Frequently Asked Questions

General Questions

Tax Relief, also known as tax resolution or tax problem resolution, is utilizing the different programs or methods offered by the IRS or used by the tax resolution industry to assist taxpayers who have defaulted on their tax obligations to instead meet these obligations. In some cases, these programs may aid the taxpayer in the manner in which they pay back their debt. Such options can include the use of one or more programs, including  a payment installment plan, a reduction in the principal amount due, penalties being forgiven in part or in whole, or any other combination. Also, relief is available to individuals and businesses, and at every level of income. 

 

It is very important for us at Bullseye Tax Relief to assess every situation as a unique case, deciding if tax relief is suitable for you, and what type of tax relief fits your situation.

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That would depend upon your own situation, which is unique to each individual and business. Although a very large percentage of taxpayers with tax issues can find some form of relief, it is not always guaranteed.  What we need to look at is the amount you owe, and if the fees to retain our services or similar service, is justified. For example, if the fees will turn out to be higher than the anticipated relief, then engaging a tax relief service may not be the best for you, in which case we will direct you to free resources that can help you manage the situation on your own. In some rare cases, we have situations that cannot be worked out using the tools and programs available. In these cases, we will advise you to save your financial resource. 

 

Free Consultation

At Bullseye Tax Relief, we believe that problem resolution is both an art and a  science. The science portion is the understanding of the tax code and available programs provided by tax authorities to help taxpayers with outstanding tax debt, combined with a deep understanding of the taxpayer’s situation. The art portion is utilizing all of this knowledge to work for you, selecting the best strategy and presenting it to the tax authorities in a way that maximizes the chances for success.

Our 3A process is unique in our industry. Most firms are concerned about how many cases they can push every day, which makes them think of themselves more as practitioners, hired to complete a task. While many of them are very reputable and truly care, they still miss the importance of the advisory aspect of tax relief. We place a great emphasis in our process on being your advisors. We take the time to tell you what options you have available and what we believe is best for you. 

 

Check our process page for more details. 

 

Last but not least, we guarantee all our clients that we will perform a thorough analysis, and will do the work using our secure process to ensure the privacy of your data. We also guarantee that our communication will be frequent enough to keep you informed, and all our instructions will be clear so you can act on them. We promise to charge fair fees and make it easy for you to pay them.

 

Contact us as soon as you are ready to start. You can call, email or send an online inquiry to have someone contact you. We will discuss your situation with you for free and tell you if we can help. 

It will be useful to have the most recent correspondence from the IRS or other tax authority ready and accessible when we make contact. In this way, we can assess the urgency of the matter and see if there is something we need to do immediately as in the case of liens and tax levies. 

 

The short answer is: it all depends upon your circumstances. There are some actions that can be done fairly quickly to resolve an issue, such as when a lien is placed on a property or your bank account is levied. There are emergency measures can be taken to stabilize your situation. However, to resolve the underlying problem and provide you the relief that you really need may take more time. Every situation is different. 

There are some guidelines and best practices that can help us give you a rough estimate of the timeline. Yet, there are always cases that take a lot less or a lot more time than the average case. Ultimately, the length of time is determined by the tax authority handling your case. 

We do have some control in reducing and/or eliminating delays:

  • by doing things right from the start
  • by helping you gather the information and documents we need
  • by keeping on top of the process
  • by frequent communication with the tax authorities
  • by presenting the tax authorities with an appealing proposed solution

Although, in some situations, tax payers end up paying a few cents on the dollar, please be aware of any advertising or claim of such promises. The Offer in Compromise and at times Partial Installment Agreements are two strategies that can lower the amount you pay below the outstanding amounts. They both have certain rules and requirements that have to be met to be qualified for those programs. They are not a free pass to lower your taxes or to bargain with tax authorities.

Please be assured that if your tax situation warrants the use of either of these strategies, we will be presenting these solutions to you.

 

Fees

Unfortunately, we cannot give you an accurate amount until we actually analyze your case thoroughly by speaking with you, gathering some preliminary information and asking you some basic questions about your tax situation. We can provide the fee amount once we analyze your case. You can decide to retain us after that. It is our pleasure to inform you that we are a no-pressure company. We will never try to make you commit to anything as fast as possible so we can lock you in as a client. We want you to be sure of the decision you made and feel comfortable about the process, the fees and the timeline presented to you.

 

Visit our payment page for some more information.

Unfortunately, not. Payment must be made before work on your case begins; however, we have several payment options that you can take advantage of. Please check our payment page for more details.

 

Yes, you can use our third-party partner that will help you make payments over time. It will allow us to start working on your file right away, while you are still making payments towards your fees.

