Tax Relief Solutions

What is Tax Evasion and How can it Affect You?

For some, it can be a terrifying ordeal to file your tax return, especially if you forget to include vital information when filing. It is important for taxpayers to double-check whatever they have placed on their return in order to avoid the IRS further looking into your tax return. The IRS will flag a taxpayer’s return if they notice that the income reported in inaccurate, if there are too many credits and deductions placed on the return, or if a taxpayer has not filed a required tax return. Although the IRS does not pursue many tax evasion cases, it is the taxpayer’s responsibility to ensure they are filing correctly to avoid the IRS investigating them – and finding something that can send them to jail. If you still have questions on what should be included in your tax return and how to properly file, here are some ways to avoid the IRS coming after you.

The IRS will usually start off with an audit process rather than taking immediate action against a taxpayer. During the audit process, the IRS will review the tax return(s) filed by a taxpayer to see what errors were knowingly made. If the IRS sees that a taxpayer has repeatedly made the same mistakes on several of their tax returns, such as not fully disclosing large amounts of income they had been receiving throughout multiple years, it could be seen as tax evasion. If a taxpayer continuously makes false statements and hides records like bank statements from an IRS auditor, it could potentially lead to criminal prosecution.

To avoid running into trouble with the IRS, specifically avoiding an audit, or being charged with tax evasion it is important to understand what you should include on your tax return. Whatever income you are earning needs to be included on your tax return. This means that if you have a full-time job as well as a side job, you must report both sources of income. If you also meet the filing requirements, you must file your tax return with the IRS. Avoiding filing a return for multiple years could be considered tax evasion by the IRS. This could also lead to the IRS looking further into the unfiled years and file a tax return on your behalf, which could cause any owed liability to increase on top of the penalties and interest you accrue for not filing in the first place. 

Understanding the IRS as well as their rules will help you navigate the tax filing system put into place. It is up to every taxpayer to keep themselves informed on any tax changes that may occur throughout the year and to also be transparent on their tax return by disclosing any information that may be vital for the IRS to know. If you are unsure of how to file and need further assistance, you can ask the advice of a tax attorney or a tax relief company that can provide you with the necessary assistance you need in order to get compliant with the IRS.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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The Difference Between a Lien, Levy, and Garnishment

The IRS can be problematic to deal with – especially if you don’t have a clue about anything tax-related. For those who owe a liability to the IRS, it is important to understand how the IRS works in addition to any potential action the IRS can take against you. If a tax balance is owed, they can place you into collections, garnish your paychecks, place a lien on your physical assets, or even levy your bank account(s). Here is what you need to know about the IRS taking action against you, and how to prevent yourself from falling into collections.

Liens

A lien is something that the IRS can place against you if you owe a tax liability. The IRS has the ability to place liens on physical assets such as a home or vehicle in order to ensure they receive the maximum amount of money if a taxpayer intends on selling their assets; they will take a portion of the profit of the sold asset and apply it to the balance owed to them. You can avoid having a lien placed against you by paying your balance owed in full and on time or, if you cannot afford to pay your balance off, you can contact the IRS to see what type of payment plan options you can be placed on. 

Levies

The IRS will send several collection notices warning a taxpayer of their intent to levy if the balance owed has yet to be paid in full. A levy occurs once the IRS considers you a delinquent taxpayer and they will go after your bank accounts, wages, or property in order to settle the debt that is owed. In some cases, the IRS will only seize a small sum of money from a taxpayer.  Other times, they will take a taxpayer’s entire savings and apply it to their tax balance. To stop an IRS levy, you can contact them directly and request they release the levy if you can prove that you are currently in a hardship. They will also release their levy if you can pay the amount owed in full, the collection period to collect the liability on your balance has ended, or the value of your property is more compared to the amount owed to the IRS. 

