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4 IRS Debt Forgiveness Options to Consider

April 26th

With the IRS’s recent expansion of their taxpayer forgiveness program, more and more middle-class Americans are able to resolve their IRS debt issues. Whether they approach the situation on their own or work with a tax debt lawyer, Americans are able to work out their debts because of the tax forgiveness program. This is a major benefit for Americans who are struggling to make multiple bill payments in the midst of a rough economy.

Forgiveness of IRS Debt

Using a tax debt lawyer can help you navigate through all the different options of IRS debt forgiveness. However, should you decide to pursue this on your own, it’s important to know all the different options available. Each IRS debt forgiveness program is tied to a specific situation that taxpayers might face.

1. Uncollectible Status. If you are unemployed or underemployed and just don’t have the means to pay your IRS debt, then file for this status. This will momentarily halt payments until you are able to begin repaying the IRS debt. This is only a temporary solution.
2. Offer in Compromise. With this option, you can settle your IRS debt for less than you actually owe! This process has saved taxpayers over a billion dollars since it was first implemented. Working with a tax debt lawyer exponentially increases the chance of this plan working.
3. Chapter 13 bankruptcy. Did you know that income taxes are dischargeable through bankruptcy? Through Chapter 13, your IRS debt is reorganized so that you can make manageable payments. However, because the Offer in Compromise has become wildly popular, the Chapter 13 option isn’t as used as it once was.
4. Chapter 7 bankruptcy. Certain taxes from your IRS debt can be discharged completely. A tax debt lawyer can help you understand which taxes are eligible for a Chapter 7 bankruptcy and which ones aren’t. This is typically the very last resort for solving tax debt problems.

 

3 Common Tax Debt Mistakes to Avoid

April 17th

For most people, the stress is finally over once you file your federal income taxes. For others, however, the problems are just beginning once they realize that their tax obligation is more than the expendable cash in their bank account. This common scenario often leads to long-term tax debt with the IRS, but there are many people who try to pay down their tax debt immediately. Instead of hiring a tax debt lawyer to help solve their problems, they make financial mistakes that have lasting consequences.

Be Smart When Paying Back Tax Debt

While dealing with the IRS is a serious issue, it’s important to be smart about it and ensure your actions don’t hurt you financially in the long run. Many people who make the rush to pay off tax debt often do so at their own expense. Common mistakes include:

Raiding your retirement savings. Remember, retirement accounts are almost always tax deferred. When you pull money out early, not only do you pay a large penalty fee, but you also have to consider that the funds withdrawn are taxable to you. Regardless, it’s a poor move to take money away from your retirement savings.
Skipping payments. When people fall into tax debt, one of the things they want to do to pay back the debt quickly is skip payments. Whether they skip a payment for next year’s taxes or skip a payment on their mortgage, they make a promise to themselves that they’ll only skip this once and double-up next time. The only problem is that they face a penalty, and come the next payment, they can’t double up as planned. Now they’re behind on two fronts. Speaking with a tax debt lawyer can help you find a solution that doesn’t damage your other payments.
Ignoring it. There are certain people who use their ability to ignore something as a coping mechanism. They fail to open the mail, or to pay attention to deadlines because they can’t meet the tax obligations anyway. However, it’s important to show your good faith effort no matter how deep you are in tax debt. You never know how it might help you!

 

Owe Back Taxes? Make an Offer in Compromise

April 1st

Approximately 11 million Americans owe back taxes and continue accruing tax debt with the IRS. Regardless of the case of back taxes, the experience is a stressful one for many taxpayers, as dealing with the IRS can be a daunting process. Fortunately, there are many options available for taxpayers to seek relief and settle their debt. While some will try to eliminate their back taxes through an installment agreement, partial payment installment agreement, or bankruptcy, there’s an incredible option for those in dire financial circumstances.

Eliminate IRS Debt with an Offer in Compromise

An Offer in Compromise is an enormous discount for those who owe back taxes. It’s so large that some people only pay as little as 1% of their back taxes once approved. However, getting approved is a difficult process, as only 34% of applicants are accepted each year.

Qualifying for an Offer in Compromise to tackle IRS debt is typically reserved for those who have little to no wealth, assets, and income. To be considered you will be judged on your:

• Ability to pay
• Current income
• Expenses
• Total asset value

Though the Offer in Compromise program has expanded to help more Americans, the qualifying standards are still stringent. Proving an “economic hardship” or “inequitable” situation is what determines qualification. Tax attorneys and experts can help people applying to an Offer in Compromise. Since there are fees involved in the application process, ensure that you understand the process and seek all guidance needed. Unfortunately, all applications fees to the IRS are nonrefundable and the chances of being approved for an Offer in Compromise are slim. However, with the help of a professional tax attorney, eliminating back taxes and solving IRS debt problems is possible.

 
 
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