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Understanding the IRS Hardship Program

Woman figuring out how much she owes to the IRS

Woman figuring out how much she owes to the IRSFor every 35 cents the IRS spends, the department collects $100 in revenue. One reason why the IRS has such a high collection rate is they don’t waste resources going after individuals who simply cannot pay the debt they owe.

Individuals who can’t afford basic living expenses and their tax debt often apply for the IRS hardship program. Once their case gets evaluated, individuals who qualify might get approved for more time to pay off their debt or other types of relief. If you currently owe the IRS a significant chunk of money but live paycheck to paycheck, then you should investigate IRS hardship rules to see if you’re eligible for this type of financial relief.

Learn everything you need to know about IRS hardship and how to apply below.

What Is IRS Hardship?

Did you know that the majority of Americans (61%) didn’t pay any federal income taxes in 2020? While that statistic might initially seem surprising, it makes sense when you consider that an overwhelming number of Americans simply can’t afford to pay their taxes. After all, the 2020 pandemic caused widespread unemployment, financial hardship, and an ever-increasing cost of living. 

When you run into unexpected financial hardship, you don’t have to struggle. There are options for you, and the IRS hardship program is one of those options. 

“IRS hardship” is a term the IRS uses to define Americans who are in “Currently Non-Collectible” status (CNC) or have agreed to a partial pay installment agreement. These individuals have applied for IRS hardship because they couldn’t afford both their basic living expenses and their tax burden.

Not everyone who is struggling financially meets the IRS hardship requirements, though. Plus, getting filed under CNC does not mean that your tax debt is permanently eliminated. That’s why it’s crucial to understand exactly what the IRS hardship program is and how it can help you.

What Is the IRS Hardship Program?

Getting a tax bill that you can’t pay off is one of the most common tax problems Americans face. If you know you honestly cannot pay off your IRS tax bill right away, then it’s important to recognize the tax burden and respond to the IRS. A failure to act could lead to further collection efforts.

First, you need to reasonably consider whether you can pay any of your tax bill. If you’re currently struggling with financial hardship, then the IRS will take that into account. If the IRS determines you can pay the full amount, then you won’t be eligible for the program. Rather than wasting time and effort going through these motions, take the time to really analyze your finances before considering this program.

Next, you need to learn what the IRS hardship program is about. It’s designed for individuals struggling to meet their reasonable, basic living expenses. You’ll need to prove this fact to the IRS, and they’ll evaluate your situation and the proof you provide. If you qualify for the program, then you’ll get offered relief in the form of either CNC status or a partial payment plan. You may get offered additional time to pay off your debt without further penalties and fees.

Who Qualifies for the IRS Hardship Program?

When you fill out an IRS hardship form, you’ll need to provide detailed information about your financial status, assets, income, spending, and average expenses. All these details are important because they’ll help the IRS determine if you qualify for the hardship program or other types of tax debt relief.

To be eligible for CNC status, taxpayers must prove that paying off their taxes would prevent them from meeting their reasonable living expenses. These “reasonable” expenses include:

• Food

• Clothing

• Housing

• Utilities

• Out-of-pocket healthcare expenses

• Transportation

If you have little to no funds left after meeting these needs, then you could qualify for the IRS hardship program. In most situations, you must also earn less than $84,000 a year.

Hardship Rules

As if qualifying for IRS hardship wasn’t hard enough, you need to understand how hardship rules work. In most cases, you’ll only qualify for this type of relief on a yearly or bi-yearly basis. Often, the IRS will completely review your financial information every two years to determine if you’re still eligible for the program. In cases where a taxpayer’s situation has changed, the IRS may revoke financial hardship status.

Your hardship status will not automatically roll over into a new year when you file taxes. If you need your financial hardship status to roll over, then you’ll need to fill out another IRS hardship form for the year you can’t pay. If possible, the best thing to do is to pay off your new taxes as soon as possible to prevent getting further into debt. Paying off your new taxes will not impact your previous hardship standing.

It’s also crucial to stay current with your tax returns while you’re in hardship status. You still need to file your returns on time. Otherwise, you could face a penalty of 5% of your unpaid taxes. This penalty could get levied every month for up to five months.

Will IRS Collection Efforts Continue?