Garnishments

The IRS can also garnish your wages if you have an unpaid balance. The IRS can legally seize your income and apply it to the balance owed to them and garnish your paychecks, commissions, or any bonuses. There are a couple of ways to stop the IRS from garnishing you, you can either pay your balance in full or contact the IRS to set up a payment plan or hardship agreement if you qualify. 

The IRS will act against those who fail to pay their tax balance and they can and potentially will attempt to garnish, levy, or place a lien against you should you ever owe a tax liability. It is expected that all taxpayers remain compliant with the IRS and adhere to the most current tax laws in order to stay out of collections. 

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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What Could Happen If You Don’t File Your Tax Return?

It is not hard to fall behind on your taxes. This can happen for a number of different reasons, such as you were unable to afford any tax services, you simply forgot about the tax deadline, or you suffered a serious illness which left you unable to file your tax return. It can be easy to avoid filing your tax return and ignore any serious repercussions – until the IRS starts sending you notices informing you of your unfiled tax years or a delinquent debt you have failed to pay. The IRS has the ability to take action against you for failure to file so it is important to know what the possible consequences could be for not filing your tax returns. 

The IRS can file a substitute return for you

The IRS can file a Substitute for Return, or SFR, on your behalf if they notice a failure to file for any tax year or years. The IRS does not file an SFR as a courtesy for those who fail to file their tax return and will not include any exemptions or deductions. Because of this, filed SFRs can reflect that a taxpayer owes a tax liability. The IRS will also send out an informative collection notice stating that a substitute return was filed or if there is a tax balance associated with the SFR.

The IRS has no time limit to collect from you

When it comes to the IRS taking collection action, the IRS has no timeline as to when they can stop. Once the IRS assesses a balance against you, they can garnish your wages, levy your bank accounts, and place liens on your physical assets. Just because you have past tax years that are unfiled, it does not mean the IRS has forgotten. It could even mean that the IRS will have the ability to hold you liable for your tax balance for up to 10 years from the date that your balance was assessed. 

Failure to file your tax return could be considered a crime

For some taxpayers, failing to file your tax return could mean getting in serious trouble. The IRS could consider this a crime and assume that you are evading the liability that they have assessed on your behalf. Consequences for not filing your tax return could mean jail time or fines as high as $250,000. 

Why it is beneficial to file your missing tax return

Filing all outstanding tax returns is important in order to avoid having the IRS take collection action against you. Although there is not a time limit for you to file any past tax years, the IRS does put a limit on receiving a refund for a previous tax return. The IRS also allows you to collect on a tax refund for up to three years from the due date of your return.

Filing your tax returns may not be the most exciting thing to do and some may even dread the filing season as it comes every year. Regardless of how you feel about having to file, it is a requirement in order to stay compliant and out of collections with the IRS. If you do have unfiled tax years, it can be beneficial to speak with a tax attorney or a tax resolution company in order to resolve any outstanding debt you have for the unfiled years or any tax debt that was assessed against you when the IRS filed an SFR for you. 

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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How IRS Debt Can Ruin Your Travel Plans (and Jeopardize Your Passport)

The stress of owing the IRS can be overwhelming. The ever-present threat of having a lien placed on your assets, the fear every time you check your bank account to discover it has been levied dry, the strain of having the IRS garnish your monthly wages; these are just a few of the things that millions of Americans go through every day. Now, the IRS has made further changes to crack down on Americans who have not paid their taxes.

As of February 2018, Americans who owe the IRS more than $50,000 are at risk of having their passports revoked. If you have unpaid taxes owed to the IRS, it is important to either pay your balance in full or go on a monthly installment agreement in order to avoid having these travel restrictions placed on you. The State Department is now working alongside the IRS to not only revoke existing passports but to also deny any passport application for those with seriously delinquent tax debt.  (If you are overseas and your passport is denied, the State may issue a temporary passport that has limited validity to return to the United States.)  Essentially, until the tax debt is settled with the IRS, people will be placed on this new “No Passport” list.

