by Fresh Start Tax | Oct 14, 2014 | Tax Help
As a former IRS agent and teaching instructor taxpayers many would be surprised how many cases are written off as noncollectable by the Internal Revenue Service.
For your case to be written off as noncollectable your expenses must exceed your income as defined by the national, regional and localized standards test standards.
You can find those standards on our website or call us today for a free initial tax consultation to find out if your case can be put in a IRS hardship.
Report by the Treasury Inspector General for Tax Administration (TIGTA).
The Internal Revenue Service’s (IRS) field workload selection process is not designed to ensure that cases with the highest collection potential are identified, selected, and assigned to be worked, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
In Fiscal Year 2013, the IRS collected over $3 billion dollars from delinquent taxpayers, but wrote off as much as $16 billion in taxes owed as not collectible.
While the field collects billions of dollars from delinquent taxpayers, resources have declined and many balance-due modules have been closed as currently not collectible. TIGTA performed this audit to determine whether the IRS’s workload identification, selection, and assignment practices ensure that the cases with the greatest collection potential are worked in the field.
In Fiscal Year 2013, 40 percent of the taxpayer delinquent accounts closed by the field were written off as currently not collectible.
There are several contributing factors limiting the effectiveness of the IRS’s collection efforts:
The IRS does not measure productivity or establish specific goals to evaluate case selection criteria.
Information systems do not track case source data, so management cannnot fully assess the effectiveness of field case selection criteria.
Case selection criteria do not consider the age of associated delinquencies, so many assigned cases include older delinquencies that will not likely be collected.
Case selection criteria do not consider the financial condition (such as income) of the delinquent taxpayers, so many of the assigned cases involve taxpayers with no ability to make payments.
Case selection criteria do not consider unsuccessful prior attempts to contact or locate the taxpayers.
IRS management has begun some initiatives intended to improve the workload selection process. While these initiatives could provide benefits, TIGTA believes that further action is warranted.
If you need professional tax help call us today we are the affordable tax firm that can provide affordable IRS tax help.
by Fresh Start Tax | Oct 13, 2014 | Tax Help
The Internal Revenue Service’s (IRS) field workload selection process is not designed to ensure that cases with the highest collection potential are identified, selected, and assigned to be worked, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
In Fiscal Year 2013, the IRS collected over $3 billion dollars from delinquent taxpayers, but wrote off as much as $16 billion in taxes owed as not collectible.
“The IRS has a large inventory of taxpayer delinquent accounts, but limited resources to collect the unpaid taxes,” said J. Russell George, Treasury Inspector General for Tax Administration.
“By making better use of its limited collection resources and working these cases strategically, the IRS could successfully collect more taxes and further shrink the Tax Gap.”
While the field collects billions of dollars from delinquent taxpayers, resources have declined and many balance-due modules have been closed as currently not collectible. TIGTA performed this audit to determine whether the IRS’s workload identification, selection, and assignment practices ensure that the cases with the greatest collection potential are worked in the field.
In Fiscal Year 2013, 40 percent of the taxpayer delinquent accounts closed by the field were written off as currently not collectible.
There are several contributing factors limiting the effectiveness of the IRS’s collection efforts:
- The IRS does not measure productivity or establish specific goals to evaluate case selection criteria.
- Information systems do not track case source data, so management cannnot fully assess the effectiveness of field case selection criteria.
- Case selection criteria do not consider the age of associated delinquencies, so many assigned cases include older delinquencies that will not likely be collected.
- Case selection criteria do not consider the financial condition (such as income) of the delinquent taxpayers, so many of the assigned cases involve taxpayers with no ability to make payments.
- Case selection criteria do not consider unsuccessful prior attempts to contact or locate the taxpayers.
by Fresh Start Tax | Feb 17, 2013 | Tax Help
Cannot Pay the IRS – There are Options – Former IRS Agents 1-866-700-1040
During these tough economic times many people are financially strapped and are having a hard time just making ends meet. IRS does not advertise this but it is very possible that you may qualify for an economic tax hardship with the Internal Revenue Service.