A common thread on tax FAQs is how to stop IRS collection efforts. When you’re facing a tax levy, a seizure of your assets, or wage garnishment, your situation can feel pretty dire. The good news is that applying for the IRS hardship program and achieving CNC status can stop collection efforts for that tax liability. It is important to understand, though, that you’ll need to get hardship status for all your tax debt in order to stop all IRS collection efforts.

If you’ve been notified about IRS collection efforts, then it’s in your best interests to consider reaching out to tax attorneys who can help you navigate your situation.

How to Apply to the IRS Hardship Program

Filing an IRS hardship application is something that you can do on your own, but it’s advised that you consider speaking with a tax consultant before you do. A tax consultant will ensure that you fill out your application correctly and thoroughly. They’ll also help you collect any documentation and proof to back up your financial claims.

To apply, you’ll first need to fill out IRS form 433-F. This will explain your monthly income, expenses, assets, and liabilities. You’ll need to be as accurate and thorough as possible on this form. If necessary, the IRS may also request a 433-A form, which is a longer and more detailed version of form 433-F. Gather up any documentation that supports what you list in the form.

Once this information is submitted, the IRS will analyze your case. You should get a response from the IRS within a few weeks.

Alternative Payment Plans

If the IRS hardship program determines you can pay back a portion of your tax debt, then they may suggest putting you onto a partial payment plan. This type of alternative payment plan allows you to pay back a portion of your tax debt while also relieving you of the full burden. Depending on your situation, the IRS might also say that you qualify for an extension on your payment time due to the undue hardship you’re facing. If you’re hoping to seek out an extension, then you’ll want to use IRS form 1127.

Another common type of alternative payment plan is an IRS settlement or Offer in Compromise. This type of relief is available for taxpayers who don’t think they’ll be able to pay off their tax debt in the immediate future. Rather than accepting their full tax debt liability, the taxpayer can come to an agreement with the IRS for a reduced amount.

Are You Interested in Applying for the IRS Hardship Program?

The IRS hardship program was designed to help provide financial relief to Americans who genuinely can’t afford to pay off their debt without sacrificing their basic necessities. While the agency’s hardship rules might seem strict, these qualifications are put into place to ensure that no one abuses this financial relief option.

Now that you’re empowered with the knowledge about what the IRS hardship program is, who qualifies, and what it can do for you, are you interested in applying? While you could always try to navigate IRS rules and regulations by yourself, it’s reassuring to have a tax expert by your side. Here at Tax Group Center, our tax attorneys, certified tax consultants, and CPAs have helped countless Americans find tax debt relief through the IRS hardship program and other programs.

Contact us today to learn more about your eligibility and options.

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Understanding Your Letter from the IRS

Understanding Your IRS CP14 Notice Tax Group Center

Understanding Your IRS CP14 Notice Tax Group CenterBefore the pandemic, almost half of Americans (48%) viewed the IRS negatively. Once the pandemic hit, though, most Americans were provided with financial relief and the IRS helped them get it, so perceptions about the IRS improved sharply. As a result, a letter from the IRS was no longer seen as something to fear—it might be an indication that a check was on the way!

Not all IRS letters to taxpayers are positive, though. Some could indicate that you owe a hefty sum of money to the IRS, and some could even mean that you’re about to suffer penalties or consequences for avoiding your returns or tax debt. 

The first step in preventing a bad situation from unfolding is to understand your letter from the IRS. You can learn everything you need to know about the different types of IRS letters and how to deal with them right here.

Identifying a Letter from the IRS

If you regularly receive mail, phone calls, or emails, then you already know how prevalent scams are. In fact, there’s a huge chance that you’ve been already targeted at one point or another. 

Fraudsters are always looking for new ways to trick people into handing over their hard-earned cash, and one of the most common types of scams involves tricking Americans into thinking they owe a tax debt to the IRS. For that reason, it makes sense to be suspicious if you receive a letter from the IRS in the mail.

The first thing you should do if you get a letter that appears to be from the IRS is to verify its legitimacy. This can be difficult to do because a fake IRS letter will likely look and appear real. Here are some tell-tale signs that could indicate the letter isn’t legitimate:

  • There are misspelled words or clear grammatical issues.
  • The letter asks you to provide bank account details to the IRS.
  • The letter demands one form of payment.
  • The letter is asking for payment in the form of gift cards or something else that doesn’t add up.
  • The letter is threatening you and saying you need to act immediately.
  • The letter contains contact information that’s different from the official IRS contact information.
  • The letter contains mistakes like an incorrect last name.
  • The letter doesn’t give you clear instructions on how to proceed.
  • The letter claims that you’ve won gift money or some type of contest.

