by Renee Lawson | Oct 18, 2024 | Tax Preparation
In response to recent IRS warnings about dubious “Offer in Compromise (OIC) mills,” it’s crucial to understand that not all tax resolution services are created equal. While there are unethical companies that exploit vulnerable taxpayers with promises of “pennies-on-the-dollar” settlements, there are also many reputable local tax resolution firms that deliver legitimate services. These firms offer personalized, professional assistance, providing a reliable alternative to dealing with the IRS directly or falling victim to fraudulent schemes.
Why Choose a Local, Reputable Tax Resolution Firm?
1. Personalized, Face-to-Face Service
Local tax resolution firms pride themselves on building relationships with their clients. Unlike impersonal national firms that may handle cases in bulk, reputable local firms typically meet with clients face-to-face, getting to know their unique financial situations. This hands-on approach allows for better communication and a deeper understanding of the taxpayer’s specific needs, which is critical when dealing with complex tax issues. Instead of feeling like just another number, you become a valued client whose case is carefully handled.
2. Accountability and Trust
Working with a local company gives taxpayers an added layer of accountability. These firms operate within their communities, and their reputations are tied to their success in helping people resolve their tax problems. A local business thrives on word-of-mouth and positive reviews, which motivates them to ensure that their clients receive real results. The threat of tarnishing their reputation in a tight-knit community serves as a powerful incentive to provide quality service.
3. Comprehensive Service Beyond the Offer in Compromise
While the IRS’s Offer in Compromise program is a legitimate option for some taxpayers, it’s not the only tool available for resolving tax debt. A reputable local firm will explore a variety of strategies tailored to your situation. These include installment agreements, penalty abatements, and currently not collectible (CNC) status, among others. Local professionals typically have a broader perspective and can craft a long-term solution rather than focusing narrowly on one program that may not even be the best fit for your needs.
4. Knowledge of State and Local Tax Issues
Federal tax debt is only one piece of the puzzle. Taxpayers dealing with local firms benefit from their knowledge of state and local tax laws, which can often complicate matters. A reputable tax resolution firm will be familiar with both federal and state regulations, helping to ensure a holistic approach to resolving your financial obligations.
5. Avoiding the Pitfalls of National “OIC Mills”
Unlike national “OIC mills,” local tax resolution firms do not rely on aggressive marketing tactics or exaggerated promises. The IRS is right to warn taxpayers about firms that advertise steep discounts and guaranteed settlements. However, these “mills” are not representative of the entire industry. Local firms are more transparent, taking the time to explain the Offer in Compromise process thoroughly and managing client expectations from the beginning.
6. Realistic, Honest Assessments
One of the biggest risks of dealing with an OIC mill is the false hope that they can settle your tax debt for a tiny fraction of what you owe. Unfortunately, many taxpayers pay excessive fees only to have their offer rejected by the IRS. Local tax resolution companies, on the other hand, tend to offer more honest assessments of your likelihood of success. They will review your financial situation in detail and give you a realistic understanding of whether an OIC or another option is best suited for your needs.
7. Experienced Tax Professionals
Many reputable local tax resolution firms are staffed by Certified Public Accountants (CPAs), Enrolled Agents (EAs), or tax attorneys. These professionals have extensive experience dealing with the IRS and can navigate the complexities of the tax code. They understand how to negotiate with the IRS and are well-versed in the procedures for submitting accurate, complete OIC applications. Furthermore, because they are licensed professionals, they are held to a strict ethical code and must maintain their credentials through continuing education, ensuring that they are up to date on the latest tax laws and procedures.
8. Transparency in Fees
Unlike OIC mills that charge exorbitant upfront fees with little transparency, reputable local tax resolution firms often offer clear pricing structures. These firms provide detailed fee breakdowns for their services and explain exactly what taxpayers are paying for, so there are no surprises down the line. Many also offer consultations where they assess your case and discuss your options before any payments are made.
Conclusion
While the IRS’s warnings about unethical OIC mills are valid, it’s important not to lump all tax resolution firms into the same category. Local, reputable tax resolution companies are essential allies for taxpayers facing overwhelming tax debt. They offer personalized service, accountability, and a realistic path to resolving your issues with the IRS.
Rather than attempting to navigate complex tax laws on your own or risk being misled by national companies that prioritize profits over results, turning to a local, trustworthy firm is a safer, more effective route. By choosing a firm with a strong local reputation, you can rest assured that your tax resolution will be handled with integrity and expertise.