 

Services

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the amount you owe. Offer in Compromise was created for those in tax debt that could not pay off their debt in full without experiencing financial hardship by doing so.

 

Although anyone can submit an Offer in Compromise, not everyone is eligible to be accepted for the program. They must be currently in compliance with their taxes. As matter of fact, only a minority of the people that request an Offer in Compromise will receive it. At Bullseye Tax Relief we work with you to see if an Offer in Compromise is the best solution for your particular situation or if you are better off with other available strategies and solutions.

 

Visit our Offer In Compromise page.

 

There is no hard and fast rule since each situation is unique. However, many offers can be accepted in about 6 months or less, unless there are delays that increase the time required to process and decide on your offer. The most important thing we do at Bullseye Tax Relief is to help you avoid delays that can increase the length of time for the process.

 

How well the Offer in Compromise is prepared is a big factor in influencing the duration of time for a decision. Having errors in the Offer in Compromise will delay any decisions in its acceptance by the IRS.

 

Another factor is compliance with having filed tax returns during the timeframe that the Offer in Compromise covers. Not being in compliance will also delay any decisions.

 

At Bullseye Tax Relief, we educate you on what needs to be done to avoid such delays. We also employ state of the art technology to help you get and stay in compliance and avoid any other delay factors that we can control.

 

The Offer in Compromise will only cover the years for which no tax returns were filed, meaning you defaulted on your tax obligation. However, other tax strategies may be utilized to address other parts of your tax debt.

 

At Bullseye Tax Relief, after studying your case very carefully, we will determine the best plan of action for your circumstances.

 

Currently Non-Collectible (CNC)

If you agree that you owe money to the IRS but your financial situation makes it impossible to pay what you owe without causing financial hardship or resulting in your inability to pay for your basic living expenses, you may qualify for a Currently Non-Collectible status. Currently Non-Collectible is a status in which the IRS cannot collect on tax debts or liens from you. 

 

If you financial situation changes, whereby you are able to pay your tax debt or a portion of it, then you may be required to pay back your debt, as long as the statute of limitation has not expired. 

 

However, if your financial situation remains as such as you remain unable to pay part or all of your outstanding tax debt, then you will not be required to make any payments.

 

After gathering information from you about your tax situation as well as your financial situation, we will determine the next steps. We will work with you to see what your estimated future income might look like and then we will advise you regarding the use of the CNC program, if it is appropriate for you. 

 

Penalty Abatement

Penalty Abatement relieves you from facing penalties for failing to file tax returns or making payments on time as an individual, or failing to deposit certain taxes as a business. If you have complied with law but are unable to meet the tax obligations due to circumstances beyond your control, the IRS offers you the ability to have your penalties waived. There are three types of penalty relief that the IRS offers: reasonable cause, first-time penalty abatement and statutory exception.

 

Most of the time, most penalties can be abated; however, not all penalties can be abated or removed. It depends upon each circumstance. It  is also important to note that first time penalty abatement requests are so much easier to be accepted by the IRS than repeat requests.

 

Yes, it is possible. We have to first see what makes up your tax debt obligation, how many tax periods are involved, and the causes of the penalty. We will then have a better idea of which penalties are likely to be removed with penalty abatement.

 

Installment Agreement

If you cannot pay your tax bill in full, there are many different types of installment agreements available to you. All of them have their own benefits. The IRS allows you to break down your debt into monthly installments if you are unable to pay the amount owed to the IRS in full in less than 120 days. This allows you to pay down your tax debt while avoiding wage garnishment, levies and collections. Your account will still accrue penalties and interest, but they will be assessed against a smaller amount as you pay down the debt. In addition, paying against your tax debt will demonstrate your “good faith” to the IRS.

 

No. Once you file, you do not HAVE to make your installment payment until the agreement is approved. However, we highly recommend that you start making these payments right away, as if your plan has already been approved.

 

Aside from our fees, there is a cost for applying to the program. Check the costs at the IRS site at https://www.irs.gov/payments/payment-plans-installment-agreements#plandef.

 

Partial Payment Installment Agreement

A Partial Payment Installment Agreement (PPIA) is similar to other types of installment agreements in that the IRS agrees to allow you to break down your tax debt into affordable monthly installments. The difference between a PPIA and a regular installment agreement is that the IRS agrees to allow you to pay only a portion of your debt over an allotted amount of time that they determine. The IRS usually allows the tax payer two years. In order to apply for a Partial Payment Installment Agreement, you must provide the IRS with a full financial disclosure indicating your wages, assets and expenses. If you cannot afford a regular installment agreement and the amount that you would be paying is unlikely to ever cover the full tax debt then a Partial Payment Installment Agreement may be the most beneficial course of action for you and your business.

