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Defense Tax Group Guide


A Defense Tax guide to tackling your tax debt problems with the IRS, whether your first un-payable tax bill or after the IRS taking punitive tax measures. – PowerPoint PPT presentation

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Title: Defense Tax Group Guide

Tax Group
Unable to Pay the IRS?
A Defense Tax guide to tackling your tax debt
problems with the IRS, whether your first
un-payable tax bill or after the IRS taking
punitive tax measures
Whos this guide for? If youve deliberately
taken measures to avoid tax through illegal
means, this guide is not for you. Youre
probably online right now because you have had a
letter from the IRS that youre struggling to
deal with. It might be the tax bill itself,
which by every calculation you try you cant
argue with yet have no idea how to pay off.
You may have already had that letter and stuck
your head in the sand like an ostrich, and are
now being told that you are subject to a wage
garnishment,bank levy or other punitive
measures. You could be receiving those measures
now. Dont worry! In reading this guide, we at
Defense Tax will show you what to do at the
different stages of your battles with the taxman.
In Part 1 we will deal with the easiest
situation - how to respond to a tax bill you
cannot afford. In Part 2 we will deal with what
to do further down the line when punitive
measures have been threatened or are in place
already. In Part 3 we will discuss the advantages
of getting a tax attorney on board. One thing
to remember from the start is that the IRS is
always nicer to people who are upfront and
honest with them. They arent going to be gentle
- their business is funding the federal
government after all - but as long as you are
trying to deal with your problems they will try
to accommodate you. On the other hand if you do
try to run or hide they can be very tough indeed
with powers ranging from taking money direct
from your employer in a wage garnishment right up
to seizing your home and business. With these
powers it really does pay to talk to the IRS from
the outset as no matter how unpleasant an
un-payable tax bill is, it is far better to
tackle the problem head on.
Part One - receiving the IRS tax demand
When you receive the first IRS tax bill, this is
the best time for you to go to the IRS to say
that you cannot afford to pay it. In this section
we will look at what they will want from you and
how you should deal with them. Before you get on
the phone or go online to the IRS you need to be
prepared to tell the IRS exactly what they need
to hear as otherwise dealing with them could get
very confusing and you could end up getting in
more trouble than you started with. There are
three broad routes to recovering from a tax debt
with the IRS - the installment plan, the offer
in compromise, and bankruptcy. Where more than
800,000 people and businesses have so far been
accepted onto an installment plan, the offer in
compromise is far harder to achieve.
Here are some things to consider
re you up to date with your tax returns?
If you have any missing years tax returns then
you should file them immediately. You dont want
the IRS to start picking your affairs apart in a
tax audit. Essentially this move ensures that
they have as little room to maneuver as possible
when you go to tackle your problem.
llowable expenses
Have you included all your allowable expenses in
your tax return? Did you know state and other
taxes are included as allowable expenses, as are
child support payments, and federal student loans
(if paid monthly)? Legal expenses are also
covered - perhaps payments to a tax
attorney. Have a look at the IRS 2019 Tax
Withholding Calculator to see if you have
deducted everything you are legally able to from
your tax bill. You never know - you may have
missed out on a big allowable expense and be
able to tell the IRS you missed it out. This
could reduce the amount you repay
significantly. Credit card debts are not
considered as allowable expenses.
Repayment in 120 days or fewer
If you can pay your bill in 120 days or fewer
this is probably the best outcome. The IRS isnt
likely to want a statement of accounts or to
audit you. If you cannot afford that then you
should consider a Fresh Start repayment over 120
days or more - we will deal with that in the
next subsection.
How much can you afford to repay? The IRS offers
two repayment plans - the short term repayment
plan of more than 120 days and the short term
repayment plan of fewer than 120 days. The short
term repayment plan is available to someone who
has a tax debt of 100,000 or less, while the
long term repayment plan is available to those
who owe a tax bill of 50,000 or less. If you
have a 50,000 tax bill on a short term repayment
plan that would mean repayments of more than
16,666 a month. If this is still too steep, you
still dont have to worry as the IRS runs the
Fresh Start initiative. Can you do all of this
online? It is cheaper to go through the whole
process online - unless you are calling for a
longer repayment plan or an Offer In Compromise
then the IRS may make added charges for going
through the process on the phone.
Cost? The IRS has a list of fees and interest
charges for installment plans on its website
Click Here
Repayment in 120 days or more
Remember, no matter how pleasant they might be on
the phone the IRS is not your friend. If you
want to repay your tax debt in more than 120 days
you will see more bureaucracy as you prove that
you can in no way make that repayment in other
  • The good bit Fresh Start installment agreement
  • Installment agreements are the commonest type of
    agreement that you end up in with the IRS. You
    can end up paying less than the original sum
    thanks to the statute of limitations on the
    amount of time the IRS is allowed to collect your
  • There are five types of installment agreements
    under Fresh Start
  • The Guaranteed installment agreement allows you
    to clear a 10,000 tax debt in three years or
  • If you owe 50,000 or less then you can pay this
    within five years
  • Under a Partial Installment Agreement you can
    agree to repay your tax debt until the statute
    of limitations prevents the IRS from collecting
    any more money from you.