If you’re struggling with tax debt, reach out to Action Tax Relief, and take control of your financial future. We will help you find the right resolution option for your situation and work to achieve the best possible outcome. You can contact us today at 937-268-2737or at www.ActionTaxRelief.com.
by Renee Lawson | Sep 16, 2024 | Tax Preparation, Tax Resolution
Preparing, filing, or even thinking about taxes can be overwhelming for many individuals, especially when faced with financial difficulties that prevent them from being able to pay their taxes in full.
However, it is vital to stay aware of the financial consequences that are associated with not paying your taxes on time and in full, because the penalties and interest can add up quickly and become a significant financial burden.
Knowing the types of penalties and interest you might encounter and how they are calculated can help you take proactive steps to address them.
In this article, we’ll review the various types of penalties that the IRS may impose if you fail to meet your tax obligations, and we’ll break down how the interest accrues. Once you have a better understanding of how these penalties and interest can affect you, you’ll have a clearer picture of the total impact they have on the amount owed.
Types of Tax Penalties
1. Failure-to-File Penalty
One of the most common penalties is the failure-to-file penalty. This is imposed when you do not file your tax return by the due date, including any extensions. This penalty is calculated based on the amount of tax you owe, and it increases over time.
Generally, the rule is that the penalty is 5% of your unpaid taxes for each month or part of a month your return is late, up to a maximum of 25%.
For example, if you owe $1,000 in taxes and are one month late, the penalty would be $50 (5% of $1,000). If you’re six months late, the maximum penalty could reach $250 (25% of $1,000).
2. Failure-to-Pay Penalty
If you file your tax return on time but don’t pay the amount that is due, a failure-to-pay penalty is incurred. This penalty is usually 0.5% of your unpaid taxes for each month or part of a month that the taxes are unpaid, up to a maximum of 25%.
For example, if you owe $1,000 in taxes and are one month late in payment, the penalty would be $5 (0.5% of $1,000). If you are six months late, the penalty could be $30 (6 x 0.5% of $1,000).
3. Accuracy-Related Penalty
The accuracy-related penalty applies if you under report your income or claim incorrect deductions. This penalty is 20% of the underpaid tax amount. Common causes of this penalty can include mathematical errors, incorrect deductions, and failure to report all of your income.
For instance, if you incorrectly report $10,000 less income than you actually earned throughout the year, and this results in $2,000 of underpaid taxes, you could owe a penalty of $400 (20% of $2,000).
4. Fraud Penalty
If the IRS determines that you’ve committed tax fraud, the penalty can be severe. This penalty is typically a whopping 75% of the underpaid tax amount. Tax fraud involves intentional acts to evade taxes, such as falsifying income or hiding assets, and it can have serious consequences.
5. Estimated Tax Penalty
If you’re self-employed or otherwise required to pay estimated taxes throughout the year, failing to make these payments can result in an estimated tax penalty. This penalty is calculated based on the amount you owe and the time it remains unpaid.
How Interest is Calculated
In addition to penalties, interest accrues on unpaid taxes, as well. The interest rate is determined quarterly and is based on whatever the federal short-term rate is plus 3%. The interest compounds daily, meaning that interest is charged on both the original amount owed and any accrued interest.
For example, if you owe $1,000 in taxes and the interest rate is 5%, the interest charges for one year would be approximately $50. And since interest compounds daily, the total amount owed could be higher the longer the taxes remain unpaid.
Addressing Penalties and Interest
1. File Your Returns On Time
Even if you can’t pay the full amount, it’s crucial to file your tax returns on time to avoid the failure-to-file penalty. If you need more time, there’s always an option to file for an extension. However, it’s important to know that the extension to file is not an extension to pay, so you’ll still accrue interest on any unpaid taxes.
2. Set Up a Payment Plan
If you can’t pay your taxes in full, setting up a payment plan with the IRS can help. This will allow you to pay off your debt in installments, which may be easier for you over time. This won’t eliminate the penalties and interest, but it can greatly reduce them and make your payments much more manageable.
3. Request Penalty Abatement
If you have a valid reason for missing your tax obligations, such as a serious illness or natural disaster, you might have the option to qualify for penalty abatement. This means that the IRS could reduce or eliminate the penalties you owe. It’s essential to provide documentation and a detailed explanation for your situation, so make sure to prepare as much information as you possibly can.