There are a few exceptions to be aware of.  You won’t be at risk of being placed on the “No Passport” list if you are currently going through bankruptcy, if the IRS acknowledges you have been the victim of identity theft, or if there is a natural disaster declared on a federal level.  You may also be able to keep or renew your passport if you have a request pending for an installment agreement, have a pending offer in compromise with the IRS or if the IRS has accepted an adjustment that will satisfy your debt. And if you are placed on the “No Passport” list, the IRS will hold your application for 90 days to allow you to resolve your tax liability, pay your balance in full or enter into an installment agreement before revoking your passport.

This is yet another sign that the IRS is escalating their collection efforts against Americans who have unpaid taxes and another reason for you, as a taxpayer,  to stay current and compliant with their IRS filings.  If you are in the unfortunate situation of having delinquent IRS debt, it is wise to speak to a qualified tax professional who can help you evaluate your options sooner rather than later. Because when it comes to owing money to the IRS, delaying is almost always a losing strategy. For more information regarding on the IRS passport revocation and denial policy, click here!

Settle Tax Debt

It is indisputable that the Internal Revenue Service is one of the most powerful collection agencies in existence. The IRS has the authority to access every U.S. financial entity in its mission to collect back taxes. The IRS can even penetrate the cloak of corporate anonymity to affix personal liability to its officers, with the ultimate authority to decide just who is responsible.

settle tax debt

The IRS “Hammers”

Although there are some constraints, the IRS has vast powers, defined in its approximately 80,000-page Tax Code. Specifically, the IRS has the authority to:

  • attach a lien on a taxpayer’s property to protect the government’s ability to collect delinquent taxes,
  • apply an outright levy, which freezes cash, securities and investment accounts, and seizes whatever property the taxpayer holds for sale to pay the tax debt, including a significant portion of a taxpayer’s paycheck.

The IRS files a lien notice at the taxpayer’s local courthouse. An IRS lien is like an 800-pound gorilla: it acts as official notification that the IRS has first dibs on the taxpayer’s property. Third parties who are entangled within an IRS lien or levy — bank officers, employers, insurance brokers for permanent life insurance policies sold to the taxpayer — have absolutely no choice but to comply with IRS legal sanctions on the delinquent taxpayer.

Facing Tax Debt Realistically

Obviously, paying income taxes on time — or later with penalties — will forestall IRS liens and levies. The IRS auditor works under the premise that if the taxpayer has assets and owes taxes, and that tax debt takes precedence over any natural desire to preserve wealth.

Time Is Not On Your Side

On the other hand, for taxpayers who are in dire financial straits, there are options in getting out of tax debt. However, those options never include trying to stonewall the IRS, because time is definitely not on the taxpayer’s side.

The IRS Paper Trail

A formal notification process begins once the IRS determines that a taxpayer owes back taxes. It takes about six weeks from the first formal notification until the final notice is issued. At that point, the taxpayer has 30 days to appeal.

Once a lien or levy has been issued, the IRS has provisions to lift or remove them. Each provision has the goal of freeing up the taxpayer’s assets to make it easier to pay off the debt.

Time Payments And Offers In Compromise

An experienced attorney can apply for a time payment plan to settle delinquent tax debts in manageable monthly installment payments. The IRS favors direct bank debits, but taxpayers may also mail in paper checks or money orders.

Another option is an IRS Offer in Compromise, which, allows taxpayers to settle their delinquent tax bills by paying only a portion of what they owe. As you might imagine, there are strict eligibility requirements to qualify. The bottom line is that taxpayers must be able to demonstrate substantial financial hardship for the IRS to accept an Offer in Compromise.

Getting Professional Tax Assistance

It’s easy to become overwhelmed when attempting to navigate complex IRS regulations, voluminous and confusing instruction booklets and forms on your own. Owing money to the IRS can be a confusing and intimidating thing. It is hard to know what you’re supposed to do to settle that tax debt.