There are provisions within the Internal Revenue Service manual that allows for taxpayers that are going through a financial crisis to apply for this economic tax hardship and in doing so IRS will go ahead and put your case into a currently non-collectible file.
The Process
1. For this process to happen, the Internal Revenue Service will require a current financial statement. IRS will require either a 433-F or a 433 -A depending on which unit is currently working the case.
2. IRS will expect that this financial statement be correctly documented and also you will have to have all tax returns currently filed with the IRS.
3. IRS will also ask if you are currently making estimated tax payments or you have sufficient withholding being taken out so you will not owe taxes this year. IRS may ask you to adjust your current withholding to put you in a current tax hardship.
Should IRS determine that your case is a current hardship, IRS will put you into the currently noncollectable status. As a result your case will stay suspended for the next two or three years until your adjusted gross income reflects a change in your ability to pay the IRS.
When the CADE 2 computers of IRS finds that your AGI has sufficiently increased, your case will send the case back in to the billing cycle to be put back into the system once again.
SUMMARY OF ECONOMIC HARDSHIP
When the taxpayer’s liability can be collected in full, but collection of the federal tax would create an economic hardship, the IRS will consider all facts before taking collection action or enforcement action such as federal tax liens or federal tax levies.
The definition of economic hardship is derived from Treasury Regulations § 301.6343-1.
An Economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses.
The determination of a reasonable amount for basic living expenses will be made by the Internal Revenue Service and will vary according to the unique circumstances of every individual taxpayer.
Department of Labor Platforms
The IRS in accordance with the United States Departmental of Labor have set up platforms to determine these hardship and living standards. They can be found on our website.
These standards are also being used by the United States Department of Justice in the normal course of U.S. bankruptcy proceedings. Because economic hardship is defined as the inability to meet reasonable basic living expenses, it applies only to individuals (including sole proprietorship entities).
Compromise on economic hardship grounds is not available to corporations, partnerships, or other non-individual entities.
The taxpayer’s financial information and special circumstances must be examined by the Agent and fully documented to determine if they qualify for an economic hardship. All documentation must be in writing.
Financial analysis includes reviewing basic living expenses as well as other considerations. The IRS may go back for the last 3 years, examine all canceled checks and will complete a full asset check.
IRS will /may also examine credit reports and loan applications and sale of assets for the last 3 years.
The IRS will/can also look to see if the taxpayer has placed assets beyond the IRS reach.
In addition to the basic living expenses, other factors to consider that have impact upon the taxpayers financial condition include:
1. The taxpayers age and employment status,
2. Number, age, and health of the taxpayers dependents,
3. Cost of living in the area the taxpayer resides,
4. Any extraordinary circumstances such as special education expenses or natural disaster,
5. Medical situations that have effected the life of the taxpayer or others in his family,
6. The education of the taxpayer is sometimes considered as well.
This list is not all-inclusive. Other factors may be considered in making an economic hardship determination.
Other Factors
Other factors that support an economic hardship determination may include:
1. The taxpayer is incapable of earning a living because of a long term illness, medical condition or disability, and it is reasonably foreseeable that the financial resources will be exhausted providing for care and support during the course of the condition.
2. The taxpayer may have a set monthly income and no other means of support and the income is exhausted each month in providing for the care of dependents.
3. The taxpayer has assets, but is unable to borrow against the equity in those assets, and liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet basic living expenses.
4. Someone in the immediate family of the taxpayer has been hit with a catastrophe.
An act of God causing an unforeseen occurrence.
Remember, each situation is different and each and every case is based on its own merit. No two cases are ever the same.
Economic Hardship – IRS will release Levies
A tax levy is required to be released when the Service determines the levy is creating an economic hardship, i.e., the levy will cause the individual to be unable to pay their reasonable necessary living expenses.
In order to obtain a release of levy for economic hardship the taxpayer must act in good faith.