4. Seek Professional Help from A Tax Relief Professional
Even with the information provided in this article, trying to figure out the potential tax penalties and interest can be complex. Luckily, there are professionals like the ones at Action Tax Relief that are skilled at handling these situations and can help make a significant difference.
Tax relief professionals can assist in negotiating with the IRS, setting up payment plans, and requesting penalty abatements. They can also help you understand all of your options and help you make informed decisions about how to handle your tax debt.
5. Consider an Offer in Compromise
In some cases, if you can’t pay your full tax liability and your financial situation qualifies, you might be able to settle your debt for less than the full amount owed through an offer in compromise. Be aware that this route requires an extensive evaluation of your finances and typically involves submitting a detailed application.
Moving Forward
Understanding the penalties and interest associated with unpaid taxes is essential for managing your tax obligations effectively. By filing on time, setting up payment plans, and seeking professional assistance, you can address your tax debt and reduce the financial burden of penalties and interest.
If you’re struggling with unpaid taxes and need help navigating the complexities of penalties and interest, Action Tax Relief is here to assist you. Contact us today at 937-268-2737 to explore your options and find a solution that works for you.
by Renee Lawson | Sep 10, 2024 | Tax Preparation, Tax Resolution
If you’ve ever tried reaching the IRS by phone, you’re familiar with the seemingly endless wait times and multiple transfers that often lead to frustration. Now, imagine trying to negotiate your tax debt under these conditions—without a clear understanding of your options.
The process can feel like an uphill battle, making it even more challenging to resolve your tax issues. That’s why it’s so important to be informed about all of the different ways in which you can negotiate with the IRS.
In this article, we’ll break down the most common methods for settling tax debts and offer guidance on how to navigate this complex process more effectively (and with the right help).
IRS Negotiation Options
1. Installment Agreements
An installment agreement allows you to pay your tax debt in manageable monthly payments rather than in one lump sum. This option is suitable if you can’t pay your tax bill in full but can afford to make regular payments.
- How It Works: You propose a monthly payment amount that fits your budget, and the IRS will review your financial situation to determine if it’s acceptable. If approved, you’ll enter into a formal agreement and make monthly payments until your debt is fully paid off.
- Pros: This option prevents the IRS from taking collection actions such as garnishing wages or levying bank accounts.
- Cons: Interest and penalties continue to accrue on the unpaid balance, which can increase the total amount you owe over time.
2. Offer in Compromise (OIC)
An Offer in Compromise is an agreement between you and the IRS that allows you to settle your tax debt for less than the full amount owed. It’s designed for people who can’t pay their debt in full and can demonstrate they’ve been through financial hardship.
- How It Works: You submit a proposal to the IRS outlining how much you can afford to pay and why you believe this amount should be accepted as a full settlement. The IRS will then review your documentation and financial situation to determine if your offer is reasonable.
- Pros: If accepted, you’ll pay less than what you owe, and the debt will be resolved. This option can significantly reduce your tax liability.
- Cons: The process can be lengthy and complicated, and not all offers are accepted. Additionally, you’ll need to meet strict eligibility requirements, and there’s a hefty non-refundable application fee.
3. Currently Not Collectible (CNC) Status
If you’re experiencing severe financial hardship and can’t make any payments toward your tax debt, you might qualify for Currently Not Collectible status. This status temporarily halts IRS collection actions.
- How It Works: You provide documentation to the IRS showing that you’re unable to pay your debt due to financial difficulties. The IRS will review your situation and may place your account in CNC status, which means they won’t pursue collection actions against you while you’re unable to pay.
- Pros: This option provides temporary relief from IRS collection actions, such as wage garnishments and bank levies.
- Cons: Interest and penalties will still continue to accrue, and the IRS may keep a close watch on your financial situation to determine if your status should be continued or changed.
4. Penalty Abatement
If you’ve been hit with penalties for late payments or non-filing, you might be able to request a penalty abatement. This means you can ask the IRS to reduce or remove your penalties based on reasonable cause.
- How It Works: You must demonstrate to the IRS that your failure to pay or file on time was due to circumstances beyond your control, such as a serious illness or natural disaster. If the IRS finds your reasons valid, they may reduce or eliminate the penalties.
- Pros: Reducing or removing penalties can lower your overall tax liability.
- Cons: You’ll still be responsible for paying the original tax debt and any accrued interest.
Tips for Successfully Negotiating with the IRS
- Gather Your Financial Information: Before negotiating with the IRS, make sure you have a crystal-clear understanding of your financial situation, including documentation to back up your income, expenses, and all of your assets. This will help you present a realistic proposal.
