No matter how honest and faithful you are in paying your taxes, you may find yourself in a situation wherein you no longer have the capability of doing so. When this happens, you can ask for help from the IRS and they might be able to grant you an uncollectible status and will suspend collection efforts against you. This doesn’t mean that you no longer have to pay for your taxes. It implies that your past due taxes would be deferred and will still be asked from you but at a later time. You can take advantage of this situation to reorganize your finances in order to qualify for a more long term resolution in the future.
Uncollectible status can be granted if a taxpayer can prove that they are unable to pay the back taxes meet he necessary expense test. This test is defined as expenses that are necessary to provide for a taxpayer’s (and his or her family’s) health and welfare and/or production of income.
How Long Can I Qualify For?
As mentioned, this exemption is not permanent. The status can is reviewed on a yearly basis upon filing your return. Contact a Tax Professional at BC Tax for additional assistance and information on determining and qualifying for uncollectible status.
Do you qualify for penalty relief or an Abatement of Penalties?
You would think that it would be an easy task to just call up the IRS receive money back that you have paid toward those costly penalties, once you have paid your past due taxes or if they were accrued due to circumstances outside your control, however it is a long and lengthy process, but if done correctly, can be done successfully.
Abatements can be granted if the taxes were caused by circumstances that resulted to several problems affecting your finances. Here are some instances wherein you can qualify:
Incarceration – If the taxpayer has been incarcerated or imprisoned, it can cause him/her to lose the capability of paying taxes.
Employment Problems – If you are unemployed or the industry you are working with is under recession, it can cause you to have insufficient or no income and can qualify for the hardship status.
Death or Health Issues – If you have had a family member that you were caring for pass away or if you yourself are experiencing medical problems and your medical expenses are consuming your income, this can be a reason to receive relief from penalties. In some cases, taxpayers are under terminal illness or extreme medical condition and IRS considers these situations.
Spousal Relations – When you face marital problems such as divorce, it can result in hardship since your income will decrease, your expenses for legal help might increase and your time that you can use to gain income will be consumed to resolve your issue.
Pregnancy and Other Child Related Issues – Pregnancy, or special education needs, can result in the taxpayer or the spouse to stop working thus limiting source of income.
Other Financial Crisis or Natural Disaster – Financial crisis or loss can be used as a reason for exemption. Some situations include casualty loss from accidents and calamities such as fire or floods, or even market losses and increased mortgage payments.
Donate To Charitable Cause – Donating to Charity is a good way to reduce your taxes. You can write off charitable contributions if you itemize your deductions. When calculating the total charitable contributions, don’t forget gifts of cash, appreciated stocks or non-cash donations. Ideally, you can include even the mileage for transportation to do charity work or the amount of money you spent on preparing meals for the charity.
Strategies for the Self-Employed – If you are self-employed or doing some side projects for extra income, you are eligible for a lot of tax deductions. This can be from expenses related to shipping, advertising, business related vehicle mileage, website fees, percentage of internet charges used for business, office supplies, business related travel, and any other expenses incurred to run your business.
Home Office – If you work from home, you can also get a deduction by declaring a portion of your house space as your office.
Tax Credits Are Gold – Take advantage of tax credits as much as you can. You can go to college and earn tax credits, invest in IRAs, you can take child tax credits, earned income credit, American opportunity credit, lifetime learning credit and a lot more. Tax credits are powerful since it is being deducted directly to the total tax owed. So if you have a credit worth $5000, you can slash that off of your tax bill. At times, tax credits can even cause you to get a tax refund.
Use Health Spending Accounts – Health Spending Accounts allow you to spend your tax free money for medical expenses. There are many health spending accounts programs that you can choose from. This is an opportunity you shouldn’t miss since it is inevitable to have some medical expenses.
Hire a Professional – Associates at BC Tax have years of professional experience and case knowledge to use at your disposal. Please contact BC Tax for additional information on what can be done to reduce your liability.
A Wage Garnishment is when the IRS intends to collect on back taxes through your paychecks. This tactic often catches many people off guard due to the fact they typically find out on payday with little or no notice. BC Tax has helped countless individuals with this problem and can resolve this issue through many different avenues.
In order to release a garnishment you will be required to provide the IRS with an alternative resolution. This typically involves providing a full financial statement. In order to preserve your rights it is recommended that you hire a professional. Contact BC Tax immediately for assistance in preserving your appeal rights.
Here are a few examples of how BC Tax can assist you:
File For an Offer in Compromise
An Offer in Compromise would allow you to pay for your taxes for far less than the amount you actually owe the IRS. This is not an easy way out and offers are often rejected by the IRS when submitted without the help of a tax professional. This is still a viable option and the associates at BC Tax are highly educated in this process which will greatly improve the chances of your offer being accepted.
Enter into an Installment Agreement
An Installment agreement is one of the most common ways to pay off your debt and can be granted if you do not have the capability of paying in full. This method will allow you to make payments in monthly installments. Once a payment plan is approved, BC Tax will ensure the garnishment is released.
These tips will help you ease your tax problems temporarily, if not permanently. In order to get the best resolution possible, it is not recommended that you fight this battle alone. Make sure to ask for assistance from a tax resolution expert.
We are one of the world’s top financial services firms. Feel free to contact us to see how we can serve you.
So you owe the IRS, and have for a few years, and the penalties and interest are piling up. It can really be a tough situation. Perhaps you made great money and now you don’t or there was an error in your filing. Either way, you need to take care of it, and fast, to keep the penalties low.
The good news is that you can resolve your outstanding tax bill if you follow a few easy steps:
1. Verify your balance. You can request a transcript of your balance by contacting the IRS. Then review your actual tax return to make sure all the numbers are correct and that you didn’t over-report your income or under-report you expenses.
2. Minimize penalties and interest. Contact the IRS and ask what they can do to help. Sometimes they can give you time to fix the situation and waive or reduce penalties and interest for a short amount of time. The IRS can sometimes offer an abatement of penalties as well, if you write a detailed letter and explain why you couldn’t pay your taxes on time.
3. Set up an installment plan. When you set up an installment plan, the IRS can agree to stop accruing penalties and sometimes interest. Then you can pay an agreed upon amount the IRS each month until your balance is settled. Don’t miss a payment though or you could lose your agreement and have to pay back penalties. And make sure you pay future tax payments on time or you could lose the terms of the agreement as well.
4. Get an Offer in Compromise.
Sometimes, the IRS will negotiate back taxes through an Offer in Compromise. It is important to properly request and file these and there are a lot of details involved, so some taxpayers choose to hire a firm to handle these requests. A qualified tax resolution firm can also help determine your balance, minimize penalties and interest, and set up an installment plan.