IRS Helps Taxpayers who Owe Back Taxes?

Yes!  New IRS Fresh Start Initiative Helps Taxpayers Who have Past Due Taxes

All irs back tax help writing is in blue.  Below is a link to the IRS Fresh Start Initiative that helps people who are dealing with overdue IRS tax.   effective 3/12/2012.  If you have questions about this review, please reference:  bp108.

• If you know you need to take action, read my article “IF” you should hire IRS back tax help.  (You should not automatically.) Titled “Owe IRS back taxes? When, who, and how do I hire IRS back tax help?” before you do anything else.

As usual, If you like the tone of this writing, I would like to refer you to someone who meets irs back tax help criteria.  Please contact irs back tax help.  Before you email me, please click on and read “About irs back tax help.”

IRS Fresh Start Initiative 2012

First, last year’s review:  2011 IRS Fresh Start Initiative.

The irs.gov link and full original text:  2012 IRS Fresh Start Initiative.

New changes in IRS Collection policy for 2012 are reviewed below.

1. “Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill. The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes. Interest still applies on the 2011 taxes from April 17, 2012 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2012.”

• The first question that comes up is do you have to be unemployed now, or at the time the tax liability was accrued?  Still searching for the answer.
• This is great news and dovetails exactly with when we have always recommended you seek to hire IRS back tax help.  (When you owe more than $50,000)
• Before you set up an installment agreement with the IRS through the On-line Payment Agreement (OPA), I really recommend you take the time to read about the “in’s and out’s” of IRS Installment Agreements.

2. Installment agreements.  “The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.”

3. Offer in Compromise:  No official changes to Offer in Compromise (IRS Form 656) for 2012.  (Yet.)

The IRS “What Ifs” for taxpayers in an Economic Downturn

Click “About irs back tax help” to learn about us or read irs back tax help Testimonials to see how we treat people.

If you would like irs back tax help to be your first or second opinion, I can be reached at irsbacktaxhelp@gmail.com.  I do not pressure people in an already stressful situation.

Regards,

irs back tax help

Can you really abate (remove) IRS penalty? And other IRS Collection Stats

IRS Delinquent Collection Activities for 2011

This is a review of IRS collection actions for 2011.  This includes Offers in Compromise accepted, Filed Federal tax lien, notices of levy served on third parties, IRS seizures, and IRS penalty abated/removed.  If you have questions about this review, please reference:  bp105.

• If you know you need to take action, read my article “IF” you should hire IRS back tax help.  (You should not automatically.) Titled “Owe IRS back taxes? When, who, and how do I hire IRS back tax help?” before you do anything else.

As usual, If you like the tone of this writing, I would like to refer you to someone who meets irs back tax help criteria.  Please contact irs back tax help.  Before you email me, please click on and read “About irs back tax help.”

Interesting stats for 2011 and somewhat contradictory.  IRS acceptance of Offers in Compromise have jumped dramatically.  Is it due to IRS leniency, or because the main offenders of frivolous offer in compromise filers are out of business?  Ronni Lynn Deutch is out of business, J.K. Harris is out of business, and TaxMasters is in bankruptcy. 

Source:  IRS Back Tax Collections, Offer in Compromise, Federal Tax Liens, IRS Levy, IRS Seizures

IRS Offer in Compromise Accepted and Rejected

There has been a large jump in the percentage of accepted Offers in Compromise with no stated equally dramatic change in policy.  By comparison in 2010, only 24% of all offers were accepted. 

Offers in compromise (thousands) [5]:	2011	% Accepted
Number of offers received	59
Number of offers accepted	20
Amount of offers accepted	154,092	34%

IRS Tax Liens, Levy, & IRS Seizure Stats 

IRS Seizures are the real concern here.  IRS tax liens and IRS levies stayed relatively level. 

Enforcement activity:	2010	2011	% Change
Number of notices of Federal tax liens filed [6]	1,096,376	1,042,230	-5%
Number of notices of levy served on third parties	3,606,818	3,748,884	+4%
Number of seizures	605	776	+22%

 IRS Civil Penalty Abatement Statistics, Yes, it does really happen

Everyone always asks.  Can you really Abate IRS Penalty?  Yes.  The IRS admits it officially.  Roughly one-third of all penalty is abated.  It is important to fight IRS penalty.  46% of all civil penalty is abated for employment taxes.  If your Revenue Officer isn’t working with you on IRS penalty, they should be. 