 

An Installment Agreement is expected to pay off the entire outstanding tax debt obligation while the Partial Payment Installment Agreement is expected to pay an amount LESS than the originally owed amount. 

 

Partial payments are accepted by the IRS in lieu of the full amount due since the IRS recognizes that the tax payer cannot pay the entire tax obligation without undue financial hardship. Monthly payments are paid to the IRS usually during a two-year period or before the statute of limitation expires.

 

One of the biggest factors in qualifying for the Partial Payment Installment Agreement is your financial situation, including your income, cash on hand and other assets you own. If your financial situation does not allow you to make full payment, but you are still able to make some level of payment towards your debt, a Partial Payment Installment Agreement can possibly be the right strategy for you. When you contact us, we will be able to assess if your agreement will likely be accepted or not, or if other strategies are more suited to your situation.

 

Theoretically, the Partial Payment Installment Agreement will be in effect until you reach your statute of limitation regarding that particular tax debt obligation or until you have paid your debt as agreed.

 

Federal Tax Lien

A Federal Tax Lien affects your financial assets, personal property and your real estate property. Tax liens can vary based upon your individual situation. They are the government’s way of protecting their interest in case you fail to pay your tax debt in a timely manner. If you fail to pay the IRS timely, a lien will be attached to all of your current or future assets until the offending tax issue is resolved. If you do not address the tax debt in a timely manner, the lien may develop into a levy where the IRS has the ability to seize said assets.

 

All assets including cars, home and other real estate, stock, bonds, and more.  Having a lien on your assets makes it hard for you to use your assets as you please. For example, if you have a lien placed on your real estate, you will not be able to freely refinance the loan you have on the property until you receive a tax lien subordination or if you are able to discharge or have the lien withdrawn.

 

Tax Lien Discharge

A tax lien discharge removes the tax lien from the specific property to which it was attached. The IRS grants a tax lien discharge once the tax debt is satisfied. If the IRS accepts your request for a tax lien discharge, they will give you a Certificate of Discharge. A Certificate of Discharge allows you to refinance or sell the property that had the tax lien attached to it.

 

You would have to contact the IRS or use the services of a licensed professional. Several forms must be completed to show good reason for the request of the discharge and meet one of the reasons that the IRS allows or accepts for a tax lien discharge. You can apply for a tax lien discharge by demonstrating to the IRS that their granting of the tax lien discharge would not jeopardize their interest in the property. In other words, the IRS would still be paid the amount owed without the use of the tax lien. There are a number of forms you must fill out demonstrating the appraised value of the property, a description of the property and a basis for the discharge. There are a number of reasons that the IRS may approve your property for discharge.

 

On average, it takes from 30-60 days to get the lien discharged however providing there are no errors in completed forms. If the documents are not all in order, you can expect that the process will take more time.

 

Tax Lien Subordination

Tax lien subordination places a creditor ahead of the IRS in their claims against a property. This may be necessary for real estate transactions, such as a mortgage refinance. Tax Lien Subordination does not remove a federal tax lien on a property; however, a creditor is given prioritized interest to your assets, ahead of the IRS. This makes it easier to acquire a loan or mortgage or to refinance a house.

 

Lien discharge is best used for the sale, transfer or refinancing of a property. Lien subordination can be used in the refinancing of a property but not necessarily when selling your property, since it just allows others to put a lien on the same property, and to take the first priority, moving ahead of the IRS. Creditors, specifically for secured loans, would want to place a lien on a property when funding you and therefore, a lien subordination or discharge would be absolutely necessary when you want to refinance a property for the purpose of securing a loan.

 

You will have to apply for a certificate of subordination by following the instructions and completing the right forms. The IRS has some self-help videos on several topics, including self-help for tax subordination. 

 

You will have to make a case that the lien subordination will be to the advantage of the IRS. For example, if refinancing your property will improve your financial situation to allow you to make payments towards your tax debt, or increase the amount of your current payment or if you will receive cash from the refinance that will allow you to pay part or all of the outstanding debt amount, then the IRS may accept a Lien Subordination request. Please contact us to discuss your case because each case is unique.

 

Similar to the process of lien discharge, it can take from 30-60 days on average to get the lien subordinated. However, any errors in completing the forms or if the documents are not in order, then you can expect that the process will take more time. It is advisable to apply as soon as you start thinking of refinancing your loan to avoid delays.

 

Tax Lien Withdrawal

You may be eligible for a Tax Lien Withdrawal if you have entered into a direct debit installment agreement or have come to some sort of an agreement regarding your tax debt with the IRS. The IRS places a tax lien on property or assets when you fail to pay a tax debt. A tax lien withdrawal makes it easier to sell your property or assets if you have a federal tax lien placed on them as it removes the Public Notice of Federal Tax Lien from the asset in question. This means that the IRS is no longer in competition with other creditors.

