IRS Collections Is Starting Back Up. What To Do If You Owe Back Taxes
2020 threw a huge wrench into everything and the IRS collections proceedings are no exception. With the tax deadline pushed until July 15th and a lot of the IRS closed under shelter at home orders due to COVID-19, to the IRS being tasked with sending millions of Americans their stimulus checks, the IRS collections proceedings took a backseat.
If you owe back taxes you might just assume you got some breathing room. However, things are starting to pick back up.
According to the Taxpayer Advocate, as of late June 2020, the IRS generated more than 20 million notices, yet these notices were not mailed to anyone. It seems now that the IRS is once again starting to send threatening notices to taxpayers who owe back taxes.
In this article, we share a few things you must do in order to get out of tax trouble and settle your back tax balances.
IMPORTANT: We highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other relief programs or get your penalties and interest forgiven. Reach out to our firm today for a consultation.
FILE BEFORE JULY 15th
Before we talk about any tax relief options, you must first get into compliance. That means being current on all your tax return filings, including your 2019 tax return.
If you missed the deadline, you must still file as soon as possible before you begin exploring tax relief options. If you have multiple years of unfiled tax returns, reach out to our firm for help today.
PENALTIES AND INTEREST
Any time you don’t pay your taxes, the IRS first hits you with a club called penalties and interest. Under normal circumstances, these penalties start accruing from day 1 after the tax deadline. Because of COVID-19, the IRS is providing additional time to respond before interest or penalties apply.
If your tax bill already has penalties, our firm might be able to help remove some of the penalties by negotiating with the IRS on your behalf.
OFFER IN COMPROMISE
You might have heard advertisements about settling with the IRS, or the IRS Fresh Start program. Not everyone qualifies for it, but if your income or business was drastically affected by COVID-19, there’s a good chance you can qualify now. This means the IRS will reduce your tax balance to a fraction of what you owe.
It’s important to hire a tax relief firm like ours to walk you through this process and properly represent you before the IRS. Talking to the IRS before talking to us would be like going to court without a lawyer.
DON’T TALK TO THE IRS IF YOU OWE $10k OR MORE.
Even though things are tough right now, the IRS’s main job is still to collect the taxes it thinks you owe them. That by nature pits them against you. Often talking to the IRS can be a treacherous path and you risk the chance of saying something self-incriminating. Save yourself the headache, time, and money by reaching out to our tax relief firm today. You wouldn’t go to court without a lawyer and you definitely don’t want to approach the IRS without expert representation.
Tax Day Is Now July 15, Here’s What You Need To Know.
COVID-19 turned the world upside down. With most of the country shut down, businesses closed, and people forced to “stay-at-home” in order to keep everyone safe, it was just a matter of time before the IRS postponed tax day.
On March 21, 2020, the IRS announced that they’d be delaying the tax filing deadline that was normally April 15th. The new tax filing due date is now extended to July 15th.
Simply put, this means you have until July 15th to file your taxes without having to pay penalties and interest, regardless of the amount owed.
Note; if you have prior years of unfiled tax returns, you should file as soon as possible to avoid penalties and interest on those years. The IRS will base the $1200 ($2400 for joint filers) COVID-19 stimulus payments on your 2019 return. If 2019 has not been filed they will base it off of your 2018 income tax return. Contact us for a free, no-obligation, confidential consultation. If you think you might owe back taxes for other years or haven’t filed your 2018 or 2019 income tax return you’re still going to find yourself in tax trouble, so contact us today.
WHAT YOU NEED TO KNOW
#1 - It’s Automatic
Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days.
#2 - Your Taxes Are Still Due
Despite having more time to file and pay your taxes, if you’re going to owe taxes they will still be due by July 15th. You just have a bit more time to pay your tax bill but if you don’t pay by July 15th, you will start accruing penalties and interest.
#3 - You Should Still File Correctly and On Time
Waiting until after July 15 to file is also a poor plan, because you will only accrue more penalties and interest if you miss the deadline. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868. Filing an extension does not mean you have more time to pay. It simply means you’ll end up paying more with penalties and interest, sinking you deeper into a hole.
So make sure you file on time!
#4 - Check Your State Filing Deadline
Though the IRS is offering tax payers some relief by delaying the federal tax deadline to July 15th, you still need to double check when your state taxes are due. Though most states are following the July 15th filing deadline, some states still might require taxpayers to file by different dates.
#5 - It’s still a good idea to file early, especially if you’ll owe taxes
The sooner you file your tax return, the sooner you’ll know if you owe money or you’ll get a refund. Filing before July 15th can give you a heads up and give you time to prepare for the financial burden you might face, especially during these uncertain times.
Our firm specializes in tax resolution and our experts can provide additional help with COVID-19 SBA Loan programs. We also serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
How to Stop an IRS Tax Levy
Of all the companies you might owe money to, the Internal Revenue Service can be the least forgiving. If you don't pay your taxes, the IRS will levy and take possession of your property, including cash accounts, wages, and real and personal property. The IRS will sell non-liquid assets to raise funds to satisfy the balances you owe.