Table 17.  Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Year 2011 [1]
[Money amounts are in thousands of dollars]
Type of tax and type of penalty	Civil penalties assessed		Civil penalties abated [2]
	Number	Amount	Number	Amount
	(1)	(2)	(3)	(4)
Civil penalties, total	38,646,963	30,921,558	4,871,988	11,008,638	36%
Individual income tax:
Civil penalties, total [3]	28,749,882	15,580,904	3,067,370	5,241,771	34%
Accuracy [4]	500,472	1,112,671	51,461	252,004
Bad check	296,559	24,795	11,959	5,088
Delinquency	3,736,987	6,344,147	790,190	2,718,565
Estimated tax	7,366,907	1,569,824	263,442	450,376
Failure to pay	16,841,952	6,291,624	1,944,535	1,697,104
Fraud	2,391	186,116	167	107,263
Other [5]	4,614	51,727	5,616	11,371
Business income tax:
Civil penalties, total	1,080,027	1,496,418	250,325	611,457	41%
Accuracy [4, 6]	4,204	191,564	d	d
Bad check [6]	4,679	14,551	210	250
Delinquency [6]	594,265	651,050	170,685	295,428
Estimated tax [6]	198,697	203,923	8,465	99,486
Failure to pay [6]	259,245	304,238	64,793	149,844
Fraud [6]	192	9,383	d	d
S corporation/partnership information [7]	18,662	117,262	1,758	10,547
Other [6]	83	4,447	4,318	38,618
Employment taxes:
Civil penalties, total [8]	7,745,830	5,298,944	1,364,041	2,424,513	46%
Accuracy [4]	2,590	13,638	238	962
Bad check	192,135	25,154	3,610	2,632
Delinquency	1,669,240	1,340,470	291,429	655,989
Estimated tax	3,595	14,182	648	10,878
Failure to pay	4,162,673	1,100,324	673,166	383,485
Federal tax deposits	1,715,095	2,795,325	394,938	1,370,523
Fraud	256	3,404	12	44
Other	246	6,447	0	0

Not happy with IRS back tax results?  

If you feel like you are on the wrong side of all these statistics, it is probably worth seeking a second opinion.  If you would like irs back tax help to be your first or second opinion, I can be reached at irsbacktaxhelp@gmail.com.  I do not pressure people in an already stressful situation.

Regards,

irs back tax help

 

Part 3, IRS Collection Efforts Failing the Taxpayer and Violating Taxpayer Rights

Part 3 of the review of the Taxpayer Advocate report includes IRS Penalty Abatement and Innocent Spouse changes.

All irs back tax help comments are in blue.  If you have questions about this post, please reference:  BP 77. 

If you know you need to take action about your IRS back tax problems, read my post about whether or not you should hire someone (You should not automatically) titled:  “Owe IRS back taxes? When, who, and how do I hire IRS back tax help?” before you do anything else. 

As usual, If you like the tone of these posts, contact me for consultation.  I can be reached at irsbacktaxhelp@gmail.com.  Before you email me, please click on and read “About irs back tax help”.

2011 National Taxpayer Advocate Executive Summary on IRS website

2011 National Taxpayer Advocate Full Report on IRS website

People have asked me why I’m skipping parts of the report.  The answer is simple: 

We don’t specialize in those areas, so we have no comment.  It is very important to get people who fully understand each deep niche of tax code, and their particular section of the Internal Revenue Manual.

• Anybody, whether it is an Attorney, CPA, or Enrolled Agent, who claims they can do it all is a little too prideful.  If the person who files your taxes says they can handle the Collection Division or other non-traditional filing issues, they probably can, the real question is how well can they handle it?  That kind of hubris is costing their clients money.
• We won’t file taxes, or litigate for people who are dealing with the Criminal Investigation Division, or any other area where we are not committed to excel.  (Although we do have experience pulling people out of the CID on occasion and got their collection cases returned to the Collection Division.)

From the Executive Summary: 

• “Many appear to believe the IRS will always seek to apply the maximum penalties, regardless of the situation, even to “benign actors.”  Absent clear procedures and transparent guidance about how these benign actors can return into compliance without being subject to maximum penalties, the IRS is squandering an opportunity to substantially improve voluntary compliance.”

This is true, and it goes right back to the automation problem discussed previously.  Computers apply IRS Penalty & Interest without thought.  It takes the human hand to remove IRS penalties.  Do not assume they will be removed automatically and do not assume that a Revenue Officer will remove them for you.  Always appeal your penalty abatement up to the Appellate Division unless you have had 100% of your IRS penalties abated.  Interest is not abatable.

