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Understanding Your IRS Negotiation Options

September 5, 2024 by Maurie West Leave a Comment

If you’ve ever tried reaching the IRS by phone, you’re familiar with the seemingly endless wait times and multiple transfers that often lead to frustration. Now, imagine trying to negotiate your tax debt under these conditions—without a clear understanding of your options.

The process can feel like an uphill battle, making it even more challenging to resolve your tax issues. That’s why it’s so important to be informed about all of the different ways in which you can negotiate with the IRS.

In this article, we’ll break down the most common methods for settling tax debts and offer guidance on how to navigate this complex process more effectively (and with the right help).

IRS Negotiation Options

1. Installment Agreements

An installment agreement allows you to pay your tax debt in manageable monthly payments rather than in one lump sum. This option is suitable if you can’t pay your tax bill in full but can afford to make regular payments.

How It Works: You propose a monthly payment amount that fits your budget, and the IRS will review your financial situation to determine if it’s acceptable. If approved, you’ll enter into a formal agreement and make monthly payments until your debt is fully paid off.
Pros: This option prevents the IRS from taking collection actions such as garnishing wages or levying bank accounts.
Cons: Interest and penalties continue to accrue on the unpaid balance, which can increase the total amount you owe over time.

2. Offer in Compromise (OIC)

An Offer in Compromise is an agreement between you and the IRS that allows you to settle your tax debt for less than the full amount owed. It’s designed for people who can’t pay their debt in full and can demonstrate they’ve been through financial hardship.

How It Works: You submit a proposal to the IRS outlining how much you can afford to pay and why you believe this amount should be accepted as a full settlement. The IRS will then review your documentation and financial situation to determine if your offer is reasonable.
Pros: If accepted, you’ll pay less than what you owe, and the debt will be resolved. This option can significantly reduce your tax liability.
Cons: The process can be lengthy and complicated, and not all offers are accepted. Additionally, you’ll need to meet strict eligibility requirements, and there’s a hefty non-refundable application fee.

3. Currently Not Collectible (CNC) Status

If you’re experiencing severe financial hardship and can’t make any payments toward your tax debt, you might qualify for Currently Not Collectible status. This status temporarily halts IRS collection actions.

How It Works: You provide documentation to the IRS showing that you’re unable to pay your debt due to financial difficulties. The IRS will review your situation and may place your account in CNC status, which means they won’t pursue collection actions against you while you’re unable to pay.
Pros: This option provides temporary relief from IRS collection actions, such as wage garnishments and bank levies.
Cons: Interest and penalties will still continue to accrue, and the IRS may keep a close watch on your financial situation to determine if your status should be continued or changed.

4. Penalty Abatement

If you’ve been hit with penalties for late payments or non-filing, you might be able to request a penalty abatement. This means you can ask the IRS to reduce or remove your penalties based on reasonable cause.

How It Works: You must demonstrate to the IRS that your failure to pay or file on time was due to circumstances beyond your control, such as a serious illness or natural disaster. If the IRS finds your reasons valid, they may reduce or eliminate the penalties.
Pros: Reducing or removing penalties can lower your overall tax liability.
Cons: You’ll still be responsible for paying the original tax debt and any accrued interest.

Tips for Successfully Negotiating with the IRS

Gather Your Financial Information: Before negotiating with the IRS, make sure you have a crystal clear understanding of your financial situation, including documentation to back up your income, expenses, and all of your assets. This will help you present a realistic proposal.
Be Honest and Accurate: Provide accurate information to the IRS to avoid complications. Misrepresenting yourself or the facts can lead to delays, rejections, or even additional penalties.
Consider Professional Help: Tax relief professionals like the ones at WesTax, Inc. are a valuable resource and can assist you in negotiating with the IRS. They have experience in handling tax debt and can help walk you through every step of the complicated process.
Stay in Communication: If you’ve entered into an agreement with the IRS, keep up with your payment schedule and communicate if you encounter any issues. Maintaining a positive relationship with the IRS can only help prevent further complications.
Review Your Options Regularly: Your financial situation may change over time, so it’s important to keep up to date with your tax relief options and adjust your strategy as needed.

If you’re struggling with tax debt and need help negotiating with the IRS, reach out to WesTax, Inc. We will assess your situation, help you choose the best resolution option, and work on your behalf to achieve the best possible outcome.