Real IRS letters will always have a notice number or a letter-number on the top or bottom right-hand corner. If there is not a number on one of those areas, then the letter is likely a fake. 

If you’re unsure whether a letter is legitimate or not, then it’s advised that you immediately reach out to the IRS at 800-829-1040. If you don’t feel comfortable doing that, then you could also bring the letter to tax attorneys who can help you determine if it’s real.

Different Types of IRS Letters and How to Deal With Them

Once you’ve accepted that the IRS mail is legitimate, you need to identify what type of letter it is and determine how to proceed. Remember, a real IRS letter will always include clear, actionable steps that you need to take. If a response isn’t required, then the letter should clearly state that no reply or action is needed. 

Below, we’ll go over the different types of IRS letters and how to deal with them.

CP521: You Have an Installment Payment Due

One of the most common IRS letters you might receive is a CP521 letter. This letter indicates that you have an installment payment due. Think of this letter as a gentle reminder to send in your monthly payment by the due date.

In response to this letter, you should pay the amount due by the date indicated on the letter. You can mail in your payment with the provided envelope. If you don’t pay, then you could end up defaulting on your agreement.

CP180 or CP181: Your Return Can’t Be Processed; Missing a Form

Another common reason the IRS may send you a letter is because there was an issue with your most recent tax return. A CP180 or CP181 letter means you’re missing either a schedule or form.

In response to this letter, be sure to read and understand what form or schedule you need to provide to the IRS. Then, download the required form and fill it out. If you have further questions or concerns about the issue, then consider reaching out to either an attorney or the IRS directly.

CP504: You Owe a Debt to the IRS; Final Notice

One of the most common tax problems is getting a tax bill that you can’t pay. If you owe a debt to the IRS, you’d better believe that they’ll remind you to make a payment. The first notice will come in the form of letter CP501. The second request is CP503. If you still haven’t paid in full, then the IRS will send out a CP504 letter.

This is a final notice to settle your tax debt. If you don’t act, then the IRS will move on to more serious consequences, including levying your assets. If you receive this notice, then you need to reach out to either a tax attorney or the IRS as soon as possible, as inaction could result in significant consequences.

CP44: Notification of Delay

Tax FAQ pages are filled with people wondering where their tax refund is. Is this you? If the IRS is experiencing delays when processing your returns, then they’ll send you a CP44 letter. This letter means the IRS is still in the process of determining your tax status. You’ll need to wait for more correspondence letters to determine what to do next.

Economic Impact Payment Notices

Recently, the IRS has taken control over distributing stimulus checks to millions of Americans. After you received your funds, you should have received an IRS letter detailing how much you received. This letter does not require further action, but it’s recommended that you save it. When you go to file taxes, you’ll need to verify how much you received. You can reference this letter to ensure you fill out those questions accurately.

If you did not receive the stimulus funds that the letter indicates you did, then you need to reach out to the IRS about the problem. Not only do you need to clear up the misinformation, but you could end up receiving your rightful stimulus money, too!

CP523: Intent to Terminate Your Installment Agreement and Seize Assets

A CP523 letter is a serious ordeal. This letter means that you’ve failed to keep up with your installment agreement with the IRS. It also means that the IRS is preparing to take drastic action to collect from you. Without any response from you, the IRS will move forward with plans to seize your assets.

After receiving this, it’s crucial to take action. Make a payment on your account if it’s possible. You should also reach out to an attorney ASAP, even if you are able to make a payment. Depending on your situation, you may be able to stop collection efforts. You might also be eligible to file an appeal. Even better, you might still be in a good enough standing to negotiate a new installment agreement or reinstate your old one.

How To Report a Fake IRS Letter

So, what should you do if you got an “IRS” letter in the mail only to find out that it was a scam? First, do not attempt to communicate with the scammer or give them any further details about your address, name, or accounts. Next, consider reporting the scam to the Treasury Inspector General for Tax Administration. You can contact the IRS directly at phishing@irs.gov.