- Be Honest and Accurate: Provide accurate information to the IRS to avoid complications. Misrepresenting yourself or the facts can lead to delays, rejections, or even additional penalties.
- Consider Professional Help: Tax relief professionals like the ones at Action Tax Relief are a valuable resource and can assist you in negotiating with the IRS. They have experience in handling tax debt and can help walk you through every step of the complicated process.
- Stay in Communication: If you’ve entered into an agreement with the IRS, keep up with your payment schedule and communicate if you encounter any issues. Maintaining a positive relationship with the IRS can only help prevent further complications.
- Review Your Options Regularly: Your financial situation may change over time, so it’s important to keep up to date with your tax relief options and adjust your strategy as needed.
If you’re struggling with tax debt and need help negotiating with the IRS, reach out to Action Tax Relief. We will assess your situation, help you choose the best resolution option, and work on your behalf to achieve the best possible outcome.
Remember, addressing tax debt sooner rather than later can help you avoid additional penalties and interest and provide you with a clearer path to financial stability. If you’re ready to explore your options for settling tax debts with the IRS, contact our team today for a free, no-obligation consultation 937-268-2737.
by Renee Lawson | Aug 19, 2024 | Tax Preparation, Tax Resolution
Looming tax debt can be overwhelming and intimidating. Not only does it continue to grow over time the longer it goes unpaid, but it can also feel like a constant uphill battle.
At times, you may wonder what options you have to finally tackle the growing debt, but figuring out if you qualify for tax relief can feel like a maze.
Tax relief can help ease the burden if you’re struggling with unpaid taxes, but not everyone qualifies. Here’s a simple guide to help you understand if you might be eligible for tax relief and how to get the help you need.
What Is Tax Relief? (aka Tax Resolution)
Tax relief is designed to ease the burden of tax debt. Essentially, it helps people manage or reduce their tax obligations when they’re facing financial hardship.
How to Determine If You Qualify
1. Assess Your Total Tax Debt
Start by looking at how much you owe. Depending on what you owe will determine your most favorable option.
If your tax debt is under a certain amount, you might be eligible for a payment plan, which allows you to pay off your debt in monthly installments that are manageable for you.
If you owe more or are experiencing severe financial trouble, you might consider an offer in compromise, which lets you settle your debt for less than what you owe.
Knowing the total amount of your debt will be an important step in the process and will help in deciding your best relief option.
2. Examine Your Financial Situation
To even qualify for tax relief, you are required to demonstrate that you’re having financial difficulties. You will need to look at your current finances – income, expenses, and current assets.
Many people find themselves struggling to make ends meet, so if you cannot cover both your living expenses and tax debt, you may be eligible for relief.
Work on gathering important documents like pay stubs, bank statements, and bills to clearly show your financial situation, especially if you are struggling.
3. Ensure Your Tax Filings Are Up-to-Date
Most tax relief options require that you have filed all your past and current tax returns, which means you need to be current with all your tax filings.
If you’ve missed any returns, get them filed as soon as possible, and make sure you’re keeping up with any new tax bills to avoid making your situation worse.
4. Explain Your Reason for Penalties
If you’re seeking penalty relief, you need to explain why you didn’t pay your taxes on time.
Some common valid reasons might include illness, natural disasters, or other significant hard times that you can prove. Have all of your evidence ready along with detailed explanations for your specific situation. It may help to strengthen your case.
5. Review Your Tax History
Your history with the IRS can influence your eligibility for tax relief. If you’ve had ongoing issues or shown deliberate avoidance, it might affect your options.
A tax relief professional like the ones at Action Tax Relief will help review your history and determine how it impacts your chances of qualifying for relief.
6. Understand Different Relief Options
As mentioned earlier, when faced with a large amount of tax debt, there are various relief options potentially available, each with specific rules:
- Payment Plans: These are ideal if you can’t pay everything at once but can manage monthly payments.
- Offers in Compromise: This option is better if you can’t pay what you owe and face severe financial hardship.
- Penalty Relief: Available if you have a reasonable cause for not paying on time.
Understanding these options and their rules may help you choose the right path for your situation.
Determining if you qualify for tax relief can be a complicated process, but with the right information and support, you can navigate this process more easily and find the help you need.
If you’re feeling overwhelmed by the options available to you or are facing financial difficulties, don’t hesitate to reach out for assistance.