Remember, addressing tax debt sooner rather than later can help you avoid additional penalties and interest and provide you with a clearer path to financial stability. If you’re ready to explore your options for settling tax debts with the IRS, contact our team today for a free, no-obligation consultation. 941-893-1791.

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Did you receive an IRS Letter LT11 (or 1058)? What is it and what to do?

August 28, 2024 by Maurie West Leave a Comment

It is A Serious Matter Requiring Immediate Attention

Understanding the Implications of IRS Letter LT11

If you’ve received an IRS Letter LT11, it’s crucial to take immediate action. This letter is a serious warning from the IRS that they intend to seize your property, including wages, bank accounts, and assets, to collect an outstanding tax debt.

What Does LT11 Mean?

Final Notice: This is the last notification before the IRS takes steps to collect the debt.
Immediate Payment or Arrangement: You must pay the full amount due or set up a payment plan to avoid seizure.
Right to a Hearing: You have the right to request a hearing to dispute the debt or negotiate payment terms.

Why is LT11 so Serious?

It is their last legal lletter required to be issued before they can take more drastic collection efforts, including:

Wage garnishment: The IRS can directly deduct a portion of your paycheck to satisfy the debt.
Bank account levies: The IRS can seize funds from your bank accounts.
Asset seizure: The IRS may seize your property, such as vehicles or real estate.

Steps to Take When Receiving an LT11 Letter

Review the Letter Carefully: Understand the amount of the debt they are claiming you owe, which tax years it for and compare to your records.
Contact your tax preparer: See if they agree with the amount they claim you owe.
Seek Professional Advice: Contact a reputable Tax Problem Solving Company such as us at WesTax, Inc @ 941-893-1791. We’ll provide a no charge no obligation consultation to help you understand your options. If we can help you, we’ll let you know exactly how and at what cost. Some of the services we provide include: Preparation of Unfiled Income Tax Returns, Penalty Reduction, Offers in Compromise, Payment Plans, Financial Hardship Plans, Wage Garnishment/Bank Levy Releases, Audits and IRS Appeals.

Check out our blog www.westaxinc.com/blog for more tax tips and info. Contact us at maurie@westaxinc.com or 941-893-1791 if you need immediate assistance.

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How To Know If You Qualify for Tax Relief

August 20, 2024 by Maurie West Leave a Comment

Looming tax debt can be overwhelming and intimidating. Not only does it continue to grow over time the longer it goes unpaid, it can feel like a constant uphill battle.

At times, you may wonder what options you have to finally tackle the growing debt, but figuring out if you qualify for tax relief can feel like a maze.

Tax relief can help ease the burden if you’re struggling with unpaid taxes, but not everyone qualifies. Here’s a simple guide to help you understand if you might be eligible for tax relief and how to get the help you need.

What Is Tax Relief? (aka Tax Resolution)

Tax relief is designed to ease the burden of tax debt. Essentially, it helps people manage or reduce their tax obligations when they’re facing financial hardship.

How to Determine If You Qualify

1. Assess Your Total Tax Debt

Start by looking at how much you owe. Depending on what you owe will determine your most favorable option.

If your tax debt is under a certain amount, you might be eligible for a payment plan, which allows you to pay off your debt in monthly installments that are manageable for you.

If you owe more or are experiencing severe financial trouble, you might consider an offer in compromise, which lets you settle your debt for less than what you owe.

Knowing the total amount of your debt will be an important step in the process and will help in deciding your best relief option.

2. Examine Your Financial Situation

To even qualify for tax relief, you are required to demonstrate that you’re having financial difficulties. You will need to look at your current finances – income, expenses, and current assets.

Many people find themselves struggling to make ends meet, so if you can not cover both your living expenses and tax debt, you may be eligible for relief.

Work on gathering important documents like pay stubs, bank statements, and bills to clearly show your financial situation, especially if you are struggling.

3. Ensure Your Tax Filings Are Up-to-Date

Most tax relief options require that you have filed all your past and current tax returns, which means you need to be current with all your tax filings.

If you’ve missed any returns, get them filed as soon as possible, and make sure you’re keeping up with any new tax bills to avoid making your situation worse.

4. Explain Your Reason for Penalties

If you’re seeking penalty relief, you need to explain why you didn’t pay your taxes on time.