You Don’t Have to Face a Letter from the IRS Alone

Have you recently received a letter from the IRS? If so, don’t panic! Follow this guide to ensure that you remain compliant with the law:

  • Identify the letter and verify its legitimacy.
  • Determine what type of letter it is and whether action is required on your part.
  • Learn what to do to ensure you remain compliant and in good standing with the IRS.

These steps seem easy on paper, but IRS mail can be difficult to cope with. Getting correspondence from the government can feel intimidating, confusing, and ambiguous. The good news is that you don’t have to face the situation on your own!

Here at Tax Group Center, our tax consultants, tax attorneys, CPAs, and enrolled agents can all help you deal with the IRS. Whether you owe the IRS a significant chunk of money or you just don’t understand a letter they’ve sent to you, we can help. Contact us today with any of your tax questions, concerns, or needs. We’re happy to help, and we look forward to hearing from you!

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Can You Go to Jail for Not Paying Taxes?

couple receives notice of legal trouble with taxes from tax professional

couple receives notice of legal trouble with taxes from tax professionalRecently, worldwide headlines reported on the arrest of John McAfee, an American tech expert, who was hiding out in Spain after committing severe tax evasion in the U.S. According to the Department of Justice, McAfee could’ve faced a maximum of five years in prison if found guilty of tax evasion.

But wait, can you go to jail for not filing taxes? Is the U.S. government really willing to extradite citizens who didn’t pay their taxes on time? In a nutshell, the bad news is that you can get arrested if you don’t pay your taxes. The good news is that it’s unlikely to happen to you unless you are intentionally evading the IRS and you owe a lot of money.

Do you need more information about what happens when you don’t pay taxes? Don’t panic! Learn everything you need to know about tax crimes and tax fraud below.

What Happens When You Don’t Pay Taxes?

So, what happens when you don’t pay taxes, and can you go to jail for not filing taxes? The first step in not paying your taxes usually involves not filing your taxes. What you need to know is just because you don’t file your federal taxes or state taxes doesn’t mean that the IRS doesn’t know what you owe. On the contrary—they know exactly how much income you earned and how much you really owe.

If you don’t file, the IRS may not take action right away, but in time, you’ll get a bill in the mail from the IRS that outlines how much you owe. Keep in mind that you’ll likely get hit with a penalty, too. Depending on how much you owe, you could have accumulated a massive penalty in the form of fees and interest.

Aside from this financial penalty, the IRS won’t immediately attempt to file charges against you. If you don’t take action after the IRS notification, though, that may change.

Tax-Related Crimes: Civil Cases or Criminal?

At this point, the IRS knows you didn’t pay your taxes. They also know that you know about your situation because they informed you via letter. They may start to believe that you are both knowingly and purposely refusing to file and pay your taxes.

You can face criminal charges for this type of tax crime. Willful and intentional tax avoidance is called tax fraud.

If you make a mistake but didn’t do it on purpose, then the IRS expects you to act. They expect you to contact them and work on resolving the issue. In these situations, the IRS won’t charge you with a crime, but they may still hit you with civil penalties in the form of monetary penalties: 

  • Negligent reporting could cost you up to 20% of the taxes you underestimated. 
  • If you failed to file your taxes in a timely manner, then you could owe up to 5% for each month you didn’t file. 
  • In total, you could end up paying up to 25% of the overall amount you owe. 
  • Failure to report specific information could cost up to $520 per return.

These civil penalties may not seem like much, but they add up quickly. If you already know you can’t pay your tax bill, then ignoring it will only make matters worse. 

Tax Fraud and Jail Time

A deliberate attempt to avoid paying your taxes by lying or falsifying information is considered a crime. You could be considered guilty of tax fraud if you lied on your tax form intentionally, falsified records, or misrepresented certain expenses. Income tax fraud is serious. If you’re found guilty, then you could be subject to three to five years of jail time. 

But jail time isn’t the only thing you’ll have to contend with if you’re found guilty of tax fraud. You might also get hit with serious financial fines on top of the extra fines and penalties you’re already facing from the IRS.

Illegal Tax Shelters

Using an illegal tax shelter is evidence that you’re willfully and intentionally avoiding paying your taxes. A tax shelter is a type of investment that the taxpayer uses to reduce their overall income tax liability without actually changing the overall value of the taxpayer’s income or assets. Some tax shelters are legal, but many of them are nefarious. Putting money into an overseas bank account, for instance, doesn’t serve any legitimate purpose. Putting money into an employer-sponsored 401(k) program, on the other hand, would be considered a legal tax shelter.