Examples of failure to act in good faith include, but are not limited to:
a. failing to make full disclosure of assets
b. inflating actual expenses or costs
c. falsifying financial information.
The decision to release a levy due to economic hardship requires financial analysis. The financial analysis requires sufficient financial information to confirm the levy is causing the taxpayer to be unable to meet necessary living expenses.
Cannot Pay the IRS – Economic Hardships – There are Options – Former IRS Agents
Fresh Start Tax comprised of tax attorneys, CPAs and former IRS agents. We have over 206 years professional experience in over 60 years of working directly for the Internal Revenue Service.
Call us today and hear all the options you have in resolving your case.1-866-700-1040.
by Fresh Start Tax | Nov 5, 2012 | Back Taxes, IRS Notice or Letter, IRS Tax Debt, IRS Tax Problem, Tax Help, Tax Settlements
Mr. Sullivan is a tax resolution expert. He is a Former IRS Agent and a Teaching Instructor with the Internal Revenue Service.
His firm Fresh Start Tax LLC 1-866-700-1040 is comprised of Board Certified Tax Attorneys, CPA’s and other Former IRS Agents, Managers and Instructors.
If you want to make sure you qualify for the Current non Collectable Program ( Economic Hardship, CNC ) if you cannot pay the IRS, it is best to check with a true tax professional. This can completely change your life. It will certainly help you for a season in time.
Economic Hardship- Cannot Pay the IRS Back Taxes
As a Former IRS agent I can tell you there is a program within the IRS-IRM that allows taxpayers who cannot pay there tax bills at the present time, the program is called Economic Hardship. It is obvious why the IRS does not publicize the program, everyone in the world would want there case placed in this file.
To qualify for the Program the taxpayer will have to produce a IRS financial statement. You can find those forms on our home page website under IRS Forms.
Depending where your case is in the IRS computer system you will have to provide a Form 433A ( used by local offices and Revenue Officers ) or the 433F which is used by the ASC Units while the taxpayer is still in letter or notice status.
The Financial Statement must be completely filled in and have all relative documents attached to provide support to the fact you cannot pay the bill on back taxes you owe.
It should be noted that these cases are also call Current Non Collectable or CNC as it is known in the business.
This is not a forever thing. It is also critical to know that these cases go in to this status for a season in time. IRS reviews these cases from time to time.
When the IRS determines to put your case in Hardship Status, few persons know how and why these cases come back out to the field or back into the IRS collection system. Having been a former IRS Agent, I had placed hundreds of cases in the currently non collectible status.
These IRS tax cases Hardship, current not Collectable ) come back out to the ASC Unit or the IRS field office because of only three reasons:
1. The closing Revenue Officer working the case places a mandatory follow-up date on the file. Each Revenue Officer is different. They get a feel for the case based on the financial statement and the asset check that was made during the course of the investigation. Sometimes it is a hunch, other times you get a feel that income may increase at a given time. This mandatory follow-up date is strictly up to the reviewing Revenue Officer.
The manager has the last say on the closing code however most of the time it is left up to the discretion of the RO.
2. A certain closing code is placed on the back taxes case. If the Revenue Officer does not mandate a certain follow-up date, a closing code based on AGI is put on the case. For example, let’s say the closing code is 50.
This means is when the taxpayer reaches $50,000 in a AGI (adjusted gross income), the case will trigger back to the field. Once again, each Revenue Officer makes their own decision.
3. The statute is about to expire. Certain cases will trigger because the ten year statute of limitation on these back taxes is about to expire. These back tax cases usually come out 1 year before the 10 year statute. These are usually large dollar cases.Small cases usually do not get much attention.
The only other way a case may come back to the field is because a Congressional inquiry was made.
The IRS Definition of Economic Hardship
A IRS Economic Hardship ( Cannot Pay the IRS ) occurs when a taxpayer is unable to pay reasonable basic living expenses.
The determination of a reasonable amount for basic living expenses will be made by the IRS Commissioner and will vary according to the unique circumstances of the individual taxpayer. Unique circumstances, however, do not include the maintenance of an affluent or luxurious standard of living.