• “The IRS should require all employees who handle innocent spouse claims, all appeals employees, all revenue agents, all revenue officers, and all SB/Se chief counsel attorneys to take the domestic violence training prepared by the Taxpayer Advocate Service”

The IRS’ handling of innocent spouse claims has already changed for the better, but still needs improvement.  Notably, the two-year cutoff for innocent spouse consideration was eliminated. We are excited to see how much further this can go. 

What’s next for irs back tax help?  More review of the Executive Summary to include increased and earlier contact from Revenue Officers for people who owe back taxes, the Federal payment levy program, and the Failure-to-Pay Penalty Computations.

If you would like irs back tax help to be your first or second opinion, I can be reached at irsbacktaxhelp@gmail.com.

What can I do to remove IRS penalty & interest? Can I get an IRS penalty abatement?

All IRS Back Tax Help comments are in blue.  This post is about IRS notices when you owe overdue 1040 personal income tax.

If you know you need to take action, read my thread about whether or not you should hire someone (You should not automatically) titled “Owe the IRS Back Taxes?  When, Who, and How to Hire IRS Back Tax Help”  

As usual,  If you like the tone of these posts, contact me for consultation.  I can be reached at irsbacktaxhelp@gmail.com.  Before you email me, please click on and read “About IRS  BACK  TAX  HELP”.

irs.gov link and original and full text here:  http://www.irs.gov/taxtopics/tc653.html

“If there is any money owed, you will be sent a bill. Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent.”  Right now it’s 3%.  

“Interest is compounded daily. If you file on time but don’t pay all amounts due on time, you’ll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is reached. The one-half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy.” To be more clear, in the first month it is .5% penalty of the amount owed, in month two, 1%, in month three, 1.5% and so on…until it reaches 25% where it caps out.  Bear in mind that this is only one of the penalties they are charging you.  Typical growth rates including both IRS penalty and interest is 20-25% for the first year, then 40% in year two.  Your total liability doubles in a little over two and a half years, and that’s why it’s so important to attack your liability in the best way possible.  Agreeing to an IRS pay plan on the Revenue Officer’s terms is literally like agreeing to a loan at 40% for 2-5 years.  You would never agree to those rates under normal circumstances.  There are ways to manipulate that growth rate in your favor.  

“If you owe tax and don’t file on time, the total late-filing penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months.”  Here’s another 5% on top of the 25% above.  This penalty grows just like the one above, and why it’s important to get filed on time or as soon as possible if it’s already late.  Once that happens, this penalty is stopped.  

“You must file your return and pay your tax by the due date to avoid interest and penalty charges. Often the funds necessary to pay your tax can be borrowed at a lower effective rate than the combined IRS interest and penalty rate.”  This is absolutely true.  However, if your financial situation prevents you from getting a loan, or you cannot risk putting up collateral, (Like your home), do not pursue this course of action.  If it doesn’t make sense now or five years from now, don’t put yourself or your assets in jeopardy of IRS levy or seizure.  IRS Installment Agreements, Offers in Compromise, or Partial Payment Installment Agreements can serve your purpose equally well.   

“The penalties for filing and paying late may be abated if you have reasonable cause and the failure was not due to willful neglect. If you’re billed for penalty charges and feel you have reasonable cause, send your explanation along with the bill to your service center, or call the IRS at 800-829-1040 for assistance.”  You can abate penalty that has accrued.  However they don’t mention that you must complete and IRS Form 843 along with your “explanation”.  Using the form creates a paper trail and invokes your appeal rights.  Here is a direct link to the form:

Topic 653 – IRS Notices and Bills, Penalties and Interest Charges

http://www.irs.gov/pub/irs-pdf/f843.pdf

“Generally, interest charges are not abated; they continue to accrue until all assessed tax, penalties, and interest are paid in full. Generally, any reasonable cause exception to the penalty for failure to pay tax cannot be determined until the tax is first paid in full.”  Three things here.  

1.  “Generally”  Does it make sense to pay them every penny of the penalty and then ask them to return it?  No.  Always do it during the first year of an installment agreement.  

2.  You have three years from the point of paying penalty to fight for it.  So if you’re agreement is longer than three years, and you paid most of the penalty in the first year, no penalty abatement will occur.  These are the reason professional help makes sense.  The IRS system is indifferent, and typically, Revenue Officers don’t care to help with a penalty abatement.  

3.  Be wary of anyone who is telling you they can get IRS interest abated as well as penalty.  They either don’t know what they are talking about (worrisome) or they are intentionally misrepresenting what can be done (ill intentioned).