Every day, taxpayers find themselves in dire financial straits. When a taxpayer receives a notice from the IRS, it can be due to any number of reasons. For instance, the IRS may issue a letter if you can expect a larger or smaller tax refund than what you filed during the tax season. Sometimes, when the IRS has a question about your tax return, they will also ask you about it in a letter. Additionally, the IRS will send a letter if they feel the need to verify your identity, in case they fear your identity has been stolen. Other times, you will be issued a letter if they are in need of additional information that may have been absent on your filed taxes. You may also be notified if there is a change in your tax return, as well as if there are any delays in processing your return.
As you can imagine, receiving any letter from the IRS is daunting. Many people have heard horror stories about interactions with the government agency, and this can leave taxpayers feeling too intimidated to respond. However, it is critical that you comply with the IRS in order to avoid serious action. Should you receive a letter, do not delay to read it. Each letter contains a lot of valuable information, so take heed to read it carefully. For example, if the IRS has made a change in your return, you should compare the information given to you with your original return.
You must respond to IRS notices with immediacy. Most notices require a response by a particular date, and there are two main reasons that you will want to comply. First, responding immediately to their letter will minimize any additional interest and mounting penalty charges. In addition, the IRS is more forgiving to grant appeal rights should you disagree.
Many people don’t know that they can receive free tax help from the IRS by telephone, email, or internet at www.irs.gov. U.S. residents can get account transcripts, seek advice on identity theft, and find answers to frequently asked questions by accessing these clearly defined sources. The website, one of the fastest and easiest ways to get tax information and advice, allows an individual or business to track a tax refund, amend returns, and explains the effect of IRS notices. Additionally, the IRS offers email correspondence that allows taxpayers to keep up-to-date on tax and filing requirements.
If you do not reply, you will face dire penalties. Should you receive a letter, such as a Notice of Intent to Levy, it is the last of several letters that have warned you to reply before they seize your assets. The key to avoiding severe penalties comes in swift response to any notice received. A Notice of Intent to Levy is a serious letter; it explains that if you do not act or respond within 30 days, the IRS has permission to garnish your wages, seize assets such as your home and vehicle, and other valuable possessions that could possibly pay off debt. Avoid this issue by reaching out to our tax professionals at Community Tax, who can consult with you and help you with your issue right away.
What Are My Options as a Taxpayer?
The IRS wants to help you with all tax related issues. The information they provide is meant to steer you away from trouble and promote fiscal responsibility. Many taxpayers may not be aware of their options when they can’t make their current year tax payment, even though the IRS provides this information for free. While the IRS.gov website offers valuable information, the options can be confusing and stressful to taxpayers who are unable to make a timely payment. Community Tax professionals provide relevant and useful tax relief help to ease the stress by explaining various payment options while ensuring the taxpayer remains compliant with the IRS until an optimal tax resolution is approved. Additionally, working with Community Tax professionals to resolve your tax problems can give you the assurance that all the necessary steps are being taken to fix your case correctly. Community Tax CPAs, tax attorneys and enrolled agents work directly with our customers to make sure their case is handled correctly and the best tax relief help is provided until the case is resolved.
Ways to Stop a Tax Levy or Wage Garnishment
When you receive a notice in the mail regarding an intent to levy or the implementation of a wage garnishment, there are still ways to find a solution. There are two main methods of repayment. Should you apply and get accepted for any of these agreements, you will be granted the ability to pay based on your affordability. The IRS allows this because they desire that they receive your payment of tax debt without leaving you impoverished. Generally, they understand that a taxpayer must first be able to sustain themselves before they can pay their taxes. The two methods of payment are:
Lump Sum Cash: This is the most preferred method of payment. If you decide that you can afford to pay off at least 20 percent of the total offer amount with your application immediately, you will be able to avoid the accruing interest and penalties that may occur within other payment agreements. If you are willing to pay in this fashion, the IRS will permit you to pay the remaining balance in no more than five payments.
Periodic Payment: A periodic payment allows you to pay off your entire tax debt within a certain amount of months or years. You do not need to pay at least 20 percent of your total amount up front, but instead you are able to pay off your tax debt in monthly installments while the application is in review. Should the IRS accept your offer, they will allow you to continue your monthly payments until the debt is fully paid. Keep in mind that this payment will have a designated end date depending on the plan that you must adhere to or else risk penalties.