  • If you are a business you can agree to repay up
    to 25,000 in less than two years
  • If you owe more than 50,000 you can negotiate a
    repayment plan under the Fresh Start initiative.
  • You should be aware that you will have to give a
    full statement of accounts to the IRS should you
    start this program.
  • The difficult bit - statement of accounts
  • Where you cannot make the payments in 120 days or
    fewer you may be required to file a full
    statement of income and expenditure so the IRS is
    confident that you can make those payments. This
    isnt just a pleasant statement of affordability
    - they will look at allowable and non-allowable
    expenses in your statement and may make demands
    you tighten your financial belt even more to make
    greater payments.

Offer in Compromise
Everyone loves the idea of paying a lot less tax
than they were originally billed for! The IRS
doesnt offer in compromise very lightly as if
they did the Department of the Treasury would be
completely broke!
There are three situations where the IRS can
offer a compromise on your tax debt Doubt as
to liability. This is where there is a doubt as
to how much you should really repay the IRS. One
example is where you can prove they disallowed an
allowable expense. If this is significant and
they cannot disprove your claim then you may have
either that amount taken from your bill or the
whole tax bill waived. Doubt as to
collectability. This is where the IRS, having
studied your accounts and projected income,
cannot see how you would be able to make your tax
debt repayments within a reasonable timeframe.
You may have lost your job or had health
problems that prevent you from earning anything
like you did in the previous tax year. Excessive
hardship. This is similar to the case above, but
is essentially where they see that your
allowable expenses a tax debt repayment would
cause you undue hardship. This again might be
for someone who has had a big fall from financial
grace due to health problems or another
unavoidable position where they can reasonably
agree that you will not be able to meet the tax
demand. This is where someone might not make
home rent payments - not a snowbird who cant
afford their Fort Lauderdale property
mortgage! If you think meet one of these strict
criteria then you should apply online or take on
a tax advisor to apply. The good news is you
could pay a tiny fraction (5 or less in some
circumstances) of the overall tax burden. The bad
news is the bureaucracy. Clean up your tax
affairs before you apply You can be refused an
offer in compromise if you have missed a tax
return. Before you apply for the offer, make
sure you have done this. You may have filed your
tax returns but failed to pay the tax debt on a
previous year - this is another reason for the
IRS to refuse to negotiate with you. In live
bankruptcy proceedings? Again, forget about the
compromise agreement.
Tax rebate? Forget it! A final point to note is
that if you are owed any monies by the IRS in
the form of a tax rebate this will be written
off as part of the agreement to go into the
offer by them. This is not a walk in the park
and should not be taken lightly. When you are
absolutely sure you can convince the IRS to come
to the table to talk turkey, only then should
you take your first steps toward an offer in
compromise. It may at this stage mean talking to
a tax advisor about your situation.
The IRS website has a simple explanation as to
how to apply for an offer in compromise here.
Click Here
It centers on the Form 656
Click Here
If you are a business applying for an offer in
compromise then you will be liable for a 186
upfront fee. If you are an individual on a low
income (that is measured as your total monthly
income being at or below 250 percent of the
poverty guidelines published by the Department
of Health and Human Services) the offer in
compromise fee will be waived. Also, if the
offer is due to a tax liability dispute the fee
will also be waived.
Appeals process After the several months (or even
longer) of consideration and negotiation with the
IRS you may be refused. You can appeal the
decision but you should be aware that this is a
legal and bureaucratic process and without legal
advice and support you may fail in the appeal.
The man who represents himself in court has a
fool for a lawyer!
Bankruptcy really is your last resort financially
and in most cases the IRS debt can not be
including in your bankruptcy. In some rare
instances as long as you cooperate with the IRS
you can in the end avoid some of your federal and
state tax burden. We will focus on the commonest
form of bankruptcy here - Chapter 13. This is for
individuals and the self-employed. Other forms
exist, and the IRS can point you to them via
this page.