 

The IRS may withdraw a lien if it is for the best interest of the taxpayer and the IRS. Generally speaking, if you make arrangements for your tax debt, such as an installment agreement or a partial payment installment agreement, you are likely to be able to get your lien withdrawn. 

 

Of course, paying off your debt is the surest way to have your lien released or withdrawn; however, we understand that circumstances may not allow you to do so. To learn more, contact us and we will assess your situation and inform you of the best way to deal with your lien. 

 

Eligibility includes:

  • You can provide evidence that the tax lien was not in accordance to IRS procedures or it was filed prematurely.
  • You entered into an Installment Agreement to pay off the past due tax lien.
  • Your tax debt is under $25,000.
  • You have entered into a direct deposit installment agreement.
  • You believe that the withdrawal of the tax debt is in the best interest of the government and yourself.
  • Withdrawal of the lien would allow easier repayment of the tax debt.

Forms can get a bit complicated and they require clear and detailed communication of the reasons why you think the IRS should withdraw your lien. Multiple errors can be made on the forms, such as missing information or a missing signature. Reasons must be stated in clear language and must be support by evidence.

 

We strongly recommend you be very careful completing these forms or get the help of a licensed professional, in order to maximize your chances of getting your withdrawal request approved. 

 

Having your tax lien withdrawal denied can impact your financial situation, affiliations, home ownership, job placement and more. According to the IRS, there are several actions you can take if  your withdrawal request is denied, including contacting the manager overlooking your request and filing an appeal. 

 

To avoid having to deal with a denial of your request, familiarize yourself with the forms and instructions for lien withdrawals. Be sure you have carefully completed all the sections of the forms, attached the appropriate supporting documentations, and signed the form. Doing so will increase your chances of having your withdrawal approved. You can always hire a third-party licensed professional, such as our company to ensure the completeness and accuracy of the process.  

 

Wage Garnishment Release

The IRS can obtain a wage garnishment against your wages and earnings through your employer to satisfy your tax debt. When you obtain a wage garnishment release, the IRS agrees not to take any part of your wages to satisfy your tax obligation.

 

Similar to any other tax levy, the IRS obtains the right to your property, i.e. your paycheck, so that they can collect the debt you owe. For this method, your employer withholds a portion of your paycheck and sends that portion to the IRS to pay off your tax debt. Wage garnishment can affect your gross wages, salary, bonuses, commissions, and retirement benefits. It and can even affect your disability as well as your VA and social security benefits.

 

A Wage Garnishment Release is just as the name implies. It is a way for the IRS to release your wages from garnishment. In order to obtain a Wage Garnishment Release, you must first request it from the IRS. There are three main reasons that the IRS will consider releasing your wages from being garnished: a) you have paid your tax debt in full, b) you have entered into a collection agreement, or c) you can prove that a wage garnishment would lead to financial hardship, making it more difficult for you to pay off your tax debt. When you obtain a wage garnishment release, the IRS agrees to not take any part of your wages to satisfy your tax obligation.

 

The IRS will typically send you a number of notices of the amount you owe in taxes before garnishing your wages. If you do not attempt to pay off your debt in full or through an installment agreement, the IRS will then garnish your wages. The IRS will not notify you that your wages are being garnished. Instead, the IRS will directly issue a notification of garnishment to your employer. Your employer will then notify you that your wages are being garnished.

 

Since the IRS sends several notices warning that a wage garnishment may be imposed against you, they are reluctant to release the wage garnishment once it is imposed. The rules and fees that the IRS must contend with do not make wage garnishment an ideal method for obtaining full payment of a tax debt.

 

If you are in full tax compliance in that you have filed all required tax returns, you are likely eligible for a Wage Garnishment Release. In other words, you may be able to release your wages from garnishment if:

We highly advise you to not ignore IRS notices but respond to them as soon as possible. If you are not sure how to respond to them, you can get the help of a tax professional. This is one way to avoid a wage garnishment.

 

As long as you pay as agreed with your payment agreement, the IRS will not impose another wage garnishment. However, if you miss any payment, then the IRS can impose a new wage garnishment against you. Keep in mind that the IRS will more than likely not accept another wage garnishment release from you if you have violated the terms of the first one.

 

If you have received notices indicating that your wages may be garnished, or if your wages have been already garnished, please call us immediately or seek other help as soon as possible.

 

Bank Levy Release

A bank levy gives the IRS the ability to freeze your bank account and collect money you have in the bank account to pay outstanding tax debt obligations. Bank levies, like wage garnishments, do not take place before you have received multiple letters alerting you of your tax issues and the intent of the IRS to levy your bank account. 