Especially if you are faced with the immediate threat of a levy, or wish to negotiate an offer of compromise, it’s wise to seek professional help. That’s where Optima Tax Relief comes in. At Optima Tax Relief, it’s our job to be in your corner, helping you to eliminate IRS tax debt.

Let Optima Tax Relief Fight For You

We actually work with the IRS and the state authorities every day on behalf of our clients, and we use our knowledge to benefit you. From day one, our experienced staff is prepared to offer representation to provide you with full legal protection while we negotiate on your behalf. Further, we are able to help you understand what you should — and shouldn’t — say to the IRS.

Your tax issues are not too big or too small for us. If you need help or have questions about preparing your tax paperwork, we can help you. If you’re facing liens, levies, wage garnishments, criminal action or other penalties, we can help you with that as well. And if you need someone to negotiate on your behalf or to represent you before auditors or revenue officers, we are prepared to do so fearlessly.

Now is the time to rely on the experience and dedication offered by Optima Tax Relief. Contact us today for more information on how you can settle your tax debt.

What Is an IRS Administrative Appeal?

courtroomIf you’ve been hit with an assessment from the IRS, for instance, as the result of an audit and you disagree with the results, you are entitled to present your case in Tax Court. However, an IRS administrative appeal may produce desirable results without the need to go to court. As a taxpayer, you are entitled to dispute the results of an IRS assessment through the administrative appeal process for any reason other than religious, moral or political, conscientious objections. The professionals at Optima Tax Relief can determine whether an administrative appeal is the right course for your situation.

IRS Administrative Appeal Categories

The IRS Appeals division operates as a separate entity from IRS offices that conduct investigations. The two types of administrative appeals available are Collections Appeal Process (CAP) or Collections Due Process (CDP) hearings. Administrative appeal hearings may be conducted by mail, telephone or in person. You may represent yourself or be represented by an accountant, attorney or individual enrolled to practice before the IRS. If your tax return was prepared by a third party who is not enrolled with the IRS, he or she may be a witness, but may not represent you.

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Submitting Your Request for Administrative Review

For assessments resulting from an audit of less than $2,500, you may approach the auditor directly or submit your request through the appeals system. Protests involving assessments of less than $25,000 may be submitted as a Small Case Request. Use Form 12203 – Request for Appeals Review, available from the IRS website, or the form referenced by your assessment. You may substitute a written statement including the items to which you disagree and your reasons for disagreement. Assessments of $25,000 or more require a Formal Written Protest including all of the following items.

  • Your name, address, and a daytime telephone number.
  • A statement of intent to appeal the IRS findings to the Office of Appeals.
  • A copy of the letter showing the proposed assessment.
  • The tax period(s) or year(s) involved.
  • A detailed description of each item with which you disagree.
  • The reason(s) for your disagreement for each item.
  • Facts supporting your position for each item.
  • Any law or legal authority that supports your position on each item.
  • The following penalties of perjury statement stated exactly: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
  • Your signature beneath the penalties of perjury statement.

If your request for appeal is prepared by your representative, he or she must substitute the declaration for penalties of perjury statement for individual taxpayers with a statement that includes each of the following elements:

  • An affirmation that he or she submitted the protest and any accompanying documents, AND
  • A statement of personal knowledge of stated facts in the protest and accompanying documents and a declaration that the facts are true and correct.

Collections Appeal Processindex

CAP generally produces faster decisions than a CDP. A CAP filed to protest a wrongful levy may be filed either before or after property has been seized, but must be filed before the property is sold. Filing a request for CAP within 30 days of the rejection or termination of an installment agreement prevents the IRS from issuing or executing a levy until the appeal has been settled. However, you cannot dispute owing additional taxes through a CAP. You are also barred from proceeding to Tax Court if you disagree with the conclusions of the CAP. You must file Form 9423 – Collection Appeal Request to initiate a CAP review. CAP can be used to address the following IRS actions:

