Unfiled Back Taxes – File, Settle Tax – The Process of ending IRS Problems
The Process of Ending IRS Problems
If you have back unfiled tax returns you can send them into Internal Revenue Service and settle your case all at one time.
The process is much simpler than you think.
Many taxpayers have a fear and hesitation about filing back taxes because this is been a mounting issue of fear in their life.
As a former IRS agent and teaching instructor let me tell you that IRS is more than happy to get you back in the system.
So don’t let fear and anxiety keep you from filing unfiled back tax returns.
Back Tax Records
If you do not have many of your tax records you can request an income transcript from the IRS and they will provide for you the last six years of income records and you can use that as a base for you to file your back unfiled back taxes.
Being former IRS agents and managers we are experts in tax return reconstruction and we can prepare all your unfiled back taxes. Being former IRS agents there are methods to use to file safe and protected tax returns. We can help audit proof your return from IRS
It is always wise to have an exit strategy if you’re going own money on your unfiled back taxes.
What is an Exit Strategy
An exit strategy is a way to close your case with the Internal Revenue Service.
In each and every case IRS will need a current financial statement which signals to IRS how they will deal and handle your case and close it off of the IRS enforcement computer.
You should plan to fill on a form 433-F which is the IRS financial statement and bring that form to a professional tax firm.
That firm will go ahead and give you an exit strategy on how to settle your case with the IRS. You could call us for your free initial tax consultation we can walk you through the process of filing and settling your tax debt.
There are various settlement strategies for unfiled back taxes Thank you
There are three settlement tax strategies and all are based on your current financial statement . after IRS reviews your current financial statement IRS may deem you as:
- currently non-collectible case and put you into economic tax hardship status.
- IRS may look at your financial statement and determine that you are eligible for installment or monthly payment plan.
- The third and last strategies for you to actually settle your case for pennies on a dollar and file what is known as an offer in compromise.
While the first two exit tax strategies will last a couple years only the offer in compromise exit strategy will permanently solve your case once and for all.
What is an Offer In Compromise – Settle tax once and for all
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed.
If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC.
In order to be eligible for an OIC, the taxpayer must :
1. have filed all tax returns,
2. made all required estimated tax payments for the current year, and
3. made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.
If you do not meet the requirement listed above do not even bother to file for an offer in compromise.
In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (the RCP).
The RCP is how the IRS measures the taxpayer’s ability to pay.
The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property.
In addition to property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
Another basic rule of thumb is you must at least offer IRS the total value of all your assets.
The IRS may accept an OIC based on three grounds.
First, acceptance is permitted if there is doubt as to liability.
This ground is only met when genuine doubt exists under applicable law that the IRS has correctly determined the amount owed.
Second, acceptance is permitted if there is doubt that the amount owed is fully collectible.
This means that doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
Third, acceptance is permitted based on effective tax administration.
An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Settlement Submission
When submitting an OIC based on doubt as to collectibility or based on effective tax administration taxpayers must use the most current version of:
- Form 656 (PDF), Offer in Compromise, and
- also submit Form 433-A (OIC) (PDF), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or
- Form 433-B (OIC) (PDF), Collection Information Statement for Businesses.
A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L (PDF), Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC).
Application fee for Tax Settlements
In general, a taxpayer must submit a $150 application fee with the Form 656. Do not combine this fee with any other tax payments.
There are, however, two exceptions to this requirement.
- First – no application fee is required if the OIC is based on doubt as to liability.
- Second, the fee is not required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception.
This exception applies if the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. Section 4 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception.
A taxpayer who claims the low-income exception must complete section 4 of Form 656.
Taxpayers may choose to pay the offer amount in a lump sum or in installment payments.
Lump Sum Tax Settlements
A “lump sum offer” is defined as an offer payable in 5 or fewer installments and within 24 months after the offer is accepted. If a taxpayer submits a lump sum offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount.
This payment is required in addition to the $150 application fee. The 20 percent amount is called “nonrefundable” because it cannot be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance.
The 20 percent amount will be applied to the taxpayer’s tax liability. The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent amount.
Periodic Tax Settlement
The offer is called a “periodic payment offer” under the tax law if it is payable in 6 or more monthly installments and within 24 months after the offer is accepted. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656.
This payment is required in addition to the $150 application fee. This amount is nonrefundable, just like the 20 percent payment required for a lump sum offer.
Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer.
These amounts are also nonrefundable. These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.
Pre-Qualifier Tool for Tax Settlement
As of last year the Internal Revenue Service came out with the pre-qualifier tool for tax settlements. Before you go running off filing an offer in compromise walk through the pre-qualifier tool that you can find on our website.
More news on Unfiled Back Taxes and Settle Tax
Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration and is further suspended if the OIC is rejected by the IRS and where the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.
If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws.
If the taxpayer does not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default.
For doubt as to collectibility and effective tax administration OICs, the terms and conditions include a requirement that the taxpayer timely file all tax returns and timely pay all taxes for 5 years from the date of acceptance of the OIC.
When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed, plus interest and penalties.
Additionally, any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
If the IRS rejects an OIC, then the taxpayer will be notified by mail.
If the IRS rejects your are offer in compromise keep in mind you can always fill on another and send it back in. It is wise to correct the problems have a professional firm review it and then send it into the IRS.
You can send in as many offers in compromise you like to the Internal Revenue Service just make sure they are valid and that you are a qualified candidate
The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals.
The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration.
A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer.
If you have unfiled back taxes and wish to file your returns and settle your tax debt contact us today and speak directly to tax attorneys, certified public accountants, or former IRS agents, managers and tax instructors.
We have over 300 years of professional tax experience in dealing with unfiled back taxes and over 60 years of direct IRS working experience in filing and settle back taxes.
The process of ending your IRS problems can be made simple with one phone call our office.
Unfiled Back Taxes – File, Settle Tax – The Process of ending IRS Problems