 

A Bank levy release will do just that, releasing your bank account so the IRS does not seize funds. Bank levies can be used in conjunction with wage garnishment to collect amounts owed to the IRS. Whether you agree if you owe these amounts or not, you have to respond to the notices you receive in order to avoid bank levies and/or wage garnishments.

 

If you just received your notice, respond immediately and work on having an agreement with the IRS to take care of your outstanding balances. 

 

If you disagree or you feel that there is error with your tax situation, you can request a hearing with the IRS as long as you respond within the 30 days period you are given to respond or to request a hearing. 

 

If you have received a letter for intent to levy, or if your bank account has already been levied, you can contact our office for a quick  consultation so we can work with you on identifying the best strategy to handle the situation.

 

Yes, if you make contact fairly quickly, and make arrangements to pay your taxes or if you challenge it through applying for an appeal, you may be able to get the funds that were levied back. Please note, the faster you make arrangements, the bigger your chances of getting that money back.

 

Innocent Spouse Relief

Innocent Spouse Relief relieves you from paying any penalties, interest or taxes for which your spouse is ultimately responsible for. Innocent Spouse Relief applies if your spouse (or former spouse) omitted or improperly reported items on your tax return without your knowledge. This relieves you from paying any penalties, interest or taxes on the misreported or unreported items on the returns, if it approved by the IRS. The IRS may also relieve you from some but not all of the responsibility for the misreported taxes in which case, you are responsible for paying whatever fees apply to the portion which the IRS did not approve for relief. The IRS will calculate for you what fees you are and are not responsible for after you file the form for Innocent Spouse Relief (IRS Form 8857).

 

The average time is approximately 6 months; however, the time can increase if there are issues while processing your request, such as contacting your spouse and/ or how fast you are able to submit requested documents. We advise our clients to carefully consider Innocent Spouse Relief as it is not the fastest or the best strategy in many cases. If we determine that Innocent Spouse Relief is the best option for your case, we will advise you to utilize this option and will provide you with all the support and guidance throughout the entire process. Just give us a call to see how we can help you.

 

Yes, the IRS will contact your spouse regardless of the marital status, whether you are still married or divorced.

 

You will not qualify for Innocent Spouse Relief if you knew of the action your spouse did, which resulted in owing money to the IRS. There are many situations where the spouse may not have known what the other spouse had done to manipulate, overstate income, understate expenses, or whatever else was the reason for the tax liability. You must have had reason to know or should have known regarding the actions of your spouse for you to be liable. So, if the spouse requesting relief was the accounting manager for the S corporation that had an understated amount on the tax return, then this spouse would not receive relief since he/she was a manager and should have known as to the truthfulness of the tax return filed.

 

Innocent Spouse Relief is one of the more complicated strategies that require careful study before determining if it is the right strategy. We highly recommend seeking help from licensed professionals when attempting to claim Innocent Spouse Relief.

 

Statute Of Limitations

The Statute of Limitation is the time period established by law for the IRS to assess, review and resolve any tax related issue. Once the time period passes, the IRS forfeits any claim to additional taxes, interest, penalties, fees or collection actions. Likewise, the tax payer forfeits any claims for refunds. There are several factors that impact the calculation of the statute, when it starts and when it ends. We greatly caution taxpayers in making these calculations on their own without first learning all the rules and exceptions that you need to take into considerations as you make this calculation. If you need help, please do not hesitate to contact us.

 

There are several statute of limitations regarding taxes: for claiming a refund, for assessing your tax, and in the collection of the taxes due. When the Statute of Limitation has expired in these cases, the IRS will not take any actions. So for example, in the case of a refund, the IRS has three years from the date of when a tax return is due to process a refund related to that tax year. After the limitation is reached, the IRS will not process a refund for you, even if you are due a refund based on tax calculations of your refund. The same rule applies to assessment and collections. Once the limitation is reached, the IRS can not assess or collect any more taxes.

 

Collection Appeal

A Collection Appeal allows the taxpayer to challenge the IRS’s actions for the collection of past taxes, including the placement of liens on the taxpayer’s properties. In many cases, this challenge will stop or reverse any collection processes and relieves the tax payer of any collection actions.

 

Whenever you fall behind on your tax obligations, the IRS will begin collection proceedings on any outstanding balances. The IRS has the ability to place liens and levies on your property and assets. The IRS will usually begin their collections proceedings by sending you collection notices. Despite being a government entity, the IRS is not perfect. They can be wrong in assessing penalties and interest on tax debt. They can even be wrong in declaring that you have not met your tax obligations. Any wrongful actions done by the IRS can be reversed.