Some common valid reasons might include illness, natural disasters, or other significant hard times that you can prove. Have all of your evidence ready along with detailed explanations for your specific situation. It may help to strengthen your case.

5. Review Your Tax History

Your history with the IRS can influence your eligibility for tax relief. If you’ve had ongoing issues or shown deliberate avoidance, it might affect your options.

A tax relief professional like the ones at WesTax, Inc. will help review your history and determine how it impacts your chances of qualifying for relief.

6. Understand Different Relief Options

As mentioned earlier, when faced with a large amount of tax debt, there are various relief options potentially available, each with specific rules:

Payment Plans: These are ideal if you can’t pay everything at once but can manage monthly payments.
Offers in Compromise: This option is better if you can’t pay what you owe and face severe financial hardship.
Penalty Relief: Available if you have a reasonable cause for not paying on time.

Understanding these options and their rules may help you choose the right path for your situation.

Determining if you qualify for tax relief can be a complicated process, but with the right information and support, you can navigate this process more easily and find the help you need.

If you’re feeling overwhelmed by the options available to you or are facing financial difficulties, don’t hesitate to reach out for assistance.

The team at WesTax, Inc. is here to help you understand your options and find the best solution for your needs. Contact us today to get started 941-893-1791!

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Steps to Take for Individuals with Unfiled Tax Returns

August 14, 2024 by Maurie West Leave a Comment

Filing tax returns is a legal obligation for anyone and everyone earning an income above a certain amount in the United States.

But life can sometimes throw you curveballs, and filing taxes ends up being on the bottom of your to do list. Out of sight, out of mind, right?

Unfortunately, the IRS does not turn a cheek, and the potential ramifications for not filing your taxes can result in major consequences like penalties, interest charges, and even potential legal problems.

For anyone with unfiled tax returns, pay close attention to all of the steps listed in this article.

Understanding Unfiled Tax Returns

Unfiled tax returns refer to the tax forms that individuals are required to submit to the IRS but have not filed for one or more tax years.

Regardless of the reason, it’s important to not let too much time lapse. It’s always best to address your unfiled tax returns as soon as possible to avoid escalating any potential penalties and legal consequences.

Potential Penalties for Non-Filing

The IRS may impose some significant penalties and consequences for not filing your tax returns. Here are some of the more common penalties that they issue:

Failure-to-File Penalty: This penalty accrues at a rate of 5% of the unpaid taxes per month, up to a maximum of 25% of the unpaid tax amount. It will apply to the net amount that is due after accounting for any payments and credits.
Failure-to-Pay Penalty: If taxes are owed but not paid by the filing deadline, a failure-to-pay penalty gets applied. This penalty accrues at 0.5% of the unpaid tax amount per month, also capped at 25%.
Interest Charges: In addition to penalties, interest accrues on the unpaid tax balance. The interest rate is determined quarterly and compounded daily, reflecting the cost of borrowing as set by the IRS.
Legal Action: Continuously complying with filing requirements may result in legal action, including IRS collection efforts, levies on wages and bank accounts. In addition, you could also be facing a $10,000 fine, and a year in prison, for every unfiled income tax return, as it’s considered a misdemeanor in the U.S. for not filing a legally due tax return.

Steps to Take for Filing Overdue Tax Returns

While this information may seem alarming or overwhelming, don’t allow it to paralyze you from moving forward. It is crucial to take action.

You want to take care of your unfiled tax returns as soon as possible because the amount you will owe will just continue to grow.

Start taking action with these steps:

Step 1: Gather Necessary Information

Income Documents: Collect all W-2s, 1099s, and any other income statements for each tax year.
Expense Records: Gather any and all receipts and documentation for deductions, credits, and expenses claimed.
Previous Tax Returns: Obtain copies of previously filed tax returns, if available.

Step 2: Prepare and Submit Delinquent Tax Returns

Download Forms: Access the necessary IRS forms for each tax year requiring filing.
Complete Forms: Fill out the appropriate tax forms accurately, reflecting income, deductions, and credits for each year.
Submit Returns: Mail completed tax returns to the IRS for each applicable tax year. Consider sending them via certified mail to track delivery.

Step 3: Address Tax Payment Options

Payment Plans: If taxes are owed but cannot be paid in full, consider applying for a payment plan (installment agreement) with the IRS.
Offers in Compromise: In cases of significant financial hardship, explore the option of settling tax debts for less than the full amount owed through an Offer in Compromise.
Penalty Abatement: Request abatement of penalties if reasonable cause can be demonstrated for the failure to file or pay taxes.