The team at Action Tax Relief is here to help you understand your options and find the best solution for your needs. Contact us today to get started 937-268-2737!
by Renee Lawson | Aug 14, 2024 | Tax Preparation, Tax Resolution
Filing tax returns is a legal obligation for anyone and everyone earning an income above a certain amount in the United States.
But life can sometimes throw you curveballs, and filing taxes ends up being on the bottom of your to do list. Out of sight, out of mind, right?
Unfortunately, the IRS does not turn a cheek, and the potential ramifications for not filing your taxes can result in major consequences like penalties, interest charges, and even potential legal problems.
For anyone with unfiled tax returns, pay close attention to all of the steps listed in this article.
Understanding Unfiled Tax Returns
Unfiled tax returns refer to the tax forms that individuals are required to submit to the IRS but have not filed for one or more tax years.
Regardless of the reason, it’s important to not let too much time lapse. It’s always best to address your unfiled tax returns as soon as possible to avoid escalating any potential penalties and legal consequences.
Potential Penalties for Non-Filing
The IRS may impose some significant penalties and consequences for not filing your tax returns. Here are some of the more common penalties that they issue:
- Failure-to-File Penalty: This penalty accrues at a rate of 5% of the unpaid taxes per month, up to a maximum of 25% of the unpaid tax amount. It will apply to the net amount that is due after accounting for any payments and credits.
- Failure-to-Pay Penalty: If taxes are owed but not paid by the filing deadline, a failure-to-pay penalty gets applied. This penalty accrues at 0.5% of the unpaid tax amount per month, also capped at 25%.
- Interest Charges: In addition to penalties, interest accrues on the unpaid tax balance. The interest rate is determined quarterly and compounded daily, reflecting the cost of borrowing as set by the IRS.
- Legal Action: Continuously complying with filing requirements may result in legal action, including IRS collection efforts, levies on wages and bank accounts. In addition, you could also be facing a $10,000 fine, and a year in prison, for every unfiled income tax return, as it’s considered a misdemeanor in the U.S. for not filing a legally due tax return.
Steps to Take for Filing Overdue Tax Returns
While this information may seem alarming or overwhelming, don’t allow it to paralyze you from moving forward. It is crucial to take action.
You want to take care of your unfiled tax returns as soon as possible because the amount you owe will just continue to grow.
Start taking action with these steps:
Step 1: Gather Necessary Information
- Income Documents: Collect all W-2s, 1099s, and any other income statements for each tax year.
- Expense Records: Gather any and all receipts and documentation for deductions, credits, and expenses claimed.
- Previous Tax Returns: Obtain copies of previously filed tax returns, if available.
Step 2: Prepare and Submit Delinquent Tax Returns
- Download Forms: Access the necessary IRS forms for each tax year requiring filing.
- Complete Forms: Fill out the appropriate tax forms accurately, reflecting income, deductions, and credits for each year.
- Submit Returns: Mail completed tax returns to the IRS for each applicable tax year. Consider sending them via certified mail to track delivery.
Step 3: Address Tax Payment Options
- Payment Plans: If taxes are owed but cannot be paid in full, consider applying for a payment plan (installment agreement) with the IRS.
- Offers in Compromise: In cases of significant financial hardship, explore the option of settling tax debts for less than the full amount owed through an Offer in Compromise.
- Penalty Abatement: Request abatement of penalties if reasonable cause can be demonstrated for the failure to file or pay taxes.
How Tax Relief Professionals Can Help
Don’t think that this has to be done all on one’s own! Tax relief professionals like the ones at Action Tax Relief are a tremendous resource and may even help reduce the total amount owed.
Their expertise goes a long way. Here are just a few of the things that tax relief professionals can assist with:
- Compliance Guidance: Ensure accurate completion and timely submission of delinquent tax returns.
- Negotiation Skills: Negotiate with the IRS on behalf of the taxpayer to secure favorable payment terms or settlement agreements.
- Penalty Relief: Advocate for penalty abatement based on reasonable cause or first-time abatement criteria.
- Financial Analysis: Conduct a financial analysis to determine the most suitable tax resolution strategy, such as installment agreements or Offers in Compromise.
Addressing unfiled tax returns is vital for anyone seeking to regain compliance with IRS requirements.
Luckily, resources are available to you. Tax relief professionals play a crucial role in facilitating compliance, minimizing penalties, and securing favorable tax resolutions.
Contact the tax relief professionals at Action Tax Relief today at 937-268-2737 to discuss your options.