Click Here
Tax returns Bankruptcy really is your last resort
financially but as long as you cooperate with
the IRS you can in the end avoid some of your
federal and state tax burden. We will focus on
the commonest form of bankruptcy here - Chapter
13. This is for individuals and the
self-employed. Other forms exist, and the IRS
can point you to them via this page. Regular
income You cannot get support from the IRS for a
Chapter 13 bankruptcy if you do not have a
regular income. Tax refunds Unlike offer in
compromise or longer installment payment plans,
you can get tax refunds. The IRS leaven this by
stating, However, refunds may be subject to
delay or used to pay down your tax debts. If you
believe your refund has been delayed or offset
against your tax debts you can check on its
status by going to our Wheres My Refund tool or
by contacting the IRS Centralized Insolvency
Operations Unit at 1-800-973-0424. On
Discharge You may be entitled to have certain
federal taxes waived on the bankruptcys
discharge. What these are will be negotiated
during your bankruptcy hearing.
Part 2 When punitive action has been enacted or
In Part 1 we went through the ideal process where
as soon as you saw you couldnt pay the tax debt
in your initial tax demand you held up your
hands, told the IRS you couldnt repay and took
every step you could to come to an agreement. Not
everyone does that! The good news is that even
when punitive measures are being threatened or
auctioned the IRS is still willing to talk. Think
of that letter notifying you of a wage
garnishment, bank levy or collection proceedings
as having a final line saying, However, if you
talk to us and try to straighten things out we
might be nicer to you! The actions the IRS take
are expensive and really are only for the most
delinquent of tax debts. At every stage you can
get them to come to an agreement. It pays to do
this as early as possible or they could end up
breaking you financially and even making you
Due process The first thing you will have had
from the IRS is your tax bill. As indicated in
Part 1 above you should respond then. The next
stage is a notice of intent from the IRS.
Whatever the IRS chooses to do to you, it will
usually send you a letter giving you 30 days
notice of its actions. This means that you have
30 days in which to get your house in order and
to face your problems. If you do not do as the
letters demand and either try to run or hide from
the problem then you really are in trouble! You
can back out of the punitive action at any time
by facing it down. Isnt it better to respond
before things get nasty? Wage garnishment This
is a process where the IRS can force your
employer to repay a significant sum of your
income. It could hit 50 or more of your income -
the wage garnishment is designed to be punitive
and is only considered as a means to bring you to
the table. If you offer an installment plan or
ask for an offer in compromise then the monthly
cost could fall considerably.
One point to note - you cannot tell your employer
to stop paying the garnishment as they could
face serious consequences from the IRS
themselves. Bank levy The IRS can take all your
money from a bank account it knows about, prevent
you from taking any money out, and continue
taking all income that goes into the account. By
talking to the IRS you can stop this. Tax
lien The IRS can take all your money from a bank
account it knows about, prevent you from taking
any money out, and continue taking all income
that goes into the account. By talking to the
IRS you can stop this. Property seizure While
the car loan repo man can only take your car
back if you fail to make repayments, with regard
taxes all your property is secured against your
back taxes. Your car can go and you will have to
repay your car loan even after it has been
seized. The IRS even has the power to take your
home and business from you. Isnt it better to
just make contact with the IRS to come to an
agreement? Passport and driving license
seizure The IRS has an agreement with the State
Department where your passport can be annulled
and you are prevented from travel. You might be
believed to be at risk of leaving the country to
avoid paying your taxes in this
instance. Interestingly, the government has
agreements with a number of countries around the
world where you can be extradited back to the
US for a number of crimes including tax
evasion. A number of states have laws where for
state and federal tax defaults they can annul
your driving license. As with passport seizure it
can stop you from earning the money you need to
make those tax repayments.
Part 3 Time to get tax debt advice?
Resolving your tax debt really isnt that easy is
it? We hope we have helped you think this whole
process through in some way. You could walk away
with no worries at all from simply paying off
your tax debt to the IRS in just a few months,
or you could end up in protracted and detailed
negotiations to reduce your tax debt. The fact
is, the IRS will deal with you as if you know
what you are doing, whether or not you actually
do. Using loose language on the phone or in a
letter to them could result in them jumping you
like a pack of hungry dogs. While applying for a
simple 2-3 installment repayment plan can be
fairly easy, the more complicated your financial
problems are the harder it will be to
communicate them to the IRS agent. At Defense
Tax we have a team of advisors and a tax attorney
who can listen to you and look at your tax debt
with you. You can use that loose language that
the IRS agent wouldnt forgive and we can help
you communicate your issues in tight, exact
language to explain your problems to the IRS. We
can answer their questions exactly as they
should be answered, and with our expertise can
even considerably reduce the amount of money that
you eventually have to repay the IRS. If you
are receiving punitive action from the IRS then
it probably makes even more sense to get in
touch with Defense Tax as we can help you get
those measures stopped and things like tax liens
and wage garnishments removed. Our fees could be
a lot less than the amount of money we save on
your tax bill at the end of the dispute with the
IRS so we can end up more than earning ourselves
the fee you pay! Get in touch today to discuss
your tax debt with us.