The Basics of Installment Agreements

As the economy continues to recover, individuals continue to find creative ways to make ends meet. For many of us that may include a second stream of income we can earn from home or the sale of a family heirloom. Sometimes it’s as simple as adjusting our tax withholding hoping to make things a little bit more comfortable on a monthly basis. But what happens when that extra income or adjustment creates a tax liability at the end of the year and we simply don’t have the funds to make payment to the IRS when it’s required?

At that point, many individuals consider making payment in installments, and the IRS has specific guidelines for accepting installment plan requests that it may be in your best interest to know about. IRS installment agreements are essentially categorized by the total amount of the outstanding liability and have varying degrees of requirements, but in many situations they can be obtained without an obtrusive personal financial examination.

The first thing to consider when dealing with an outstanding liability is whether or not the full amount can be paid within 120 days, if this is the case then an installment agreement may not even be required. With a simple phone call or a visit to the IRS website, a taxpayer can potentially establish a request to pay in full within 120 days and avoid the fee associated with an installment agreement.

If the liability is too large for payment to be made within 120 days, the analysis becomes more involved. A taxpayer should be able to repay the amount owed within the statutory period for collections, in other words, within the ten year period that the IRS has to collect the debt. Typically, an installment agreement will provide a taxpayer with seventy-two (72) months to pay off the full amount owed in equal installments. The IRS may consider agreements over a longer duration or for a lesser amount than the full amount owed, but these situations are the exception and not the rule. Ultimately, in order for an installment agreement to be valid, it must be approved by the IRS. So how does a taxpayer get an installment agreement approved?

As mentioned previously, agreements can be categorized by the total amount of the outstanding liability, and in general, the smaller the amount owed the less complicated the approval process for installment agreements. For taxpayers owing $10,000 or less and meeting specific IRS standards, approval is mandatory provided the taxpayer has timely filed all returns and paid all taxes owed over the past five years, has not entered into an installment agreement within the last five years, is determined to be unable to pay the tax owed in full on the due date, and agrees to pay the full amount owed within thirty-six (36) months while complying with all tax laws during that period.

Not meeting these standards does not eliminate a taxpayer from eligibility for an installment agreement, but it does remove them from automatic approval and subjects their installment proposal to individual review and consideration by the IRS. In considering proposals the IRS will review certain required information and again, the amount of the outstanding liability determines how much information is required to be furnished. For taxpayers owing $50,000.00 or less a proposal can be made for a Streamlined Installment Agreement which does not require a standard financial disclosure statement. Provided a taxpayer agrees to direct debit installment payments, the consideration comes down simply to the ability of the taxpayer to pay the outstanding liability within the time remaining for collection and in many cases will be approved without completing a financial statement.

Should you find yourself in a situation where you are faced with a substantial liability and would like to discuss your options for an Installment Agreement, it may be a valuable mechanism for resolving your tax problems and protecting your livelihood. Contact Tax Alliance today to discuss your situation further.

If you feel that this is something you need to anticipate or would like to review based on a previous year’s filing, the professionals at Tax Alliance are equipped to assist you in evaluating your eligibility for relief and filing the necessary documents to claim what is rightfully your money.

Tax Alliance

2002 E McFadden Ave #110

Santa Ana, CA 92705

 

(800) 987-3051

www.TaxAlliance.com

Stop Avoiding the Mailbox

The same routine plays out every day all over the country; millions of Americans hit the end of the driveway to check the mail already knowing what’s inside. The highlight might be a birthday card or a new magazine but, for the most part, it’s some variety of grocery store circulars, solar panel advertisements, or rage inducing cable and cell phone bills.

But for so many of us, that walk to the mailbox makes our heart beat a little faster, our palms sweat a little, and our minds start to race knowing that we don’t have an answer to the letter awaiting us. That’s because the IRS has come calling. For anyone dealing with an income tax issue, the walk to the mailbox is a daily cause of anxiety, wondering how much the penalties and interest may have increased, or what further collection action the IRS may be pursuing.  That anxiety grows until, at some point, those IRS letters may find themselves in the same “circular file” as the rest of the bills that we’re simply too overwhelmed to worry about today. And that’s when the problem gets worse.

