Articles Posted in Tax Payment Plans

Under the newly enacted legislation, the Fixing America’s Surface Transportation Act,  a provision was included that allows the IRS to outsource the collection of tax debts under some circumstances to private debt collection firms. Anyone who has dealt with a private debt collection firm can understand why I think this is a bad idea, manly because such firms sole goal is to collect money, and other circumstances (loss of job, age, sickness, etc.) could be at play and discretion is required. Even the IRS’s own taxpayer advocate was against the idea of using private collection companies. You can read her letter here.

The use of private collection companies will follow a procedure of where they will typically contact the taxpayer by mail and try to establish a payment plan. From my experience, most people being pressured with a collection company will agree to a much higher monthly payment than what they can afford. These plans will then default due to missed payments and then its back to the collection firm to handle once again. Hopefully, the IRS limits the use of this collection tactic so as to not harm the public from over zealous tax collectors, and collects a fair amount through thoughtful collection means.

Starting January 1, 2016, the Internal Revenue Service will be given the power under new legislation to deny, rescind, or limit a passport of anyone who owes the IRS more than $50,000. This threshold amount includes both taxes, interest and penalties. From a practical perspective, this threshold dollar amount is not  difficult to amass for the average self-employed taxpayer who can have tax rates close to 50% once social security taxes are factored in, or individuals with significant income. From my perspective, if the law was limited to criminal matters, it would make more sense.

The good news, is that the IRS will not rescind or hinder the ability of an individual to have a passport where 1) that individual has entered into an installment agreement with the IRS to pay the back taxes, 2) for humanitarian reasons, or 3) if the taxpayer is contesting the tax liability in Court or an administrative proceeding.  This new legislation will be under section 7345 of the tax code, called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”

While different from New York States revocation of a taxpayers drivers license if they owe NYS taxes, it is very troubling nonetheless in that it restricts the ability to travel (or in NY’s case simply drive) which can directly impact a persons ability to generate income to pay for their tax obligation. I doubt this legislation will cause delinquent tax collections to rise dramatically, and may have the unfortunate impact of hurting taxpayers who are already hurting economically.

Denial, avoidance and procrastination are all activities in which an individual may engage when faced with something that he or she would rather not deal with or do. However, such coping tactics are almost always sure to backfire and make an unpleasant or difficult situation even worse. This is especially true in cases where an individual receives communication from the Internal Revenue Service.

Anyone who opens their mailbox and sees a letter from the IRS is likely to panic. Whether an individual chooses to throw the sealed envelope away or simply disregard its message, ignoring the IRS can end up costing an individual hundreds to thousands of dollars in fines and, in some cases, a whole lot more.

Annually, the IRS claims to send “millions of notices and letters to taxpayers for a variety of reasons,” some of which may be minor or even positive in nature. Even in cases where an individual knows that he or she failed to file or pay taxes or expects bad news, it’s important toopen an IRS letter or notice as soon as possible and to contact the agency with any questions. This is especially true in cases where an individual believes that the IRS erred and an individual plans to dispute the issue in question.

Did you let Tax Day come and go without filing a return or paying what you owe to the IRS? If so, you are certainly not alone, but that doesn’t make the consequences that you face any less serious.

Chances are that you didn’t file a tax return because you can’t afford to pay the money that you owe. Maybe you don’t even know how much you will owe, you just know that you can’t afford to pay the IRS anything.

Or maybe this isn’t the first time you have avoided filing a tax return, and you got away with it in the past so you figured you would just try to avoid paying again this year.

Tax day, April 15, is just a few days away and if you are like many New Yorkers, you may be hoping to win the lottery before then in order to be able to pay your tax bill on time.

Believe it or not, you may not need a winning lottery ticket in order to make good with the IRS this tax season.

A tax payment plan, or an IRS Installment Agreement, is a great way for people who cannot afford to pay their tax debt to avoid getting into trouble — and more debt — with the IRS. Here is how it works:

If you know you won’t be able to afford to pay the income taxes you owe in full this year, you might be starting to panic as tax season approaches.

As we all know, failing to pay taxes can result in significant fines as well as criminal charges, so it’s smart to get a plan in place now. The good news is that there are options available for people in your situation.

These options from the IRS help you to avoid the interest and penalties that are normally associated with failing to pay the taxes you owe. They include:

If you owe the IRS back taxes, chances are that you are feeling scared and powerless. But the good news is that even if you are partially in the wrong, you still have rights thanks to The IRS Restructuring and Reform Bill of 1998 and the more recently adopted Taxpayer Bill of Rights.

Under these policies, the IRS has to fully communicate with taxpayers and afford them “due process” rights before pulling one of the many levers it has to make a taxpayer’s life miserable. Understanding your rights can make all of the difference when dealing with the IRS and back taxes.

Your right to be informed. The IRS has a duty to explain exactly what you need to do in order to comply with the tax laws. You also have a right to have all decisions made about your tax account explained to you in terms that you understand. However, you can’t just ignore the IRS’s attempts to inform you.

At first glance, it might seem that the inability to pay taxes is something only people of limited means might encounter; having too little withheld in taxes on one’s paycheck could lead to a big tax bill in the spring, and someone with a limited income stream might have a tough time coming up with a large sum of money to deliver to the Internal Revenue Service or state taxation authorities.

However, in reality, people of all income levels might be susceptible to having unmanageable amounts of tax debt. One example of this is actor Stephen Baldwin, of the famous Baldwin acting brothers. Stephen Baldwin pleaded guilty earlier this year to failing to pay New York state taxes for three years; between the amount he owed, plus interest and penalties, the state was due a staggering $400,000 from Baldwin.

However, that amount has now decreased by roughly half. Baldwin’s attorney announced recently that $100,000 would go toward the tax debt; this is in addition to another $100,000 that Baldwin put toward the debt earlier this year. When he agreed to plead guilty to not paying taxes earlier this year, the actor agreed that the full amount would be repaid by March 2014. If he does that, he won’t have a criminal record. Should he not live up to the bargain, however, he could be on the hook for five years’ probation.

When New York readers think of the various reasons why a person might need a tax attorney, an audit from Internal Revenue Service might top the list. However, effective tax planning requires more than defensive approach. A tax attorney might agree that a proactive approach to the issue of tax liability might yield better results.

One area that could benefit from advance planning is the issue of inheritances. Readers likely know that an inheritance typical triggers tax liability for the beneficiaries. Yet a recent article highlights a lesser-known problem: As many as ten percent of estates might have unresolved — and ongoing — tax liabilities or issues.

What that means is that a beneficiary may have to step in the shoes of the former property owner and deal directly with the IRS. The beneficiary’s receipt of assets or funds from the estate might be delayed until the state or federal tax authority has released any liens.

Taxpayers facing potential collection action from the Internal Revenue Service might have good reason for alarm. Garnishments and tax liens are aggressive collection methods that can be hard to remove, once attached. Even in contexts like foreclosure or bankruptcy, tax liens may receive priority or remain with property, despite a transfer in ownership.

When facing a disputed tax liability, many taxpayers might take comfort in a consultation with a tax attorney. Although the IRS has administrative remedies for resolving tax controversies, an attorney might provide extra peace of mind by reviewing proposals such as installment agreements, partial pay installments, or offers in compromise.

For example, tax installment agreements often require some negotiation with IRS officials. Partial pay agreements, which may resolve a tax liability for a reduced amount, typically must be repaid within a period of two years. Yet arriving at the amount of monthly payments often requires negotiation. Such variables might include specified maximum allowances for rent and living expenses, child support or parenting obligations, vacation budgets, and transportation needs.

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