  • Prior to or after the filing of a Notice of Federal Tax Lien
  • Prior to or after levy or seizure of property by the IRS
  • Proposed or actual termination of an installment agreement
  • Rejection or modification of an installment agreement
  • Rejection of proposed trust fund recovery
  • Denial of a trust fund recovery penalty claim
  • Denial of abatement request for late payment, late filing or deposit penalties
  • Rejection of an Offer in Compromise

Collection Due Process

Unlike the CAP, a CDP hearing allows you to proceed to Tax Court if you disagree with its findings. You must file Form 12153 – Request for a Collection Due Process or Equivalent Hearing, available for download from the IRS website, or a letter containing the same information as Form 12153 to request a CDP hearing. You generally have 30 days from the date you receive your assessment or audit examination report to submit your CDP appeal. After 30 days, you may request an Equivalent Hearing, but collection activities will not be suspended. You will also not be able to request a judicial review of the results of an Equivalent Hearing; you cannot appeal the results in Tax Court. You may request a CDP or Equivalent Hearing to request a review relating to any of the processes listed below:

  • Collection proposals (e.g. installment agreements or Offers in Compromise)
  • Lien subordination (relinquishing priority claim)
  • Withdrawal of Notice of Federal Tax Lien
  • Innocent Spouse defense claims
  • Existence or amount of additional tax assessment ( ONLY if there was no notice of deficiency or other opportunity to dispute tax liability)
  • Claim of economic or other hardship resulting from collection of tax liability

IRSThe Administrative Hearing Process

After submitting your request for administrative review, you generally have at least 60 days to prepare for the hearing. Draft a rough outline of the information you wish to include in your presentation. Categorize any other relevant information in spreadsheets or in visual displays, with separate folders for each item.

It’s wise to request a copy of the auditor’s file under the Freedom of Information Act (FOIA) immediately; FOIA requests can take at least a month to process. The letter should cover all relevant tax years and provide an offer to cover copying costs. Send the letter by certified mail or other traceable means.

The hearing itself will be fairly informal. You are entitled to take notes or record the hearing if you wish. Be prepared for requests for further information. If that happens, don’t hesitate to ask for more time.

If you reach a verbal settlement during the hearing, the settlement will be transcribed onto IRS Form 870 – Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, which can require months to show up in the mail. Double check all the figures and do not sign the form unless you understand and agree with everything contained within it. The professionals at Optima Tax Relief can address any questions you may have regarding this process.

Likewise, do not sign the form if you’ve found other mistakes by the auditor or appeals officer. Once you sign the form, you are barred from making further appeal to the Tax Court.

It’s Worth the EffortLeslie Haviland

The administrative review process can be daunting, but the odds of winning your case are very good. Investopedia reports that according to at least one edition of the book Stand Up to the IRS, published by legal portal Nolo, claims that taxpayers who appeal their audits have their assessments reduced by an average of 40 percent. With Optima Tax Relief on your side, you have a good chance of achieving favorable results, too.

5 Simple Ways to Avoid A Tax Lien

A tax lien, not to be confused with a tax levy,  is a hold that the IRS places against some or all your assets. By doing so, the IRS is attempting to ensure that it receives payment for the unpaid taxes that you owe.

But there are five circumstances by which taxpayers can potentially avoid an IRS tax lien. A tax professional like those from Optima Tax Relief can help you determine the best method to avoid a tax lien or a more serious tax levy.

1. Pay the Taxes You Owe in Full

If you can afford to pay the taxes that you owe in full, you can stop an IRS lien in its tracks. The IRS allows you to make payments directly from your bank account or by debit or credit card through a third-party processing service. You may also use the Electronic Federal Tax Payment System (EFTPS) to make a secure electronic payment. Or you may go the low-tech route and mail a check or money order, or deliver your payment in person to your local IRS office.