Ignoring the IRS may seem like the only way to deal with this difficult situation, heck, as we get older we ignore a lot of unpleasant things like the doctor, the dentist, or the retirement adviser. But choosing not to respond to communications from the IRS, or simply not knowing how to resolve your tax issue properly, can lead to very intrusive and financially burdensome collection activity including the filing of a tax lien, a garnishment of wages, levy of personal bank accounts, or a seizure of your assets. Ultimately, the only thing you can do is face the liability head on and develop a strategy to get back on good terms with Uncle Sam.

That’s where Tax Alliance comes in. Often times the situation is daunting because you don’t where to begin, the issue may stem from unfiled returns or long overdue balances that you’ve lost track of. It can help just to have an experienced adviser who will help you sort out the issues and get a clear picture of what’s happening in your case. From there, we can help to develop a plan and review your eligibility to resolve your Federal and State tax issues in the most affordable and efficient way possible.

Working directly with Tax Alliance gives you access to highly skilled Enrolled Agents, Certified Public Accountants, and Attorneys that will give you an honest assessment of what can be done and outline the best possible resolution that you can expect. From there, we work together to make sure that the best outcome is accomplished. This may include reviewing your options for penalty abatement, installment agreement, or potentially a negotiated offer in compromise should your financial circumstances warrant. Like many legal situations, it can be in your best interest to seek the guidance and services of a professional, and an IRS liability is no different. It could make all the difference in resolving your situation affordably and amicably.

So the next time your daily routine plays out, and you feel that anxiety start to creep in as you walk to the end of the driveway, do yourself a favor and call Tax Alliance to see how we can be of help to you today.

Tax Alliance

2002 E McFadden Ave #110

Santa Ana, CA 92705

(800) 987-3051

www.TaxAlliance.com

The Basics of Injured Spouse Relief

As we close the books on another summer wedding season, for some newlyweds the champagne won’t be the only hangover that results from their new legal relationship. Now to be clear, the situations discussed in this article are not an everyday occurrence, but the possibility for this information to be useful grows each day as the economic climate continues to turn around. Whether just married, or just confronted with an outstanding obligation of a single spouse, it is important to understand how that obligation can impact the other individual and the family’s finances.

While unpleasant, hopefully the parties have gone through their individual finances prior to marriage to identify potential points of difficulty in the future. Or maybe it’s necessary to reevaluate those finances when specific life events such as loss of employment or medical issues require families to make difficult financial decisions in order to get by. One thing that a couple may want to outline, would be the separate obligations of both parties that may be subject to tax refund offset or intercept should those obligations fall behind. Tax Alliance believes, Nobody wants to face these issues but they do happen, and being prepared for the potential consequences can save one spouse from suffering the consequences for an obligation which is not truly their own. These obligations could include prior tax liabilities owed to the IRS or state, court mandated child support payments, or even federal student loan obligations and may be owed by only one spouse from prior to the marriage.

In the event that a specific debt falls delinquent, and is subject to federal collection efforts (i.e. a federal student loan, child support, or tax debt) the IRS may turn over any refund due to the owing party in order to pay down the balance of that obligation. When a couple files a joint tax return and is owed a refund, this may cause a portion of that refund that is attributable to the non-debtor spouse to be forfeited as well. This non-debtor spouse is suffering the consequences of their spouse’s individual obligations and is therefore entitle to relief under the tax code as what is commonly referred to as “Injured Spouse Relief”.

By filing Form 8379, in conjunction with their jointly filed return, an injured spouse may recoup or prevent the application of their portion of the refund to the past-due obligation of their spouse. While simple in its concept, this is a mechanism that may go overlooked at the time of filing and would require an additional filing within the appropriate time frame to take advantage of this valuable relief.

Tax Alliance

2002 E McFadden Ave #110

Santa Ana, CA 92705

(800) 987-3051

http://www.TaxAlliance.com