IRS has a National and Regional Tests
IRS will review your 433A or 433F and compare it to the National or Regional Standards. You must fall within the guideline of the established guideline by your case will be considered for Cannot Pay or an Economic Hardship.
What are the National Standards.
National Standards: Food, Clothing and Other Items
National Standards have been established for five necessary expenses:
1.food,
2. housekeeping supplies,
3.apparel and services,
4. personal care products and services,
5.and miscellaneous.
The National Standard for Food, Clothing and Other Items includes an amount for miscellaneous expenses. This miscellaneous allowance is for expenses taxpayers may incur that are not included in any other allowable living expense items, or for any portion of expenses that exceed the Collection Financial Standards and are not allowed under a deviation.
The standards are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES).
The survey collects information from the Nation’s households and families on their buying habits (expenditures), income and household characteristics.
IRS also has standards for Housing and Utilities Expenses and also for vehicle and operating costs. See our homepage toolbar, IRS forms.
What the IRS has done to help taxpayers with current Hardships
a. Added Flexibility for Missed Payments.
The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.
b. Additional Review for Offers in Compromise on Home Values.
An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties.
However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.
c. Prevention of Offer in Compromise Defaults.
Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.
d. Postponement of Collection Actions.
IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.
e. Expedited Levy Releases.
The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.
Call us today to see if qualify for the Hardship Program, 1-866-700-1040
Cannot Pay the IRS Back Taxes – You can Ask for a Economic Hardship – Former IRS Teaching Instructor
by steve | Feb 29, 2012 | IRS Tax Debt, Tax Help
Do not be afraid to ask the IRS to put your case into Hardship or a Currently Non Collectable Status.
As a former IRS Agent, 50% of the cases I worked, I had to write off as currently not collectible because the taxpayers simply had no money at the current time to pay the tax and for that matter, even make a small payment to the IRS. Most of these taxpayers were broke.
Since the case was in my inventory it had to be closed and put back into the system. Accounts are generally full paid, put in part pay status or placed in to a Hardship Status.
IRS does not advertise to the public that your case can be put into a current IRS hardship.
There are about 10 million cases right now in the IRS collection system that are deemed IRS tax hardships. They can stay in hardship for 1 year or stay there until the collection statute expires on the case. For more insight into how long cases stay in the closed computer system you can contact me directly.
So what is a IRS TAX HARDSHIP?
Many people have absolutely know idea that hardship or currently uncollectible exists. The truth of the matter is that most of our clients fall into the hardship rules.
Under the Internal Revenue Service IRS 5.16.1.2.9 (04-29-2011) explains the hardship provisions.
Hardship
Follow the procedures in IRM 5.15.1, Financial Analysis Handbook, to determine the correct resolution of the case based on the taxpayer’s assets and equity, income and expenses:
A hardship exists if a taxpayer is unable to pay reasonable basic living expenses.
The basis for a hardship determination is from information about the taxpayer’s financial condition provided on Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection Information Statement for Businesses.
Generally, these cases involve no income or assets, no equity in assets or insufficient income to make any payment without causing hardship.
Generally, an account should not be reported as Currently Not Collectable if the taxpayer has income or equity in assets, and enforced collection of the income or assets would not cause hardship.
Other reasons for IRS hardships:
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The taxpayer has a terminal illness or excessive medical bills.
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The taxpayer is incarcerated.
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The taxpayer’s only source of income is social security, welfare, or unemployment.
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The taxpayer is unemployed with no source of income.
For accounts where the aggregate unpaid balance of assessments is above $10,000 the following additional verification is required:
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Full credit report on IMF and sole proprietor taxpayers and LLCs (where an individual owner is identified as the liable taxpayer)
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Motor vehicle records
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Real and personal property courthouse records.
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On-line locator services, such as Accurint, follow security guidelines when using public internet search engines
Should you think you qualify for hardship, call us today.