 

There are two types of collection appeals recognized by the IRS: Collection Due Process (CDP) and the Collection Appeal Program (CAP). Both options apply to specific circumstances which sometimes may overlap.

 

There are two types of collection appeals recognized by the IRS: Collection Due Process (CDP) and the Collection Appeal Program (CAP). Both options apply to specific circumstances which sometimes may overlap. Collection Due Process allows you to appeal a Notice of Federal Tax Lien, both before or after a levy is placed on property, depending on the type of levy enforced.

 

CDP (Collection Due Process)

  • Works for liens and levies 

CAP (Collection Appeal program)    

  • The rejection or termination of an Installment Agreement
  • Before or after the IRS has placed a lien, levy or any seizure action against your property

A Collection Appeal enables the taxpayer to challenge the IRS’s actions for the collection of past taxes, including the placement of liens, levies or seizure on the taxpayer’s properties. In many cases, this challenge will stop or reverse any collection processes and relieves the tax payer of any collection actions. If the collection is found to be a mistake or to cause financial hardship, a collection appeal may allow the tax payer to at least stop if not reverse the collection process.

 

To be eligible for Collection Due Process, you must file for an appeal of the IRS’ ruling and actions within 30 days of the receipt of the first notice of a right to a hearing. This stops any collection actions by the IRS until a final decision is made. You are still able to file after the 30-day window; however, this will not stop the IRS from taking collection actions against you.

 

The Collection Appeal Program is more lenient in filing for an appeal. Although it is best to take immediate action, this appeal allows you to file before or after any action is taken by the IRS. If you file before the IRS takes any collection action, the CAP will usually protect you from any action being taken in the first place unless the IRS feels that the collection of the tax debt is at risk.

 

If you received a notice for your right to appeal, and you are not sure what action to take, please contact us immediately to guide you on the best action to take.

 

Administrative Appeal

An Administrative Appeal allows you a second chance in reversing or stopping an IRS’s decision or action that is unfair or incorrect. This may lead to a more favorable outcome for your tax situation.

 

The term Administrative Appeal applies to any appeal filed regarding action taken by the IRS. The IRS allows you to appeal any decision or action taken by them including decisions made during an audit or decisions to collect on tax debt. As a taxpayer, if you feel that the IRS has made any unfair or incorrect decisions in regard to your tax situation, you may appeal said action without going to court through their Office of Appeals, a separate entity from the IRS themselves.

 

All Administrative Appeals are filed through the IRS Office of Appeals. If you find yourself in a dispute with the IRS or are going through a tax audit, you have the right to appeal any decision made before going to court. The appeal method is often more cost effective than going to court.

 

In some cases, after an appeal is filed, the IRS will request either written arbitration or a hearing (usually over the phone) with an official within the IRS Office of Appeals in order for a final decision to be made; however, arbitration is optional. Most appeals to the IRS are made through a tax professional. If for any reason you apply for an appeal and the appeal is rejected, you are able to appeal the rejection of the appeal as well.

 

When an Administrative Appeal is filed, the IRS will halt any collection actions taken against you until the appeal is resolved and a decision is made. The Office of Appeals is separate from the IRS so that one does not influence the other in the decision making process.

 

The method for applying for an Appeal depends upon the amount of tax assessed. When the amount is less than $2500, the taxpayer can request the appeal with IRS personnel who assessed the taxes. If the amount is greater than $2500 but not greater than $25,000, then forms have to be completed or a complete and detailed written statement explaining the specifics of your dispute be provided. When the amount is greater than $25,000, a full request must be submitted. This includes, in addition to forms, information related to the request such as supporting documentation. 

 

When you disagree with the IRS decision in a tax assessment and  you want or should appeal their decision, please be careful to review all the facts. Research the different types of appeals available to you and the different use for each type. Complete all required forms or statements carefully.  Make sure the information is complete and accurate. 

 

If you need help, we are available to help you. Please take advantage of our free consultation where we can discuss your situation and discuss your alternative solutions.

 

Employment Tax Resolution

Employers are expected to pay federal, and state taxes for and on behalf of their employees, referred to as “payroll tax”. When these taxes are not paid, a series of collection steps are enforced, with some devastating results at times. Tax resolution can help avoid or deal with these collection activities. 

 

The term “Trust Fund” has a different meaning when applied to employment tax rather than to wealth management. This is the payroll tax amount assessed to the officers of the business. When the IRS refers to a trust fund in terms of a business, they mean the funds recovered from the taxes withheld from employees for which the employer is responsible for depositing into their federal tax deposit. These are called trust fund taxes because the employer holds the money in trust until it is deposited. A Trust Fund Penalty is enforced when taxes are held by the employer, but not used for the taxes for which they are intended. Tax resolution can help reduce and/or arrange the payment of these taxes.

