New Strategies for Tax Relief
The Complete Tax Relief Guide
A Step-by-Step Guide to Resolve Your IRS Tax Debt
From the Professionals at US Tax Shield
Smashwords ebook edition published by Fideli Publishing Inc.
© Copyright 2011, The Professionals at US Tax Shield
No part of this eBook may be reproduced or shared by any electronic or mechanical means, including but not limited to printing, file sharing, and email, without prior written permission from Fideli Publishing.
SmashwordsLicense Notes
This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each person you share it with. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then you should return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.
ISBN: 978-1-60414-474-1
This information is being provided to the taxpayer as required by the Internal Revenue Service and follows the guidelines for best practices for tax advisors per Circular 230 10.33(a)(1-4), and 10.35(b)(2), (8), and (10). As by definition, this written statement may be considered to be a “covered opinion” as defined by the Internal Revenue Service. This statement(s), along with subsequent correspondences, is not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding lawful penalties that may be imposed on the taxpayer by the Internal Revenue Service. The principal purpose of any stated tax advice included here has as its purpose to claim tax benefits in a manner consistent with the statutes and Congressional intent. US Tax Shield is a tax resolution firm offering tax-related services to individuals/entities facing tax issues. All advice is to be construed as tax advice only — we do not provide attest services or services unrelated to tax. US Tax Shield is a DBA name of InterCard Payments, Inc.
Contents
Tax Problems? You’ve Come to the Right Place
— IRS Letters & Notices
— Taxpayer Bill of Rights
Step #1 — Get out of Collections
— The IRS Collection Process
— Federal Tax Liens & Levies
Step #2 — Become IRS Compliant
— File Missing Returns
— Move Forward Toward Resolution
Step #3 —We Can Work it Out — Offer in Compromise
— Criteria to Qualify for OIC
— How to File and Succeed with an OIC
— Remove Some or All of Your IRS Penalties & Interest
— Reasons Leading to Successful Abatement
Step #5 — Installment Agreements
— Do You Qualify for an Installment Agreement?
— Types of Installment Agreements
Step #6 — Currently Not Collectible/Status 53
— Will Your Circumstances Qualify You for Status 53?
— How to Apply for Currently Not Collectible
Step #7 — Are You an Innocent Spouse?
— Three Types of Relief
— Injured Spouse Claim
— Unpaid Trust Fund Taxes
— How to Beat a Trust Fund Recovery Penalty
— Where to Start
Tax Problems? You’ve Come to the Right Place
The IRS. Amazing how three simple letters can have the power to frighten, intimidate, frustrate and anger. Combine “IRS” with the three letters “IOU” and you have a recipe for potential financial disaster, personal suffering, public humiliation, and possible bankruptcy. But we’re not here to scare you with horror stories; far from it — we’re here to give you hope. Because the truth is, no matter how big the tax problems you may face, there is a way to solve them. We know, because over the years we’ve helped countless people just like you do exactly that!
You might find yourself in a situation like Jeff and Monica. Decent, honest people, they’d worked hard throughout their eight-year marriage to buy a modest but nice home, drive late model vehicles, even take an occasional family vacation with their two small kids. Sometimes things got tight, but they always managed to make ends meet and even set aside some money for an emergency. Everything was going just fine — until the day that Jeff’s supervisor called him into his office. One look at his boss’s face told Jeff that something was seriously wrong.
“First off, let me say that you’ve been one of our best employees,” the boss said, clearing his throat, nervously playing with the pen on his desk. “Unfortunately, I don’t have to tell you how slow things have been around here.”
Jeff tried to tell himself this was just another talk about taking a pay cut. His illusion didn’t last long.
“I’m going to have to let you go,” said his supervisor, still barely able to look him in the eye.
Jeff couldn’t believe it. He’d always been a model employee, a real team player, the guy others often looked to for leadership. But facts were facts.
At first, he and Monica were optimistic that he’d find work quickly. But days turned into weeks, which turned into months, and the best that Jeff could do was find sporadic work helping out with his brother’s painting business. When April 15th rolled around, Jeff and Monica were staggered to discover that they owed the IRS more than $10,000 in taxes. They thought about using a credit card, but all their plastic was maxed out. They filed for an extension, hoping things would improve. They didn’t. As the IRS notices kept piling up, Jeff and Monica simply stuffed them into a file folder, part of them hoping they would just magically disappear. That didn’t work either. By the time they opened the letter informing them they were officially in collection, Jeff and Monica owed not only their balance, but a late payment penalty of one percent for each month plus annual interest charges on the balance due. Every day that went by their hole literally grew deeper and deeper, with no apparent way out.