How Tax Relief Professionals Can Help

Don’t think that this has to be done all on one’s own! Tax relief professionals like the ones at WesTax, Inc. are a tremendous resource and may even help reduce the total amount owed.

Their expertise goes a long way. Here are just a few of the things that tax relief professionals can assist with:

Compliance Guidance: Ensure accurate completion and timely submission of delinquent tax returns.
Negotiation Skills: Negotiate with the IRS on behalf of the taxpayer to secure favorable payment terms or settlement agreements.
Penalty Relief: Advocate for penalty abatement based on reasonable cause or first-time abatement criteria.
Financial Analysis: Conduct a financial analysis to determine the most suitable tax resolution strategy, such as installment agreements or Offers in Compromise.

Addressing unfiled tax returns is vital for anyone seeking to regain compliance with IRS requirements.

Luckily, resources are available to you. Tax relief professionals play a crucial role in facilitating compliance, minimizing penalties, and securing favorable tax resolutions.

Contact the tax relief professionals at WesTax, Inc. today at 941-893-1791 to discuss your options.

#taxes #taxproblems #irs #irsproblems

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When Does Married Filing Separately Make Sense?

August 5, 2024 by Maurie West Leave a Comment

I often get asked by clients if they should file separately from their spouse due to a variety of reasons. Most often the answer is no, but not always.

While most married couples opt to file their taxes jointly, there are situations where filing separately (MFS) might be beneficial. This option can offer financial protection and autonomy for each spouse, especially in cases of separation or divorce. Additionally, MFS might provide opportunities for certain deductions, such as medical expenses, that are based on individual income. However, it’s essential to weigh these advantages against the potential drawbacks.

Filing separately often results in higher taxes due to less favorable tax brackets and reduced standard deductions. Moreover, couples may miss out on valuable tax credits and deductions available to joint filers. The complexity increases in community property states, where income might still be split evenly regardless of filing status.

Changing Your Filing Status

Couples who previously filed separately can choose to file a joint return within three years, provided certain conditions are met. This option allows for potential tax benefits but should be evaluated based on individual circumstances.

Making the Right Choice

Ultimately, the decision to file jointly or separately depends on your unique financial situation. Carefully consider factors such as income, deductions, credits, and potential liabilities. Consulting with a tax professional can provide valuable guidance in making an informed decision. Remember, understanding your options is crucial for maximizing your tax refund or minimizing your tax burden.

By carefully weighing the pros and cons of each filing status, you can choose the option that best suits your financial goals and protects your interests.

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Tax Planning 101 for Gig Workers

July 30, 2024 by Maurie West Leave a Comment

The rise of the gig economy has brought new tax challenges for workers earning income through temporary, non-salaried, or freelance jobs. From pet sitting and home repairs to modern digital platforms like Uber and Etsy, gig workers face unique tax reporting and planning needs. The IRS estimates that the number of gig workers tripled between 2017 and 2021, highlighting the growing importance of understanding tax obligations for this segment of the workforce.

Gig workers must be diligent about their tax responsibilities to avoid penalties and interest. Anyone earning $400 or more from gig work must report their income, and those earning over $600 should receive a 1099 form, including payments through platforms like Venmo and PayPal. Additionally, gig workers are subject to the self-employment (SE) tax, which is 15.3% of their earnings, covering Social Security and Medicare contributions. To offset these costs, the IRS offers special deductions for self-employed workers.

Quarterly estimated tax payments are a crucial aspect of tax planning for gig workers. If they expect to owe at least $1,000 in taxes for the year, they must calculate and pay these taxes quarterly. Using tools like the 1040-ES instruction booklet can help gig workers estimate their taxes accurately. A good rule of thumb is to set aside a third of gig income for taxes, with about two-thirds allocated to federal taxes and the remainder to state and local taxes.

Gig work can come with numerous benefits whether you are looking for flexibility and the option to set your own work hours or you are looking for extra cash on top of your day job to reach your financial goals or make ends meet. Those who are prepared for the tax implications of gig work stand to benefit the most. By being aware of when you are required to report gig income and setting aside sufficient funds for estimated tax payments, you can avoid unnecessary tax penalties and focus more of your energy on your side hustle.

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