Abusive and illegal tax shelters are investment strategies that reduce taxes unfairly. Sometimes large investors use specific counties, states, or regions that have a lower corporate or personal income tax rate. This is called a “tax haven.”

The IRS sees illegal tax shelters as abusive and fraudulent behavior. You could face a penalty that’s up to 75% of the taxes you underpaid if you’re found using an illegal tax shelter to reduce your tax liability.

How to Avoid Tax Consequences

The above scenarios are all pretty frightening, especially if you don’t earn a huge amount of money to begin with. If you’re currently facing a large tax bill, remember this: It’s not a crime if you can’t pay your taxes on time. So long as you are not willfully or intentionally lying or avoiding your taxes, the IRS can’t file a criminal case against you.

Rather than avoiding the situation, you should respond to the IRS and consider the tax relief solutions available to you. Obviously, the best solution is to pay your tax bill in full, but that’s not always possible. If you can’t pay your debt right away, then you can likely enter into an agreement with the IRS.

Installment agreements allow you to pay off your tax bill over time, and other options like penalty abatement can help you reduce any fees you’re facing due to late payment. If you’ve been struggling to pay off your back taxes for a while or you owe a very high amount, then you should research whether the IRS Fresh Start Program can help.

If you enter into any of these agreements, then the IRS is unlikely to continue attempting to collect from you. Instead, they’ll wait for you to adhere to your side of the agreement and start making payments. If you default on your payment plan, however, the IRS may re-initiate those tax consequences.

So, Can You Go To Jail for Not Filing Taxes?

So, can you go to jail for not filing taxes in the U.S.? To make the answer as simple as possible, you can get arrested for not filing your taxes. Your actions must be willful and intentional, though, which means you won’t simply get arrested off the street. You’ll have ample opportunity to settle your debt or at least get into contact with the IRS to prevent an arrest.

In most cases, you can reconcile your tax debt and avoid the consequences of tax crimes. There are legitimate tax planning and tax avoidance measures, but flat-out refusal to pay what you owe is considered a criminal act.

Leave your tax worries behind with expert guidance from a team that has 30 years of experience working with the IRS. Contact us today!

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What Is a Notice of Intent to Offset?

filing taxes using laptop computer and calculator

filing taxes using laptop computer and calculatorIn the wake of the coronavirus pandemic, about 11.23 million Americans failed to pay their taxes on time. Collectively, that means a whopping $125 billion didn’t get paid to the federal government and therefore can’t be used to fund important programs or help citizens in need.

If you owe a significant chunk of money in back taxes, you may have received a Notice of Intent to Offset. You know consequences are imminent, but what you may not know is exactly how the Treasury Offset Program works or what you should do after you get a Notice of Intent to Offset. Learn everything you need to know to protect your rights and financial future below.

What Is a Notice of Intent to Offset?

In a nutshell, a Notice of Intent to Offset is an informational letter that tells you what’s about to happen. It means that you owe the IRS back taxes or you owe a significant chunk of money to a different government agency.

It also means that the IRS is planning on seizing your tax refund.

Read the letter carefully to determine whether your entire tax refund or federal payments are at risk. Often, the government will only seize a portion of your refund or payments, but the amount they want to take will depend on several factors. You also need to go through the letter and verify that the following details are 100% accurate:

  • Your name
  • The amount of your federal payment or tax bill
  • The agency that’s initiating the offset
  • The agency’s contact information

Depending on the situation, the agency may take all your tax refund. In other cases, you’ll still receive a portion. Be sure to check the information in the letter and make sure that it is correct.

How Does the Treasury Offset Program Work?

The Notice of Intent to Offset is most often sent through the Bureau of the Fiscal Service. This government agency operates the Treasury Offset Program, and it also processes all payments from any federal agency. In other words, your tax refund must go through the Bureau of the Fiscal Service before it gets to you.

This government agency also gets information about delinquent debts you owe to creditor agencies. Your debts get attached to your tax identification number and name. If you owe the Department of Education for unpaid federal student loans, for example, the BFS knows about it!