If you think this is a scenario that could happen to anyone, you’re right. If you’re like Jeff and Monica, you may already face:
— Collection
— IRS garnishment of your paycheck
— IRS levying of your bank accounts
— Unfiled tax years
— Unpaid tax years
— A revenue officer assigned to you
— Owe $25,000 or more
— A tax lien on your credit or house
Like Jeff and Monica, you may feel there is no hope. There is. Many people feel more comfortable working with a tax professional who is experienced in dealing with the IRS and satisfactorily settling the issue on behalf of his or her clients. Whether or not you decide to work with a professional firm or want to tackle the problem yourself, don’t let yourself be overcome with anger or despair. Based on our years of experience helping countless people just like Jeff and Monica, we’ll take you step-by-step through the process of settling your tax debt and getting your life back on track.
Definition of a Bad Day: You’ve Got Mail … and it’s from the IRS.
One day you go to the mailbox and open it to find the letter that no one wants to get: addressed to you from the IRS. For most people, this is their first awareness that they’ve got a tax problem. Perhaps you’ve already received one — or are worried that you’re about to. Remember — getting one of these letters is serious, but it is not the end of the world.
Every year the IRS sends millions of letters and notices to taxpayers but that doesn’t mean you need to press the panic button. Here are some things you need to know about IRS notices just in case one happens to rear its ugly head in your mailbox:
— Don’t panic. (Easy for us to say!) But we say it because it’s true; many IRS letters can be dealt with simply and painlessly.
— There are a lot of reasons that the IRS sends out notices to people. Your letter could be about anything from an IRS request of payment of taxes, to notifying you of a change to your account or even to simply request additional information. IRS letters generally address a very specific issue about your account or tax return, and will provide specific instructions about how to respond.
— If the letter is notifying you that the IRS believes you owe them money, take a careful look at what they’ve sent and compare it with the information on your return.
— If you agree that you owe (and have the ability to pay), write them a check and consider the matter closed. However, if you disagree with their assessment of the situation, it is important that you respond right away. Write them a letter explaining why you disagree, and be sure to include any documents and information that support your point of view. Mail it to the IRS address shown in the upper left-hand corner of the notice you received.
— Remember that most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, there will also be a phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the IRS letter handy when you call so you are armed with information. Oh, and be ready to wait in a long “phone queue.” This is the government we’re dealing with, after all.
— Be sure to keep copies of IRS correspondence in a safe place where you can find them if necessary.
So how does the IRS decide who they go after and who they don’t? An excellent question. The truth is that the IRS accepts most returns without comment or question. We’re guessing, by virtue of the fact that you’re reading this book, that you don’t fall within this group. How did they pick you out of the crowd? Initially, they use computers to find returns that have what they consider to be inconsistencies or errors. They also might use outside information such as public records or facts obtained from other people that indicate your return may not be what the IRS considers to be correct. The specific methods used by the IRS are spelled out in IRS Publication 556, “Examination of Returns, Appeal Rights, and Claims for Refund.” We’ve included a sample at the end of this book for you to take a look at.
Usually, the IRS makes their first contact through the mail. So what are these letters and what do they require you to do? Let’s take a look at some of the common letters that people receive, what they mean, and how to respond to them.
IRS Letter 525 is known as the “General 30 Day Letter.” This letter comes with a report that gives you a computation of the adjustments the IRS is proposing to your tax return. It outlines several courses of action you can take if you don’t agree with the proposed adjustments. We’ll get into these options in detail in just a bit. The letter will explain that if you agree with their proposed adjustment (in other words, you don’t want to fight it and you’re willing and able to pay), you just sign and return the enclosed agreement form. If you don’t think you owe the money, you can submit a request for appeal/protest. This protest must be filed within 30 days from the date on the letter (not the day you received it) in order to appeal the proposed payment.
You also may have received IRS Letter 531, which is a “Notice of Deficiency.” In this letter, the IRS will inform you that they have determined you owe additional tax for a certain number of specified years. The letter will explain how you can dispute the amount in the notice of deficiency. (Again, we’ll get into this in detail in just a bit.) Basically, if you dispute the adjustments, you must file a petition with the Tax Court within 90 days from the notice date. We can help you with this process.
IRS Letter 692 is a “Request for Consideration of Additional Findings.” Accompanying this letter will be a report giving you the IRS’s calculation of their proposed adjustments to your tax return. The letter explains that if you don’t agree, you can submit a request for appeal and/or protest. You must file this protest within 15 days from the date on the letter.
If you are a business owner, you may have received IRS Letter 1153, the “Trust Funds Recovery Penalty Letter.” In this letter, the IRS will explain that their efforts to collect federal employment or excise taxes due from your business are insufficient to constitute full payment of your liability. Because of this, the letter will inform you, the IRS will propose to assess a penalty against you. As with the other letters, if you agree that their proposed payment amount is fair (and you have the ability to pay), then you simply sign the enclosed form and move on with your life. However, if you don’t agree, you can file a protest within 60 days from the date of the letter with the IRS Office of Appeals.