Sometimes, people are unable to pay their amount, whether in full—or making any payments at all. When these instances arise, a taxpayer may see if they qualify under the Low Income Certification guidelines. The IRS will permit you to not pay the initial payment nor application fee or monthly installment while the IRS evaluates your case.
Types of Payment Methods
As mentioned earlier, the IRS is willing to negotiate a payment method that is reasonable for you. Much of the time, taxpayers cannot pay their tax debt in full right away. In fact, this may be the reason why many people avoid paying their debt to begin with. However, this is a self-sabotaging plan. You may pay a large portion right away in several methods. For example, those who pay in full may refinance their homes, take out credit, or take a home equity loan. This may help, however, it can also lead down a worse financial path. Our tax professionals at Community tax will be able to strategize whether this is a viable plan according to your financial needs.
An installment agreement is generally the most easily attainable option to pay off tax debt, and it is therefore one of the more popular options. When you negotiate an installment agreement, you agree that you will pay off your tax debt within a certain amount of time, in an amount that the IRS determines. When the IRS accepts your application for an installment agreement, you have agreed to take on the responsibility of paying off your entire debt, including interest and penalties, every month to be entirely paid within a certain time span.
If you desire to acquire an IRS installment agreement, you must first know which type of agreement you need. There are four types of installment agreements. Each agreement comes with different pros and cons, which may benefit you depending on your specific financial situation. Each plan is implemented by the IRS in order to allow you to pay debt reasonably and efficiently.
- Guaranteed Installment Agreements. The guaranteed installment agreement is exactly what it sounds like: a guaranteed payment plan, albeit under certain conditions. If the IRS accepts your application for a guaranteed installment agreement, you will have the benefit of not having to endure the burden of a federal tax lien. Conversely, if you were to be issued a tax lien, creditors would be alerted to your tax status, and would therefore make obtaining credit much more difficult. Another benefit is that you are only required to make a minimum payment of $25 a month, so long as you pay off your entire debt within three years. With this plan, you have the flexibility to pay almost as little as you want, or as much as you want, within three years. However, the one caveat is that the total amount of tax debt you owe must be no more than $10,000, including interest and penalties. Besides this, you must also have paid all past tax returns and have paid on time for at least five years.
- Non-Disclosure Installment Agreement. A non-disclosure installment agreement is appealing because it does not require that you disclose much of your personal financial information. Should you apply for this agreement, you will be excluded from filing a Form 433F, Collection Information Statement. This is a statement that would require you to disclose all accounts, lines of credits, credit cards, business information, non-wage household income, monthly living expenses, and all other assets. It’s only granted to those who owe $25,000 or less and agree to pay within 72 months. You also will not be issued a tax lien, so your creditors will not be alerted, and you will still be able to reasonably attain credit.
- Streamlined Installment Agreements. The streamlined installment agreement is issued to those who have a debt total ranging from $25,000 to $50,000. When the IRS accepts this agreement, you agree to the responsibility that you will file all of your future taxes, and that you will pay all of your tax debt within 72 months. Thanks to the Fresh Start Initiative, the Streamlined Installment Agreement has increased the flexibility of debt from $25,000 to $50,000. Similar to the Non-Disclosure Installment Agreement, you will have to promise that you will pay off all debt within 72 months. You may also apply for an option that is $25,000 or less.
- Partial Payment Installment Agreements. Some people are unable to pay for the entire debt amount, but may still qualify for a partial payment installment agreement. This agreement allows you to pay off less than what you owe. This is a more difficult plan to obtain, and requires more paperwork. In order to apply for this partial payment installment agreement, you must submit all financial information, including all accounts, assets, and other valuables. However, in this plan, creditors will be alerted to your tax situation, and credit may be difficult to obtain in the future.
When looking for tax help, taxpayers may come across a wide variety of resolution plans for repayment. Some of the payment options include financial hardship installment plans, currently not collectible status, penalty abatement, streamlined installment agreement, and Offers in Compromise. At Community Tax, we will communicate directly with the IRS and find a payment plan that fits your financial status. Our professionals have years of experience in dealing with the IRS and can take the stress and guess work out of paying your taxes. Contact Community Tax today for your past, current, and future tax relief help needs.