Before issuing your tax refund or federal payment, the BFS will run your tax number to check for debts. If the debt is eligible for the offset program, then you’ll get sent that dreaded Notice of Intent to Offset.

Types of Treasury Offset Program Debts

Are you wondering what types of debts get sent over to the BFS and which ones are eligible for the Treasury Offset Program? Here are the types of liabilities that could potentially end up resulting in an offset:

  • Unpaid child support
  • Delinquent spousal support
  • Past due student loans
  • Delinquent state income taxes
  • Back federal taxes
  • Certain unemployment liabilities

The above types of debts get sent to the Treasury Offset Program once they’ve been delinquent for over 90 days.

Not every federal payment is eligible to get offset, though. Here are the types of federal payments though could get reduced through the Treasury Offset Program:

  • Military pay
  • State income tax refund
  • Federal retirement payments
  • Federal travel reimbursements
  • Contractor or vendor payments from the government
  • Some federal benefits (other than Supplemental Security Income)

The amount of income that can get offset is limited by law. If your Notice of Intent to Offset letter mentions your Social Security benefits, then know that they can only withhold 15%. If the letter mentions your tax refund, then understand that the full amount could be offset.

The Consequences of an IRS Tax Offset

An IRS tax offset or other type of offset means that consequences are forthcoming. If you do not take action, then the money mentioned in the notice will likely get seized. You will not receive the funds you expected, but the overall amount of debt you owe will decrease. If the offset doesn’t cover the full amount of your debt liability, then you’re not out of the woods yet. Future federal payments or tax refunds could be offset, too.

What to Do If You Get a Notice of Intent to Offset

It’s essential to take action if you receive a Notice of Intent to Offset. First, confirm that everything in the notice is accurate. As we explained above, you need to verify that all your information is correct, and you should ensure the debt amount is current and accurate. This step is very important, because the Federal Offset Program may not realize that you’ve already paid off a debt liability.

Next, you need to decide whether to fight the offset or allow the money to be seized. If you don’t want to challenge the offset, then you don’t have to do anything. Your money will be taken and it will go towards your unpaid debt.

If you know that the debt amount is correct but want to prevent the offset, then you have several options depending on whether you owe money to the IRS or the Department of Education.  

First, you need to identify who you owe your debt to. If you owe money to the IRS, then you’ll need to contact the IRS about your debt. We’ll go over that in more detail below. 

If you owe student loan debt to the Department of Education, then you have a few options for preventing the offset. A student loan consolidation tax offset means that you can bundle all your student loans into a single loan. After consolidating your debt, it will no longer be considered in default, which will mean that you’re no longer eligible for an offset. Another option is to rehabilitate the loan by reaching an agreement with your lender. You could always pay the defaulted loan in full, too, but that’s usually not an option for most borrowers.

If you want to challenge the offset, then you do have options. We’ll get into more detail about them below.

Tax Refund Offset 2021: What Are Your Options?

After receiving a tax refund offset notice, your time is limited. The IRS will only give you about 60 days to pay off the full balance of back taxes. Clearly, that’s not possible for most individuals who are receiving an offset in the first place.

That’s where tax debt negotiation strategies come in. If you and the IRS come to an agreement about your delinquent taxes and you start making payments, then there is a chance that the government will decide not to offset your federal payment.

Take note, though: there is no guarantee that the IRS will choose not to offset your federal payments even if you attempt to reconcile your debt. The only way you can be sure that no offset will occur is if you pay off the full balance of what you owe before the 60-day deadline. In most circumstances, the IRS will still offset your tax refunds even if you’re making monthly payments on your back taxes by using an IRS installment agreement.

If you owe state taxes, then look into your options for state tax debt relief, too. Sometimes, you can work with the IRS to reduce the overall amount of tax debt you owe. You can also act and start making payments to show the agency that you are willing and able to pay off that debt over time.

Steps to Take If You Want to Dispute IRS Offset Claims

Do you want to challenge or dispute the notice? If so, then you need to contact the agency listed on the notice ASAP. You only have a certain amount of time after receiving the notice to act, so get started quickly. If the agency agrees that you’ve paid your debt, then tell them to stop the offset by informing the proper agency immediately. Otherwise, that agency may be tasked with refunding you any amount that gets unfairly offset.