The IRS has many other letters notifying you of potential problems such as non-filing of taxes, innocent spouse relief, and other specifics. We will cover these in great detail shortly.
While IRS letters telling you there is a problem are troubling enough, even more stress-inducing are IRS Letters of Collection. By the time you receive one of these notices, the IRS has decided that you owe them money and are telling you how they intend to collect it. Talk about a letter nobody wants to get! Remember, although these letters are indicative of serious issues that you must address, it is not the end of the world. We’ll tell you how you can straighten everything out. First, let’s take a look at the different types of collection letters the IRS sends out.
IRS Collection letters come in different forms. IRS Letter 11 is your “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” This letter spells out your unpaid taxes and tells you that the IRS intends to levy (seize your property) to collect the amount they claim you owe. If you disagree with their findings, you will need to file a Form 12153, also known as a “Request for A Collection Due Process Hearing,” and send it to the IRS within 30 days from the date of the letter. Check out the sample Form 12153 on the next page to see what you would be dealing with.
IRS Letter 1058, a “Final Notice Reply Within 30 Days,” is similar to Letter 11. It informs you of unpaid taxes and says the IRS plans to levy to collect the amount owed. Also similar is IRS Letter 1085, the “30-Day Letter Proposed 6020(b) Assessment,” which also alerts you to unpaid taxes and states that the IRS intends to levy to collect the amount owed. As is the case with Letter 11, if you disagree and wish to appeal either Letter 1058 or Letter 1085, you must file a Form 12153 within 30 days from the date of the letter in order to appeal the action with the IRS Office of Appeals.
Fun, huh? But we’re not done yet. The IRS has a few more numbers up its sleeve.
IRS Letter 3172, the “Notice of Federal Tax Lien Filing and Your Rights to a Hearing under IRC 6320,” informs you that the nice folks at the IRS have filed a notice of tax lien for your unpaid taxes. As with the other letters of collection, if you disagree with the IRS’s version of your situation, you must file a Form 12153 within 30 days.
(Sample:
actual form is 4 pages
http://www.irs.gov/pub/irs-pdf/f12153.pdf)
If you’ve received any of these IRS notices, don’t ignore them. You have a problem that you need to address and pretending it will just go away will only make things worse. But that doesn’t mean you have to give in. You have choices. You can fight back. Read on to find out how.
The Taxpayer Bill of Rights
In dealing with the IRS, it is very important to remember that you have rights. These aren’t just vague concepts — it’s the law. Thanks to the enactment of the “Omnibus Taxpayer Bill of Rights” in 1988 and follow-up legislation in 1996, you now have legal leverage in dealing with the IRS. In providing this legislation, the U.S. Congress made a bold step “to inject reason and protection for individual rights into the tax collection process.”
This Bill of Rights mandates that the IRS must explain the audit and collection process to you before conducting any audit or collection interview. They also must describe the basis for any and all taxes, interest, or penalties they might seek on any notice they send to you. Before the IRS can place a lien on or seize your property, it must give you thirty days’ notice. Another important provision is that the Bill of Rights authorizes the IRS to make installment agreements with you if paying a lump sum would result in provable financial hardship. We will get into this in much greater detail in a bit.
The important thing to bear in mind is that you have rights and the IRS is a human institution with all the imperfections that implies. For many years the government made the default presumption that the IRS’s determination of tax liability was always correct. In this mode of thinking, it was always the taxpayers’ responsibility to present evidence if they disagreed with an IRS determination. Now, the tables have turned (at least a little). The IRS has the burden of proof if all of the following statements about you are true:
— You are able to present credible evidence which a court would find sufficient upon which to base a decision if no contrary evidence were submitted.
— You have complied with Internal Revenue Code and Treasury Regulations.
— You have kept all records required by the IRS.
— You have cooperated with “reasonable” IRS requests.
— If the dispute regards a partnership, corporation, or trust, the net worth of the entity is $7 million or less.
And there’s more. Now you enjoy the protections of attorney-client privilege between you and any federally authorized tax practitioner regarding your taxes, following the same conditions that apply to attorney-client communication. However, this applies only to non-criminal tax matters.
Furthermore, the IRS is now encouraged to adopt liberal acceptance policies when considering Offers in Compromise and installment agreements with you. (We’ll get into this in much more detail in a little while.) Does this create a level playing field between you and the IRS? Hardly. But it does mean you have leverage in dealing with them, and they are required to work with you if you provide the proper documentation and evidence to support your case. The bottom line: don’t be intimidated by the IRS. While they are still a formidable agency, by following the steps in this book, you can work your way down the path to tax relief!