the filing of tax returns or the payment of tax optional. For those who do not comply with this system and fail to self-report their tax liability, the tax law authorizes action to be taken.

Trust me, the IRS has heard every story in the book and have burned each chapter 9 times out of 10. 2 certainties in life: death and taxes. Stop trying to prove otherwise. If you owe a tax debt, try to resolve the issue rather than arguing it and making life worse for yourself. If you truly feel that an injustice has been made against you and the IRS is to blame, it would be in your best interest to seek out the assistance of a tax attorney or tax resolution firm.

Cheers!

- Taxus

Magic Tax Negotiation: Make My Lien Disappear!

Presto!

What do you mean the lien is still there?

Damn.

That's right. Tax liens are awful. They attack from all sides and in the end, leave you with a terrible credit score, hinder your ability to buy/sell assets, and broadcast your tax debt to the general public. So if "presto" didn't do the trick, what magic word will? None...unless that word is followed by full payment of the tax liability. Tax liens will stick around until the amount of tax is paid or abated in full.

Obviously most of those that find a lien placed against them cannot pay their tax debt in full. It's just not a practical option. So another option to release the lien would be thru an abatement program. This process is possible via: offer in compromise (if applicable), a penalty abatement request (if this is all the debt you owe), expiration of the collection statute of limitations, and/or filing amended returns, if warranted.
Each process above has the potential to release a lien but are not simple maneuvers. When serious about releasing a tax lien, it would be in a taxpayer's best interest to consult a professional tax resolution firm. Trust me, you will have much more luck by using the help of someone familiar with tax negotiation as opposed to relying on some type of magic solution.

Cheers!

-Taxus

TAX NEGOTIATION: Mr. Fix-It VS. The IRS

I have always considered myself a do-it-yourself type person. I just don’t agree with paying someone to do something that I can do myself. I recently purchased a home in the last year, and when something goes wrong, I will try to fix it myself. That’s just the way I am. But recently, I have come to a very significant realization: I am not able to fix everything. More importantly, if I can do it, I just might not do it well. I have realized the hard way that there are some situations better left to a professional.

A tax problem is another good example. Any taxpayer may choose to represent themselves before the IRS, and it is possible to facilitate tax negotiation without professional assistance. Yes it’s possible…BUT it can be difficult for a taxpayer to represent himself or herself effectively due to the lack of experience. This is similar to representing yourself in a court of law. Oh, it’s possible, but probably not the best route to take. You see, it is an IRS agent’s job to deal with taxpayers, but not a taxpayer’s job to deal wit the IRS. If the average taxpayer only knows to that they have to pay taxes and something bad happens if they don’t, I would not consider that existing knowledge to be the secret weapon in their arsenal. I am afraid they are going to get to the line and it’s game-set-match. IRS.

If you find yourself in a situation where you believe you might be over your head, you probably are. That is why, especially in high-liability cases (cases involving more than $10,000), I would strongly advise that a taxpayer have good representation by a professional who is enrolled to practice before the IRS. Don’t try to be Mr. Fix-It or Mrs. Fix-it for that matter. As stated before, you can do it, but you might not do it well. Think about that before you take on the IRS.

Installment Agreement: Partial Payment- by Tippy Taxes

There is another form of installment agreement that the IRS recognizes and that’s the Partial Payment Installment Agreement. This is were the taxpayer has submitted a full financial statement and can only pay a portion of their debt over the course of their statute; (i.e. Taxpayers debt is $100,000.00; the monthly payment the taxpayer can pay toward that debt is $500.00. $500.00 x 12 months is $6000.00 x 10 years equals $60,000.00), hence, partial payment installment agreement. This became an option January 17, 2005. Prior to that date the taxpayer was left with only the option to full pay.For additional articles "Installment Agreement" "Streamline Installment Agreement" and So you owe the IRS - What next?.

-Shared by Tippy Taxes

Installment Agreement- by Tippy Taxes

There are several options a taxpayer has when he/she goes to settle IRS debt. One of those options is to establish an installment agreement. An installment agreement is a monthly payment plan. There are several thresholds the taxpayer needs to consider when establishing an installment agreement with the IRS, they are as follows;$25,000 or lessOver $25,000 but less than $100,000Over $100,000The higher the debt the more difficult it becomes to establish an installment agreement and the more documentation that will be needed to resolve the situation. When the debt is less than $25,000 the taxpayer has 2 options one is to establish a streamline installment agreement. This is where the taxpayer’s debt is divided into 60 equal monthly payment installments. If the taxpayer is unable to pay an installment agreement of this magnitude one could submit a full financial statement to the IRS to see if they qualify for a lesser installment agreement. The IRS has established National Standards for this payment plan.Debt that exceeds $25,000 always requires a full financial statement. Debt that exceeds the $100,000 threshold is handled by a specialized unit known as the “Large Dollar Unit”.

Again, each step along the way requires more financial information from the taxpayer and becomes more and more difficult to resolve. The IRS requires your financial information to be submitted using the form 433A for Individuals and 433B for Businesses. There are companies out there that offer free tax consultations. It never hurts to seek the advise of experts when it comes to your financial future. The IRS Problem Solver is also a good source of information when it comes to Installment Agreements, check them out.

-Shared by Tippy Taxes