 

A Trust Fund Recovery Penalty is implemented by the IRS to encourage business owners to pay their employment taxes. When someone owns a small business and they fall on hard times, they may feel tempted to tap into the tax funds that they collected from their employees to stay afloat. This action has dire consequences. Taxes collected from employees are called trust fund taxes because that money is held in trust until you deposit it to the IRS. When an employer fails to deposit their employees tax funds, they may have a penalty assessed against them.

 

A Trust Fund Recovery Penalty Interview and investigation permits the IRS (Internal Revenue Service) to collect unpaid taxes from businesses and assets of the individuals involved in the finances of the business. If the IRS believes you are responsible for the trust fund taxes, they will request an interview with you. The purpose of trust fund penalty assessment interview is to figure out if you are responsible for the recorded unpaid taxes or not. The interview is called a 4180 interview because the IRS agent will ask questions from the Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty).

 

A Collection Due Process (CDP) hearing could be your last chance to resolve whatever tax controversy you have with the IRS. The IRS will issue a IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing  or it will send IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it sends a levy. After that notice you must have a CDP hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153.

 

Trust Fund Penalty

A Trust Fund Penalty is an amount paid to the Department of Treasury for a business’ failure to timely deposit Trust Fund Taxes collected from its employees' paychecks.  It includes the full amount of the unpaid trust fund tax as well as interest. Employers withhold certain monies from their employees’ paychecks for income tax, Social Security and Medicare. These amounts are held in trust by the employer until he/she deposits the amounts with the Department of the Treasury. If an employer uses these monies to pay for expenses other for what they are intended, they are penalized.

 

The monies employers withhold from their employees’ paychecks are called Trust Fund Taxes because employers hold them in trust before depositing them with the IRS. They are payments for Federal income tax, Social Security, Medicare and the employer’s matching amount for FICA (Social Security and Medicare).

 

The person responsible for collecting and paying the Trust Fund Taxes is anyone responsible for collecting or paying withheld income taxes, employment taxes or excise taxes. This person either performs or directs the collection, accounting and paying of the Trust Fund Taxes. These people may include:

  • An employee or officer of a corporation
  • A corporate shareholder or director
  • A person with authority and control over the disbursement of funds
  • An employee or member of a partnership
  • A member of the board of trustees of a non-profit entity
  • Another corporation or third-party payer
  • Payroll Service Providers (PSP) or their responsible parties
  • Professional Employee Organization (PEO) or their responsible parties
  • Responsible parties within a common law employer or client of PEO/PSP
  • Sole Proprietor

Willfully failing to collect or pay Trust Fund Taxes will result in being personally liable for the full amount of taxes due plus penalties, also known as Trust Fund Recovery Penalty (TFRP). “Willfully” means to intentionally, voluntarily, or consciously failing to collect and pay these taxes despite being aware of the responsibility to do so. Intentionally disregarding the law or being indifferent with or without malice or paying other creditors instead constitutes willfulness.

 

The IRS will send you a letter stating that they plan to assess the TFRP against you. You have 60 days to respond or 75 days if you are outside the United States. They will conduct an interview with you to determine if you are the person responsible for the taxes or if you are directed by another. The penalty is equal to the amount of the Trust Fund Taxes (income taxes, withheld FICA taxes and excise taxes) uncollected and unpaid. Once the IRS has assessed the penalty, they will take collection action against your personal assets, including using Federal tax liens, levies and seizure actions.

 

The best way to avoid paying the TFRP is to always collect and pay the withheld amounts to the IRS on time. Do not use these funds for other expenses. If a TRFP is assessed against you immediately, pay it in full. You could also admit being liable by signing the Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then try to set up a payment plan or apply for a settlement. If the bill is under $25,000, the business should be able to pay it back over a 24-month period. Once a business sets up payments, you no longer have to worry about any personal assets being at risk.

Trust Fund Penalty Assessment

The IRS assesses a penalty against the person responsible for collecting and paying the Trust Fund Taxes and yet who failed to do so. Trust Fund Taxes are held in trust by the person responsible for collecting them. This person must then deposit these monies with the IRS by the deadline. 

 

No. The IRS will assess the penalty against anyone they believe had a part in the non-payment of the trust fund taxes. If the IRS believes an individual “willfully” withheld trust fund taxes, they will be assessed the penalty. For willfulness to exist, the responsible person must have been, should have been or was aware of the outstanding taxes. Once they were aware of these taxes, they either intentionally disregarded the law or were plainly indifferent towards the requirements. The IRS will sometimes even impose it against those who had no knowledge or control in the disbursement of the funds. In order to be liable and possibly assessed, you must have had a duty to collect and pay taxes, but willingly refused to do perform that duty. The penalty will remain owed against everyone deemed responsible until it is paid off by one or more the parties. 