If you’ve received a levy notice from the IRS, it’s time to ACT IMMEDIATELY. Our firm may be able to get your levy released the same day but you must call now for a confidential consultation.
Forewarned Is Forearmed
Unless you don't open your mail or you moved without leaving a forwarding address, you probably won't be blindsided by an IRS levy. You'll receive a "Notice and Demand for Payment" of your tax balance well in advance of any action taken.
If you ignore this notice, the IRS will follow up by sending you a "Final Notice of Intent to Levy and Notice of Your Rights to a Hearing." Now the clock begins ticking.
You have 30 days to pay your tax balance or to contact the IRS to try to stop the levy. Even if you're unaware of the levy proceedings, your employer has a little bit of time to warn you if he receives notice that the IRS plans to take the bulk (up to 90%!) of your paychecks. Your employer doesn't have to begin sending your earnings to the IRS until the next pay period. With any luck, your employer will let you know what's going on within this time frame, so you can take action.
If the IRS levies your bank account, the bank will freeze the money in the account and remit it to the IRS after 21 days. Therefore, you must act quickly to try to have the funds released upon receiving a notice that the IRS has levied your bank account.
Contact A Tax Relief Firm
Now is not the time to do it alone. If you call the IRS, they will often trick you into giving incriminating answers, further distancing you for the tax relief you so desperately need.
They are not your friend. They are there to collect what they believe you owe in taxes. Contact a professional experienced in tax resolution to help you with your case. Would you go to court without a lawyer? Well, it’s the same with the IRS. You need professional representation from a CPA, Enrolled Agent or tax attorney who is also a tax resolution specialist.
Establish Hardship
If the IRS intends to levy your pay or Social Security benefits and you can't come close to making ends meet on what's left, the IRS wants you to contact them. The contact phone number should appear on the levy notice. DO NOT CALL THE IRS (see our note above).
The law requires that the IRS leave you with the total of your tax exemptions for the year plus your standard deduction divided by 52 if you're paid weekly.
Gather your documents and call our firm. We’ll help make the case to the IRS and explain that the levy will cause hardship for you and your family. You'll have to provide documented evidence of this, but if you do, the IRS will release the levy. This doesn't mean you no longer owe the tax. It just means that the IRS will leave your earnings and income alone and work with you to figure out some other way for you to satisfy the balance.
Make Payment Arrangements
We can also ask for payment terms for your tax balance even if the levy won't cripple you financially. If you enter into an installment agreement, the IRS will typically release the levy unless the notice you received specifically states otherwise.
You Can “Settle” For Less Than You Owe
An offer in compromise allows you to settle your tax balance for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances:
- Ability to pay;
- Income;
- Expenses; and
- Asset equity.
The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. It’s best to explore all other payment options before submitting an offer in compromise as the Offer in Compromise program is not for everyone. Make sure you hire a tax professional to help you file an offer, and be sure to check his or her qualifications.
The IRS really doesn't want to destroy you financially. It just wants the money it's owed. If you can make some arrangement to pay or prove that you don't owe the tax, or if you legitimately cannot pay it at this time, you may be able to make the levy go away.
Our firm specializes in tax resolution, even if you have years of unfiled tax returns, we can help! If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
How to Protect Yourself When Paying Taxes – Vital Steps You Need to Take Now
Tax season can be an unpleasant time of year for a lot of taxpayers, especially if you owe money to the IRS or State. The only thing you can do is make the most of it, prepare ahead of time, and pay the lowest amount allowed by law.
Whether you are due a refund or writing a big fat check to the IRS, there are some steps you should take after your return has been filed. Here are three critical steps to take once the tax filing deadline has come and gone.
Step #1: Print Off Hard Copies of All Your Forms and Receipts
Even if you save all of your documents on the computer and in the cloud, it is a good idea to print off hard copies and store them in a safe place. From the 1099 forms detailing your interest and dividend payments to the receipts that back up your charitable donations and business expenses, you never know when you will need this information.
You will appreciate having those hard copies on hand if your computer crashes or your cloud storage service fails. It takes only a couple minutes of printing, and those couple minutes could save you weeks of hassle down the road.
Step #2: Check Your Refund Status Or Balance Due Online
Even if you file electronically, you cannot expect instant service on your tax refund. It is the IRS after all. Even so, you should see quick action on your return and a notice that it has been accepted. Keeping an eye on your tax refund is one of the best ways to protect yourself and make sure the money you are owed does not end up in the hands of identity thieves.
This is also true if you owe money to the IRS. There have been tax identity theft cases where someone else files a tax return with your social security number, leaving you to deal with the liability or adding on to the amounts you owe.
