The IRS offers several tax resolution options that business owners and individuals can participate in to eliminate or reduce tax debt. Tax resolution can also be thought of as tax debt relief or tax settlement. The tax settlement options include extension to pay agreements, installment agreements and ability to pay agreements. Many taxpayers don’t take advantage of these programs because they do not know of their existence.
Small business owners often feel overwhelmed handling complicated tax related issues alone, while managing and running their own businesses at the same time. This can lead to unintentional oversight, and even avoidance which can be very detrimental to their businesses, both monetarily as well as legally. Becoming compliant and resolving IRS problems is a process worth doing, and remaining current and vigilant about taxes can lead to enormous savings. We are able to help our clients navigate through their tax frustration by guiding them through their tax settlement options so that they can save time and money and have a fresh start with the IRS.
Do you have IRS Tax Debt Problems? At Novellus Financial our Enrolled Agents provide our customers with help on reducing, settling and eliminating IRS Tax Debt.
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What’s the Breakdown of a Reasonable Collection Potential?
To keep it simple, it goes like this:
100% of your cash, investments and accounts receivable.
The “realizable value” or your vehicles, real estate and personal assets.
Your monthly disposable income over 48-60 months.
What is Realizable Value?
The realizable value of your cars, real estate and personal property breaks down as follows:
Fair market value multiplied by 80% equals Quick Sale Value
Quick Sale Value minus Outstanding Secured Loans equals Realizable Value
For example, let’s say that you own a home that’s been appraised at $100,000. Eighty percent of that value is $80,000. The balance of your first and second mortgages is $72,000. This leaves you with a realizable value of $8,000. This represents the actual amount of cash you could probably get if you were to sell your house today.
What do they mean by disposable income over 48-60 months?
You’re going to prepare a budget using a specific IRS form—Section 9 of Form 433-A. The budget consists of three main parts: Firstly, you will assess your food and clothing expenses. The national standard for food and clothing is broken down by the number of people in your family and monthly gross income. Certain states like Hawaii and Alaska have higher allowable expenses.
Secondly, you will determine your housing expenses. This standard is decided by the number of people in your household and the county where you reside.
Thirdly, you will break down your transportation costs. This is determined similarly to the previous two categories.
You will then subtract this from your Total Living Expenses. You multiply this number by 48 if you plan to pay your Offer In Compromise within 90 days of it being accepted. You multiply this number by 60 if you plan to pay it off in installments of more than 90 days, but less than two years.
Keep in mind that two years is the maximum amount of time to pay off an Offer In Compromise.
What is the Total Timeframe For OIC Acceptance?
1 to 2 years. This is mostly because the IRS takes an average of 380 days to process an Offer In Compromise application. Preparation usually takes 1 to 4 months because you’ll need to research, prepare back up documentation, and complete several forms.
Acceptance time frames will vary a little. Regardless, it’s important to know that approval isn’t going to happen overnight.
What Can I Do To Protect my OIC from Revocation?
There are a few key ways to keep your Offer In Compromise once you’ve been accepted. Primarily, you must file and pay your taxes on time for the next five years. If you can’t file or pay by April 15th, you must request an automatic extension. You then must meet that extension’s deadline.
Failure to meet these conditions will mean full reinstatement of your previous balance. Additionally there will be penalties, interest and aggressive collection efforts.
What can I do if I don’t qualify for an OIC?
If you don’t qualify, there are other options. One common choice for those with smaller tax debts is setting up an installment agreement with the IRS. Talking to a tax professional will help you to evaluate what’s the best option for you.
Working With A Professional.
Getting an Offer In Compromise approved isn’t easy. Statistics show that the IRS approves only about a quarter of applications submitted each year. The key to a successful Offer In Compromise is making sure the IRS can process your application and that you have complete backup documentation to support your offer. A professional can make sure you submit you application properly and that you don’t waste your time and money.
At Novellus Financial our Enrolled Agents can provide you with help on reducing, settling and eliminating your IRS Tax Debt. Drop us a line to find out more about how we can help you.
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