2. Enter into a Guaranteed Installment Agreement

If you cannot pay your entire tax balance in full, but owe less than $10,000, you may still avoid a tax lien. By entering into a Guaranteed Installment Agreement, you set an agreement by which the IRS will receive your entire tax balance due in monthly installment payments. The amount of each monthly payment and the length of the entire installment agreement vary according to how much tax you owe.

3. Enter into a Streamlined Installment Agreement

If you owe between $10,000 and $25,000 in unpaid taxes, you can still avoid a tax lien from the IRS. A Streamlined Installment Agreement works much the same way as a Guaranteed Installment Agreement. The end result is the same; you eventually pay your entire amount that you owe in federal income taxes.

4. Pay Down Your Balance

If you owe more than $25,000 in back taxes to the IRS, you must pay down your balance to less than $25,000 to avoid a federal tax lien. This payment must take place before a lien is imposed. Once your unpaid tax balance is below $25,000, you may enter into a Streamlined Installment Agreement.

5. File an Offer in Compromise

If you can only afford to pay a portion of your back federal taxes, you may still avoid a tax lien by filing an Offer in Compromise. If accepted, an Offer in Compromise allows you to settle your tax obligation with the IRS for less than the total federal taxes owed. But you should be forewarned: the IRS is stringent about accepting Offers in Compromise. The process for reviewing Offer in Compromise applications can be lengthy. There is also no guarantee that the IRS would not impose a tax lien while you are waiting for a decision on your Offer in Compromise application.

Top 10 benefits of working with a professional tax relief firm

Having an outstanding tax debt is becoming a growing issue that many Americans face. The number of Federal tax liens and levies filed by the IRS has grown significantly in recent years.  In 2011, nearly 4 million tax levies were served on third parties, a 456% increase when compared to the same IRS reports from 2001. Similarly, the IRS issued over one million Federal tax liens in 2011, up 145% from a decade earlier.

The IRS is usually relentless in their pursuit of collecting outstanding tax debt. The stress and pressure that is often placed on individuals and families can be overwhelming. Professional tax relief firms can be an incredible source of assistance when it comes to dealing with the IRS (or other State Tax Authorities) regarding back tax amounts owed or a wide range of other tax related challenges. Here are the top 10 benefits of working with one of these organizations.

1.  You don’t have to face the IRS alone

One of the major benefits of using a tax relief company is the fact that they have many professionals with different educational backgrounds to help you. By having a wide range of experts who understand how the IRS works (such as attorneys, CPA’s, or other specialists), they are able to put that knowledge to work for you so that you can reach the best possible settlement or solution for your tax problems.  After all, when dealing with the IRS or State Tax Authority, you can never have too many professionals working on your side.

2.  Reduce the overall balance you owe

The total amount you owe the IRS is often compounded by additional penalties and interest, and may involve more than one tax period or issue. These penalties and interests are automatically assessed to your account by their computer system; however you may not actually have to pay the additional fees.

A professional tax relief firm can evaluate your situation, and depending on the circumstances behind why you owe the debt, can oftentimes have these penalties removed from the total balance owed. This applies to the interest accruing on your balance as well, which can really add up over any length of time.

3. Avoid losing your home or other property from an IRS seizure

In some extreme cases, people have lost their home or other property because of past due tax debts. Although property seizure is one method that the IRS can use to collect amounts owed, it is usually a last resort for them.

However the number of IRS property seizures has increased dramatically in the last decade. In 2011, the IRS conducted 776 property seizures (compared to 234 seizures in 2001), resulting in a 230% increase in this form of enforcement in just 10 years. An experienced tax relief organization can help you avoid becoming one of these alarming statistics.

4. Avoid having your bank account levied

Similar to a property seizure, the IRS can also implement other actions to collect past due taxes. One more common method used is to levy your bank account. This action will occur after the IRS sends several written notices and warnings, yet still takes many people by surprise when they find out their bank account has been cleared out overnight.