If you use a tax filing software package, you should receive a notice by email when your return is submitted to the IRS, and another when it has been accepted. Watch your email box carefully and follow up if you do not receive those notifications within a day or two.
Once a week has passed, be sure to check the Where's My Refund page at the IRS.gov website to see where your refund stands. This handy tool provides a real-time picture of your refund status, from the time it is received by the IRS to the minute the money hits your bank account.
If you owe money, log in to your IRS account here and check the balance to make sure it lines up with what you know you owe. If there are discrepancies, contact your tax resolution firm ASAP.
Step #3: Prepare for Next Year
You just filed your taxes, and the last thing you want to do is think about filing for next year. Despite this trepidation, now is the perfect time to start getting your ducks in a row for the filing season to come.
Start by looking at your current year's return and think about ways you could have lowered your tax balance. Perhaps you could have given more to your favorite charity. Maybe you could have increased your retirement savings rate. Knowing what you did wrong this year will make it easy to adjust your strategy and save more money going forward.
Nothing can make filing taxes a truly pleasant experience, but dealing with the IRS is something every American needs to do. Now that your tax return has been duly filed and your 1040 form is on its way to the IRS, taking the right steps can save you money down the line, protect you from identity theft and make future tax dealings a little less stressful.
ABOUT BPB TAX RESOLUTIONS, LLC., OMAHA
Our firm specializes in tax resolution, even if you have years of unfiled tax returns, or owe the IRS over $10,000 we can help! If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Why the IRS Cares About Your Cryptocurrency Holdings, and Why Now is the Time to Come Clean
After years of flying under the radar, taxpayers who hold Bitcoin, Ethereum, Litecoin and other cryptocurrencies are finally getting their fair share of scrutiny from the IRS. The tax agency, it seems, has figured out that cryptocurrency is here to stay, and that the mind-boggling returns early adopters have enjoyed could be a boon for government coffers.
The tax agency has also figured out that many holders of cryptocurrency, from the earliest of early adopters to latecomers enticed by ever rising prices and the fear of missing out, could owe a lot on these ethereal assets. The currency may be virtual, but to the IRS the taxes due are all too real.
Note; we encourage all readers facing an IRS tax problem to contact us for a free, no-obligation, confidential consultation. If you think you might owe back taxes on your cryptocurrencies, contact us today.
The Illusion of Anonymity
If you have been skating along under the veil of anonymity and failing to report your cryptocurrency holdings, you might want to rethink your strategy. After years of taking a largely hands off approach, the IRS is catching up in a big way, and the tax agency is pulling out all the stops to recover the money the government is owed.
Many holders of cryptocurrency are under the erroneous impression that their transactions are totally anonymous, and that there is no way for the IRS, or anyone else, to tell how much they hold or how they use their virtual coins. That may be a soothing fiction, but the reality is far different.
The truth is the IRS has a wide range of options at its disposal, from official form filings to subpoenas and legal documents, to pierce the veil of anonymity and find the real world identities of cryptocurrency holders.
Did You Get a 1099-K? So Did the IRS
In some cases, holders of cryptocurrency are finding tax forms in their mailbox. If you receive such a form, you can be sure the IRS received a copy as well.
When you file your taxes, automatic matching programs will compare the amount you claimed with the amount on these automatically generated forms. If there is a mismatch, you will be hearing from the tax agency.
One of the most common forms used to report cryptocurrency holdings and transactions is the 1099-K. For sellers on eBay and some freelancers, this form will already be familiar, but it is being extended into the virtual world as well. If you receive a 1099-K form this year, it is time to come clean with your cryptocurrency holdings.
The Cryptocurrency Question and Your Tax Form
Until now, cryptocurrency holders could, and often did, plead ignorance. They could claim they did not realize their Bitcoin, Ethereum and other virtual holdings were taxable, and they could back up that assertion by saying the IRS never asked them about these assets.
The validity of that excuse may have been questionable, but with the 2020 tax year even that thin veil of supposed ignorance will be gone. Starting in 2020, taxpayers will be asked directly if they bought, sold, transacted or otherwise acquired any cryptocurrency, and they will be expected to answer that question in a truthful manner.
The wording of this question means anyone who holds any type of cryptocurrency would be required to answer in the affirmative. Even so, simply holding virtual coins in a cryptocurrency wallet does not necessarily mean any taxes will be due. Someone who simply holds cryptocurrency but makes no transactions should not owe any taxes, just as a holder of stock does not owe taxes until those shares are sold.
The IRS is getting serious about cryptocurrency, drawn by a combination of past returns, unreported taxes and increased exposure of these alternative forms of payment. For holders of Bitcoin, Ethereum and other forms of cryptocurrency, the days of flying under the radar are over. So make this the year you come clean, so you can enjoy your cryptocurrency without worrying about the IRS.
Our firm specializes in tax resolution and our experts can also help with cryptocurrency tax questions. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
