by Optima Financial Group | Mar 27, 2015 | Tax Relief Solutions
If 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.
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 Process
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
The 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 Effort
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.
by Optima Financial Group | Sep 12, 2014 | Tax Relief Solutions
Every year like clockwork you conscientiously pay your state income taxes, but this year you spaced and missed the deadline. Don’t panic. Unless you neglect to file AND pay for years, it is unlikely that you’ll wind up as an extra for Netflix’s Orange Is the New Black. But you’ll need to get your act together now to minimize the potential damage.
Are You Sure You Have to File?
If you live and work in any of the following states, you are not required to file an income tax return or pay state income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two more states, New Hampshire and Tennessee, also exempt wage earners from paying state income taxes, although interest and dividend income is taxed. But if you live or work in any of the other 41 states or in the District of Columbia, you may be subject to late filing fees, late payment fees or both. (PriorTax)
How to Get a State Tax Extension
Your state’s official website is likely to have information available on filing state tax returns after the deadline. If you cannot find the information online, contact your state’s treasury or tax office by telephone. Be prepared to answer general questions about your income and filing status, because your answers may have a bearing whether you actually must file. For instance, many states exempt taxpayers who owe no state taxes from the requirement of filing a return. But you will forfeit any refund or tax credits you might otherwise have received if you do not file a return.
Were You Granted an Automatic Extension?
Some states grant taxpayers an automatic extension of time to file if they filed an extension request with the IRS on or before the tax deadline. Other states require a separate extension request even if you filed a federal request. Again, consult your state’s official website or place a telephone call to the appropriate agency to obtain the information that you need.
State Tax Amnesty Programs
Like the IRS, many states have adopted a cooperative attitude toward taxpayers who make honest mistakes. Some states have tax amnesty programs or otherwise eliminate or minimize penalties for taxpayers in arrears who voluntarily come forward. If you just straight up forgot to file, or didn’t file because you didn’t have the money, come clean with the proper authorities. Often, the state will work with you to develop a payment schedule that you can live with to bring you back into compliance.
What Do I Do Now If I Forgot to File State Taxes?
File your state taxes ASAP. If you forget to file your return until a few weeks or even a few months after the deadline, don’t panic. There is only the slimmest chance that you will ever face criminal charges. But that doesn’t mean that you should dawdle. Tax penalties imposed by the state can often rival those of the IRS, including liens and levies against your paycheck and assets or even possible jail time. The sooner you file, the quicker you can stop the clock on penalties and interest charges.
If you are missing Form W-2 or other tax records that you need to file a return, you can often obtain the information you need immediately through the IRS website. In some cases, you may need to make a request by telephone or regular mail, which will require extra processing time. Inquire with your secretary of state’s office or tax office if you need blank tax forms. Don’t just assume that you can file the same form as you would have if you had filed your return on time.
Don’t Assume You’re in the Clear
Honest taxpayers act as quickly as possible to file their returns after they have realized that they somehow forgot to do so. But some may decide that since they have managed to get away with not filing a return or paying taxes that they will continue to flout the law. Don’t make that mistake. If your state income tax authority concludes that you intentionally evaded paying taxes, you could have the book thrown at you – including time behind bars.
by Optima Financial Group | Feb 21, 2014 | Tax Relief Solutions
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.
by Optima Financial Group | Dec 20, 2012 | Tax Relief Solutions
Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The initiative allows qualified taxpayers to avoid the IRS Failure to File penalty. This penalty is usually placed on unpaid tax balances, with accrued interest. Qualified individuals can request a six-month payment extension in which no penalties will accrue. Late payment penalties will be charged if the balance is not paid by October 15. Secondly, Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens.
Recognizing the need for tax relief, IRS Commissioner Doug Shulman said, “This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.” Do I Qualify for the IRS Fresh Start Initiative? is the logical question being asked by many taxpayers. Consider the qualifications below.
- You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15 2012.
- Married couples filing jointly need to have only one spouse that meets the qualifications.
- Individuals who are self-employed need to be able to show at least a 25 percent drop in their net income.
- Taxpayers must not earn more than $200,000 per year for married couples or $100,000 per year for individuals.
- Fresh Start is also limited to taxpayers whose tax balance was not more than $50,000 at the end of 2011.
- Taxpayers must file Form 1127A, which is not available electronically.
by Optima Financial Group | Dec 11, 2012 | Tax Relief Solutions
Annually, the Internal Revenue Service (IRS) reaches out to taxpayers across America who earned $49,078 or less to offer a little tax relief by way of the Earned Income Tax Credit (EITC).
The EITC varies according to your income, family size and filing status. Basically, it is a federal refund for taxpayers with low to moderate incomes. And eligible taxpayers may still get a refund even if they don’t owe taxes.
Eligible workers often miss out on it because they either don’t claim it or don’t file a tax return. This is especially true if their financial situation has changed; something that has happened to a lot of Americans over the last few years.
You can easily find out if you qualify just by visiting IRS.gov and answering a few questions using the EITC Assistant.
To get your EITC refund, you have to:
- Have had earned income through employment, self-employment or farming
- Have a valid social security number
- Be a U.S. citizen or resident alien, or a non-resident alien married to a citizen or resident alien
- Be 25 years or older
- Have investment income of less than $3,150
- Not be claimed on someone else’s tax return
- File a tax return
There are additional stipulations with regard to how you file (single or married) and whether you have filed Form 2555 (foreign income). However, in this climate of continuing financial struggle, taking the time to determine if you are eligible for some tax relief from the IRS is well worth the time investment.
And if taxes aren’t the only financial obligation that has you struggling right now; if other unsecured debt like credit cards, student loans or a car note have you wondering how you will make ends meet, take the time to ask us about debt settlement. It’s our specialty.
by Optima Financial Group | Nov 13, 2012 | Tax Relief Solutions
The IRS brings good news this week to middle-class Americans who continue to struggle with tax debt by expanding their Fresh Start Initiative.
Loosened guidelines for the Offer in Compromise program, which forgives a portion of a taxpayer’s debt, will allow more Americans to qualify as well as eliminate their tax debt in as little as two years, compared with four or five years.
The adjustments to the program come after the IRS recognizes that many taxpayers are still struggling to pay their bills. They wanted to apply a common sense approach to reflect real-world scenarios.
Changes to the program include:
- Revising the method of calculating taxpayer’s future income.
- Flexibility in repaying student loans.
- Flexibility in paying local and state delinquent taxes
- Expanding the Allowable Living Expense allowance (expenses such as credit card payments and bank fees can now be taken into account).
The changes will allow many more consumers to qualify for tax relief under the Offer in Compromise program. Specifically, when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years.
“This phase of Fresh Start will assist some taxpayers who have faced the most financial hardships in recent years,” said IRS commissioner Doug Shulman. “It is part of our multi-year effort to help taxpayers who are struggling to make ends meet.”
The IRS, having a reputation of rigidity, surprised many Americans with this welcomed announcement of increased flexibility. Full details of the announcement are available at theIRS website.