How to Deal With a Notice of Intent to Offset

Have you recently been served with a Notice of Intent to Offset? Are you wondering how to deal with the notice without suffering the consequences of losing out on federal income you expected to receive? Whether you decide to dispute IRS offset claims or participate in a tax refund offset alternative like making payments on your debt, there are ways to successfully deal with a Notice of Intent to Offset.

Here at Tax Group Center, our experts can help you determine your best financial option. Our experts include professionals like tax attorneys, CPAs, enrolled agents, and certified tax consultants. Our top priority is providing realistic and achievable solutions to individuals and businesses struggling with the IRS.

Get accredited and sound professional advice on your Notice of Intent to Offset, tax relief, or other IRS issues by contacting us today.

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How to Get the IRS to Remove Penalties and Interest

Woman finishing taxes looking content

Woman finishing taxes feeling contentIf you had to guess the maximum financial penalty you could face for failing to pay your taxes, then what would you say? Five percent of your unpaid taxes? Ten percent?  Believe it or not, the highest penalty you could face if you fail to pay your taxes in time is a whopping 47.5%! That’s the least of your worries, though. On top of that, tax evasion is a crime. If you intentionally attempted to evade a tax assessment, then you could face up to five years in jail if you get convicted. You could face an entire year in jail for each year that you failed to file a tax return. The good news is the IRS rarely issues such harsh penalties. For the most part, they just want you to pay what you owe.  Are you wondering how to reduce IRS penalties so that you can afford to pay back your tax debt? If so, keep reading. You can learn everything you need to know about how to get out of IRS penalties below.

How to Get the IRS to Remove Penalties and Interest Debt

When was the last time you filed your taxes? Do you take the time to verify that your returns are error-free every year? If you had to think hard on either of these two questions, then there’s a good chance that you could owe the IRS money due to unfiled returns or unpaid taxes. When you’re late on your taxes, the IRS has the authority to issue fines against you. These fines are no laughing matter, either. At minimum, you’ll be charged a 5% interest fee on your entire tax bill for each year you’re late. The IRS has a lot of authority to penalize you in other ways, too, so it’s a good idea to get informed on the consequences of not filing taxes if you know that you owe back taxes or haven’t filed in a few years. Knowing that you’ll likely owe even more money in the form of IRS penalties and interest fees can discourage you from filing at all. You’re likely asking yourself, Can I get the IRS to waive penalties and interest fees?  The short answer is most likely. The long answer is that it depends on the actions you take right now. Next, we’ll give you an overview of the best steps to take to help you reconcile your tax debt and get penalties and interest debt removed from your account.

Determining How Much You Owe

You’ll never be able to tackle your tax debt if you never face it head-on. Your first step, then, involves determining how much you owe in back taxes. Before you get in touch with the IRS, do a little research on your own. Try to estimate how much income you earned in the years you didn’t file, and then try to estimate how much taxes you owed that year.  If you’re struggling with estimating your taxes, it may be time to discuss your situation with a tax professional. If you reach out to the IRS about your account, then they may re-initiate collection methods.

Filing Tax Returns for Previous Years

Once you’ve got a good idea of how much you owe, it’s time to get squared up with the IRS. You’ll need to file your tax returns for all the previous years you’ve missed out on. It’s crucial to enlist the help of a tax professional during this step, because tax laws are always changing. The deductions or credits you can claim from years past may not be the same as they are today. You’ll have a better shot at maximizing your return if you get a professional to help.

Negotiating Your Tax Debt

Once the IRS processes your returns, you’ll likely receive a hefty tax bill. First, review this tax bill thoroughly. Verify that all the information on the bill is accurate. Then, go through and review how much of your bill is from tax penalties and interest. If you can pay off the entirety of your bill, then it’s advised that you do so. More than likely, though, you’ll need to negotiate with the IRS to create a payment plan that works for you. Depending on your situation, you may be able to apply for tax debt relief programs that reduce or eliminate your tax bill altogether. If you’re interested in learning more about these programs, then reach out to one of our tax experts today.

How to Get the IRS to Remove Penalties and Interest on Back Taxes

If you want to remove IRS penalties from your account, then your best option is to apply for IRS penalty abatement. This action potentially gets all of your penalties and interest removed from your tax debt. In rare situations, you could even have some of your interest or penalty payments refunded to you. It’s no easy feat to qualify for penalty abatement, though. First, you need to prove that you had reasonable cause for not paying your taxes on time. “I didn’t have the money” isn’t considered a reasonable cause. You’ll need to prove that you experienced a hardship, like an inability to obtain your records, a death in the family, or a severe illness in the family. It’s advised that you speak with a tax consultant to determine if you’re eligible for penalty abatement with the IRS if you own a significant amount of tax debt.