 

According to the IRS, the TFRP can be assessed against any person who is:

  • Responsible for collecting or paying withheld employment taxes.
  • Willfully fails to collect or pay the taxes.
  • An employee or officer of a corporation
  • A corporate shareholder or director
  • A person with authority and control over the disbursement of funds
  • An employee or member of a partnership
  • A member of the board of trustees of a non-profit entity

If the IRS determines that you are the person responsible for the failure to pay Trust Fund Taxes, they will send you a letter stating that they plan to assess the TFRP (Trust Fund Recovery Penalty) against you. The letter will explain your right to appeal. You have 60 days to respond  (75 days if you are outside the United States). They will conduct an interview with you to determine if you are the person responsible for the taxes or if you are directed by another. If you do not respond to their letter, they will assess the penalty against you and send a Notice and Demand letter

The best way to avoid paying the TFRP is to always collect and pay the withheld amounts to the IRS on time. Do not use these funds for other expenses. If a TRFP is assessed against you immediately, pay it in full. You could also admit being liable by signing the Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then try to set up a payment plan or apply for a settlement. If the bill is under $25,000, the business should be able to pay it back over a 24-month period. Once a business sets up payments, you no longer have to worry about any personal assets being at risk.

 

Trust Fund Penalty Assessment Interview

A Trust Fund Recovery Penalty Interview and investigation permits the IRS (Internal Revenue Service) to collect unpaid taxes from businesses and assets of the individuals involved in the finances of the business. If the IRS believes you are responsible for the trust fund taxes, they will request an interview with you. The purpose of trust fund penalty assessment interview is to figure out if you are responsible for the recorded unpaid taxes or not. The interview is called a 4180 interview because the IRS agent will ask questions from the Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty).

 

There are two ways to avoid an interview:

  1. Pay the bill and cancel the interview.
  2. Admit liability by signing Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and attempt to set up a payment plan or settlement. In this case, your personal assets would no longer be at risk. It is best to consult a tax professional first.

If you are not responsible for the payment of Trust Fund Taxes, you can argue your liability. However, this can be extremely difficult and it is highly recommended to get a tax professional to assist you. Perhaps you accidentally signed off on a tax but you were not really responsible for the collection and payment of those taxes. Perhaps you acted carelessly, were “bullied” into signing off or did not understand the severity of the situation. The tax professional will have to prove that you are not responsible for the unpaid tax even if you were involved with the company finances. 

 

Collection Due Process

A Collection Due Process (CDP) hearing could be your last chance to resolve whatever tax controversy you have with the IRS. The IRS will issue a IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing  or it will send IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it sends a levy. After that notice you must have a CDP hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153.

 

Liens are recorded against properties indicating that you owe someone money. When the property is sold, the amount of money owed to the lien holder is distributed to that lien holder. Liens against properties make it difficult to sell or refinance them. A Federal Tax Lien indicates you owe money to the IRS for back taxes. Paying taxes on time, entering into payment agreements or offering compromises will help you avoid liens against any of your properties.

 

A levy is more serious than a lien since the IRS can seize any funds or properties to settle your account owed. This means seizing bank accounts and personal properties. A levy under U.S. Federal law is an administrative action by the IRS to seize property to satisfy a tax liability. The levy “includes the power to seizure by any means”. Once the IRS levy is in place, they will begin to seize assets until the tax liability is paid in full. If you happen to disagree with anything the IRS says you owe, you can file the CDP (Form 12153) request only within 30 days of these notices. Otherwise, you forfeit your right to object. Requesting a CDP hearing, entering into an installment agreement, requesting an offer in compromise or appealing the levy in the Collections Appeal Program will stop the levy.

 

It is best to speak with a tax professional when requesting a CDP. The tax professional will file IRS Form 12153, Request for a Collection Due Process Equivalent Hearing. The form will require some background information and the reason why you believe the IRS should not pursue the lien or levy against you. You send this form back to the return address displayed on the envelope containing the notice. You will have 30 days from the date of the letter. They are extremely strict with this requirement and failing to file within the 30 day period will result in you losing the right to a CDP hearing. If the CDP request is filed on time, the IRS must put a hold on collecting the debt amount pending the outcome of the hearing. If you happen to miss the 30 day deadline, you can still file for an Equivalency Hearing;  however, the IRS is already authorized to pursue the debt against you. You only have 30 days to act once you have received notice from the IRS regarding liens and levies so contacting a tax professional immediately is your best action.

 

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