According to the IRS, over $55 billion dollars was collected as a result of enforcement actions in 2011, up 63.3% from a decade before. Imagine the nightmare of waking up one morning only to find that the IRS followed through with their threat of levying your bank account, and realizing that the money in your account that you were going to use for bills, rent, or other items, is no longer yours to spend.

But this is just another example of a situation that can be avoided by having a professional tax relief service help you. You should contact them the moment you receive that first threatening letter from the IRS.

5. Stop or prevent an IRS wage garnishment

Garnishing your wages is yet another tool the IRS can implement to collect past due amounts owed to them. This adjustment to your paycheck can be financially devastating to your household income, usually taking somewhere between 30-75% of your NET paycheck before it makes it into your hands.

The IRS legally requires an employer to comply with their collection efforts and the wage order stays in effect until the IRS releases it, usually not until the entire amount owed to them has been collected.

A skilled tax relief firm can appeal to the IRS on your behalf and have the garnishment of your earnings reduced to a more reasonable amount or oftentimes stopped altogether.

6. Settle your outstanding tax debt for much less than you actually owe

Oftentimes the IRS is willing to negotiate with tax payers in regards to outstanding debts that are owed. This is true largely because of the fact that they would rather collect a lesser amount than nothing at all. But entering into a settlement negotiation with the IRS can be risky territory, especially if you are not fully aware of all of your rights or settlement programs that exist to reduce your overall debt.

This is another area where a company that specializes in tax resolution can assist you. By negotiating with the IRS on your behalf, they can usually reach an agreement that not only significantly lowers the total amount you owe, but also makes the terms of payment simple and for a shorter period of time.

7. Get caught up on past returns

It is estimated that 1 in 6 Americans (26 million people) is currently struggling with tax problems. Many people let these problems grow and compound over years and end up failing to file new tax returns, figuring they are already in enough trouble with the IRS as it is. Working with a professional tax relief organization can also offer benefits by helping you get caught up on any back tax returns you may still need to file.

8. Assistance during audits

One nightmare than many people fear is being audited by the IRS. A reputable tax relief firm will stand by you through this process and make sure that everything you need to have is covered. The chances of being selected for an audit are relatively low with only around 1% of tax returns being selected for this process each year. Furthermore, of those returns that are audited, only about an additional 1% of them are for individual tax payers. So while the odds of being audited are low, it is nice to know you have someone on your side if you need them.

9. Avoid dings in your credit score due to unpaid tax issues

While the IRS is not currently providing information to the 3 major credit bureaus about any unpaid taxes you may owe, it is something they have strongly considered recently. Additionally, if the IRS files a lien because of outstanding debt owed, that information could show up on your credit report since it is considered a judgment, and will remain on your credit report for 7 years after you have repaid it or 10 years if you ignore it. This information can definitely affect your overall credit score and sometimes even potential employment.

10. Enjoy a little piece of mind again

The stress and pressure that can be placed on an individual or family because of outstanding tax debt can be so overwhelming and can even cause major problems in the lives of people who are struggling with it. It can seem like the easiest solution is to run and hide from the problem, but let’s face it, the IRS is one powerful and relentless authority and when they want their money, chances are they will find you.

These issues will not go away on their own. The only way to make them disappear is to face them and address them as they arise. Having an experienced tax relief firm on your side to help with all the complicated policies and procedures can help your overall mental health dramatically.

Although facing the IRS and State Tax Authorities can be a very scary and intimidating experience for many people, it doesn’t have to be so difficult. There are many options to help reduce or sometimes eliminate the debt you owe, but trying to handle it on your own can be equally challenging. Working with a professional tax relief firm is often your best bet. These knowledgeable and skilled individuals can help you handle everything necessary to get your tax related problems resolved once and for all.

How to Remove Tax Lien from Credit Report

A new tax lien policy recently approved by the IRS gives hope to many taxpayers plagued by the stigmas long attached to their negative credit reports. In this article, we’ll discuss how to remove tax lien from credit reports.

