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Tax Burdens! Ugh!

Posted Monday, July 6, 2015 by Stuart Margolis, CPA, MT Margolis Partners LLC.

You’ve seen the commercials on TV and heard them on the radio. “Call now for help paying back the IRS. You may be entitled to tax forgiveness, etc.” So what’s the story? Is that possible?

The IRS has a program called the IRS Fresh Start Program to make it easier for taxpayers to pay back taxes and avoid liens. This overview was developed based on information found on the program website, www.IRS.gov.*

Situations of Compromise

The IRS now offers more flexibility when analyzing a taxpayer’s ability to pay debt which makes compromised available to a wider group of taxpayers. The Offer in Compromise (OIC) is an agreement that allows tax payers to settle their debts for less than the full amount owed.

Generally, the IRS will accept an offer if it represents the most the agency can expect to collect with a reasonable amount of time. The IRS will not accept an offer if it believes the taxpayer can pay off the debt in a lump sum or through a payment agreement. There is an Offer in Compromise Pre-Qualifier tool on IRS.gov to help taxpayers find out if they might qualify for an OIC. Factors relating to income and assets are used to make the decision at the IRS.

Depending on circumstances, compromises can be reached for forgiveness of penalties as long as the tax debt is paid. To get started, download the IRS booklet on Offers in Compromise, Form 656-B.

Pay Backs using Installment Agreements

There are Direct Debit Programs established by the IRS to pay back tax debt owed. So how do you establish a Direct Debit Program? Under the Fresh Start Program, access to installment agreements has been streamlined. Taxpayers who owe up to $50,000 to the IRS can pay through monthly direct debit programs for periods up to six years (72 months). The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. Manually, the form to obtain is Form 9465, Installment Agreement.

Taxpayers in need of an installment agreement for IRS debts over $50,000 or with and installment period longer than 6 years will need to provide a financial statement with their application. In addition, the IRS might require one of these two forms: Collection Information Statement Form 433-A or Form 433-F.

Tax Lien Application for Withdrawal

Generally under the Fresh Start program, the amount taxpayers can owe before the IRS will file a Notice of Federal Tax Lien is $10,000 in tax obligation (of course, with some exceptions where the IRS may still file a lien notice on amounts less than $10,000).A taxpayer who received an IRS tax lien can now file an Application for Withdrawal of the lien by using Form 12277, Application for Withdrawal. In order to withdrawal the taxpayer must meet certain criteria and must have paid off their tax debt. Some taxpayers can qualify to have their tax liens withdrawn even if the taxes have not been paid if they have established a Direct Debit installment agreement mentioned above. Again, Form 12277 needs to be completed to make Application for Withdrawal of a Lien once the Direct Debit Plan is in place.

If a taxpayer’s request for lien withdrawal is granted and the taxpayer defaults on the Direct Debit Installment Agreement, the IRS will file a new Notice of Federal Tax Lien and resume action for collection.

In summary, the Fresh Start program now makes it easier for taxpayers to settle their tax debts for less through an Offer in Compromise, pay the tax in full using a Direct Debit Programs installment agreement, and remove Federal Tax Liens.

Contact Margolis Partners or your local CPA if you need help.

*IRS Fresh Start Program go to www.IRS.gov/uac/Newsrom/IRS-Fresh-Start-Program-Helps-Taxpayers-Who-Owe-the-IRS.

About Margolis Partners

Margolis Partners have long been recognized as the financial experts for privately-held businesses with a specialty in print and packaging, assisting companies with strategic and financial management, valuation, mergers/acquisitions, accounting, audit and tax services. The firm is noted for its expertise in enabling companies to optimize profits. Proudly, it is the purveyor of the industry’s Value-Added Principles of Management, and compiles the annual Printing Industries of America Ratios, the printing industry’s premier financial benchmarking tool. www.MargolisPartners.com. P 610.667.4310.