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IRS Expands ID Protection Program: An IP PIN is a six-digit number assigned to eligible taxpayers that helps prevent the misuse of their Social Security number on fraudulent federal inc

SETTLING TAX DEBT WITH AN IRS OFFER IN COMPROMISE

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. That's the good news. The bad news is that not everyone is eligible to use this option to settle tax debt. In fact, nearly 60 percent of taxpayer requested offers in compromise were rejected by the IRS. If you owe money to the IRS and are wondering if an IRS offer in compromise is the answer, here's what you need to know.

Who is Eligible?

If you can't pay your full tax liability or doing so creates a financial hardship, an offer in compromise may be a legitimate option. However, it is not for everyone, and taxpayers should explore all other payment options before submitting an offer in compromise to the IRS. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC.

To qualify for an OIC, the taxpayer must have:

• Filed all tax returns.
• Made all required estimated tax payments for the current year.
• Made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

IRS Acceptance Criteria

Whether your offer in compromise is accepted depends on a number of factors; however, typically, an offer in compromise is accepted when the amount offered represents the most the IRS can expect to collect within a reasonable period of time. This is referred to as the reasonable collection potential (RCP). In most cases, the IRS won't accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP), which is how the IRS measures the taxpayer's ability to pay.

The RCP is defined as the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income minus certain amounts allowed for basic living expenses.

The IRS may accept an OIC based on one of the following criteria:

Doubt as to liability. An OIC meets this criterion only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law.

Doubt as to collectibility. This refers to whether there is doubt that the amount owed is fully collectible such as when the taxpayer's assets and income are less than the full amount of the tax liability.

Effective tax administration. This applies to cases where there is no doubt that the tax is legally owed and that the full amount owed can be collected but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

Application and Fees

When requesting an OIC from the IRS, use Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals. If you are applying as a business, use Form 433-B (OIC), Collection Information Statement for Businesses. A taxpayer submitting an OIC based on doubt as to liability must file additional forms as well.

A nonrefundable application fee, as well as an initial payment (also nonrefundable), is due when submitting an OIC. If the OIC is based on doubt as to liability, no application fee is required, however.

If the taxpayer is an individual (not a corporation, partnership, or other entity) who meets Low-Income Certification guidelines they do not have to submit an application fee or initial payment and will not need to make monthly installments during the evaluation of an offer in compromise.

The initial payment is based on which payment option you choose for your offer in compromise:

• Lump Sum Cash. Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is accepted, you will receive written confirmation. Any remaining balance due on the offer is paid in five or fewer payments.
• Periodic Payment. Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If the IRS rejects your OIC, you will be notified by mail. The letter will explain why the IRS rejected the offer and will provide detailed instructions on how to appeal the decision. An appeal must be made within 30 days from the date of the letter.

Questions?

If you have any questions about the IRS Offer in Compromise program, don't hesitate to contact the office for more information.

IRS problems will not go away by themselves

IRS Tax Problem Resolution

IRS problems will not go away by themselves. (The IRS never forgets.) You only have three choices to end your IRS nightmare:

- Pay the IRS 100% of what THEY think you owe today.
- Set up a monthly payment that almost never goes away because of the additional penalties and interest that continue to add up.
- Reduce the total amount you owe to an affordable number (with our help) and get on with the rest of your life.

We can help you explore all the choices and options, but you must take the first step. 

Call today to schedule a time to discuss your specific situation at 816-220-2001 or online at www.AFIT-Calendar.info

How can I Pay Less Tax?

Blue Springs Missouri Tax Planning

If you are like many people here in America, the amount of taxes you pay can be your single largest expense. We get taxed at many different levels including sales tax, excise tax, property tax, payroll tax, estate tax, local taxes, entity level taxes, state income tax, and federal income taxes. If you add them all up, it can be a very large amount of your earnings goes to pay these various kinds of taxes.

With proper tax planning you may be able to reduce your tax bill. This could mean big changes and opportunities in your future. Can you imagine what you would do with an extra $5,000 or even $50,000 per year?

Key steps

• Key Steps to lower your tax bill:
  • Remember that tax laws are not necessarily fair. All types are income are not taxed the same. Income from a business, investments, real estate can have less tax than wages.
  • Tax laws are always changing. In many cases, Congress tries to steer the economy with changing the tax laws from time to time. To pay the least amount of tax legally possible, it is important to have your tax situation reviewed by a pro-active tax professional.
  • Your Proactive tax Plan needs to fit your situation. What works for Bill Gates, Donald Trump and Warren Buffet, or others, will most likely will not work for you. Each situation is unique, and you need a plan that is custom fit for you.
  • Keep it legal. There are many different ways you can use to lower your tax burden legally. Your tax strategy needs to be able to withstand the scrutiny of an audit.
  • You need to act. The greatest tax strategy plan is of no value if it is not implemented. The sooner the tax reduction plan is started, the more savings can be realized.
• How do I get started?
  • Contact us and set up an appointment.
  • Provide us a copy of your prior year’s tax returns.
  • Provide us your current year’s profit projections.
  • Engage our firm to design a customized tax reduction plan for you.
  • Review the tax reduction plan with us and gain a basic understanding of it.
  • Implement the plan.
  • Enjoy the tax savings.

UNFILED TAX RETURNS - HERE ARE SOME THINGS YOU SHOULD CONSIDER:

You missed the tax deadline April 15th, so now what?   

Income Tax Services Blue Springs Missouri

Although the IRS has received a record number of returns this year, there are still millions of people and business owners who did not file tax returns by April 15th. The reasons for this are numerous, but the IRS research shows that often people do not file in years that their status changes, for instance the death of a spouse or a divorce. Emotional or financial hardship reasons may also cause a person not to file. And then there are some folks who have simply procrastinated. Whatever your reason is, if you did not file your taxes by April 15th, you should stop putting it off and file your tax returns as soon as possible - even if you are late.

Sure, if you file late, you might be missing out on the economic stimulus tax refund check, but the reasons for filing are more compelling, and often less painful than ignoring your obligation.

Here are some things you should consider:

1. You could lose your refund. There is no penalty for failure to file if you are due a refund; however, you cannot obtain a refund without filing a tax return. If you wait too long to file, you may risk losing the refund altogether. In cases where a return is not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund.
2. You won’t receive your Earned Income Tax Credit (EITC). Even if you are not otherwise required to file a tax return, you must file in order to receive this credit. The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
3. A statute of limitations applies to refunds and credits. After the expiration of the refund statute, not only does the law prevent the issuance of a refund check, it also prevents the application of any credits, including over payment of estimated or withholding taxes, to other tax years that are underpaid. It is also worth noting that the statute of limitations for the IRS to assess and collect any outstanding balance does not begin until a return has been filed. Or put another way, there is no statute of limitations for assessing and collecting the tax if no return has been filed.
4. A “Failure to File” penalty may be assessed when you miss the tax filing deadline; the sooner you file, the more likely you are to be able to negotiate or decrease this penalty.

Regardless of your reason for not filing, file your tax return as soon as possible. You can contact a tax professional or the IRS for help with filing delinquent returns. I personally specialize in helping individuals and businesses who are unable to fully pay their taxes, either back taxes, or due to current or late filing. If you can not pay your taxes, do not let this prevent you from filing as tax settlement options may be available. For more details contact us as quick as possible.

For more information on how to file a tax return for a prior year, visit our website.

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