New Tax Lien Policy

It’s a well-known fact that federal tax liens have a habit of sticking around on credit reports like the inevitable albatross around debtors’ necks for the entire time it takes to pay off the loan, plus an additional seven year penance (thank you Fair Credit Reporting Act!). Purgatory some may say, others indentured servitude, but the awful reality is they have been here to stay, no matter what way one looks at it.

Enter the new policy recently passed, announcing that federal tax liens are now approved for removal and will be erased from credit reports faster than any other detrimental issue. How? The process by which the IRS has termed “withdrawal.” Withdrawal occurs when the taxpayer’s lien is paid in full, OR the taxpayer signs up for a payment program that is scheduled for periodic installments until the account is up to date and closed.

How To Remove Tax Liens From Credit Reports?

Either of these scenarios can now result in the IRS formally withdrawing a tax lien, along with the stigma mark on one’s credit report. In order to achieve this, the taxpayer must make a formal request to the IRS (using IRS Form 12277, also known as Application for Withdrawal of Filed Form 668(y), Notice of Federal Lien). Once this request is filed, the IRS will return a form 10916(c), which is the magic word to open the door to cleared credit.

It is important to note that this new policy does not include tax liens held at the state levels. These liens will still be evident on your credit reports. Also not subject to complete withdrawal are tax settlements. Such settlements, commonly called “offers in compromise,” are present when a taxpayer and the IRS settle on terms of a lien where less than what is actually owed is considered adequate payment. Due to this not being an exact repayment in full, the IRS grants what they call a “release” rather than an actual withdrawal. As such, unfortunately, the credit report will still show such releases for a full seven years after the date paid.

A Win-Win

On all counts, it seems that this new policy is a win-win situation. The IRS benefits because debtors who may have normally attempted to settle their debts may now be more willing to step up to the plate to pay, since now such actions could help their credit. The taxpayers, obviously, reap the reward of having not having a black cloud of doom hanging over their credit reports when applying for credit in the future.

Bill seeks to extend state tax relief for mortgage debt forgiveness – Will It Happen?

One of the near-casualties of the Fiscal Cliff earlier this year was the Mortgage Debt Forgiveness Relief Act, which expired on December 31st, 2012. However, on January 3rd, 2013, President Obama signed The American Taxpayer Relief Act, which extended the deadline of the Mortgage Debt Forgiveness Relief Act one more year to December 31st, 2013.

The Mortgage Debt Forgiveness Relief Act was originally enacted in 2007 to accommodate the rising number of homeowners who had to do short sales as a result of the housing crisis.

A short sale occurs when a lender allows the homeowner to sell their home at a price that is lower than what is owed on the mortgage. The difference between the amount owed and the sales price is “forgiven” by the lender.

As with most forms of debt relief, the amount forgiven by the lender has been historically treated as taxable income by the IRS (adding insult to injury for the home seller).

When the housing crisis began to unfold, Congress and the Legislature decided not to consider canceled housing debt as income. This applied to canceled debt from foreclosure, the refinancing of a home loan or the short sale of a primary residence up to $2 million.

The California state law providing more relief, the Mortgage Debt Forgiveness Relief Act of 2007, expired at the end of 2012. This excluded up to $500K from taxable income in the form of debt forgiveness.

In California, AB 42, a bill that seeks to extend state tax relief for mortgage debt forgiveness was presented by Assemblyman Henry Perea, D-Fresno earlier this month. AB 42 would mirror the federal law and extend state income tax relief for debt forgiveness up until the end of 2013.

The Franchise Tax Board estimated the local impact to be a $50 million reduction in state income tax for 2013.

Since California’s mortgage debt forgiveness bill could affect state revenues, the measure was set aside until further analysis could take place regarding next year’s budget projections.

Brenda Harjala is a staff writer for Optima Tax Relief. Her mission is to help consumers stay financially savvy, and save some money with tax relief.