The Number One Way to Avoid IRS Penalties in the Future

Getting the IRS to eliminate your penalties for non-payment or late payment is a hassle. The best way to avoid IRS penalties in the future is to ensure that you get your taxes filed every year on time. You also want to do your best to avoid making errors on your returns. So, how can you ensure that your taxes are error-free? We suggest using a bookkeeping service to help you record your transactions all year long. Doing so will help ensure that your taxes are correct and easy to file once Tax Day arrives.

Are You Ready to Solve Your Tax Problems?

Have you been avoiding filing your taxes because you’re afraid you won’t be able to afford the bill? Are you simply not sure how to cope with excessive penalties levied against you by the IRS? Our certified tax consultants can help answer your questions, guide you through filing your taxes, and help you find solutions to your tax problems. If you’re ready to make a change in 2021, then let our experts help. Leave your contact information on our online form now to get started on making a change.

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Can You Buy a House if You Owe Taxes?

realtor shows house to two interested buyers

realtor shows house to two interested buyersA whopping 65% of Americans own their own homes. The remainder either rent, live with family members, or suffer from homelessness. If you haven’t become a homeowner, then you likely have your reasons. Are you currently not pursuing home ownership because you’re uncertain about your tax status? Have you found yourself wondering, If I owe taxes, can I still buy a house? The last thing you want to do is invest in a home only to have to forfeit it to the IRS.  Thankfully, you don’t have to! If you’re interested in learning more about buying a house with IRS debt, then you’ve come to the right place. Read on to learn everything you need to know about becoming a homeowner, even if you owe back taxes.

Can You Buy a House if You Owe Taxes?

 

The American Dream often involves homeownership, so if you’re getting older, you’re likely considering whether now is the right time to buy a home. But, there’s just one problem. You haven’t paid your taxes over the past few years, and you do owe a significant amount of back taxes to the IRS. Can you still buy a house? The short answer is yes. It will take some hard work on your part, though, and the road won’t be as straightforward as it will be for someone who doesn’t owe money in back taxes. You’ll need to first learn about and understand the real consequences of not paying taxes. Depending on how long it has been since you filed or how much you owe, the IRS could already have started pursuing collection actions. If you don’t have any assets, then you might not realize that you could already have a tax levy against you. A tax levy is legal permission for the IRS to seize your assets or property to settle a tax debt. If you’ve received a “Final Notice of Intent to Levy” document in the mail, then the IRS likely already has this legal measure in place. If you are in this situation or you’re not sure about your tax levy status, it’s crucial that you speak with a tax expert ASAP. If you do end up securing a home without attempting to settle your tax debt situation with the IRS, then the IRS could utilize their tax levy to take it away from you. You might also already be facing significant IRS penalties, like wage garnishment, which can make it harder to buy your home. If you’re struggling under the weight of collection efforts but want to buy a home, then you do have options. Get more details about how you can move forward with your homebuying aspirations even while you still owe back taxes below.

Your Guide to Buying a House With Back Owed Taxes

So, what should you do if you want to buy a home but you’re unsure about your tax situation? If you’re not sure whether you owe taxes or how much you owe, then your first step is to identify where you fell short. You may need to get in contact with the IRS to determine what years you didn’t file for or what years have errors. You’ll need to rectify those errors by filing the correct tax returns for each year you missed. The IRS will accept your forms, process them, and then let you know how much you still owe. Your best option at this point is to completely pay off your back taxes, but this usually isn’t an option for most Americans. After all, if you had the money to pay off your tax debt, then you probably would have when they were originally due! Don’t panic. There are plenty of options for you if you can’t pay off your tax debt right away. The IRS will work with you as long as you prove that you’re not intentionally avoiding paying your taxes. Not taking any action at all, though, could be viewed as evasive. If the government suspects you’re willingly avoiding paying your taxes while you have the means to do so, then they will likely take action against you.  That’s why you need to work with the IRS to come up with a tax debt negotiation that works for both parties. We’ll get into more detail about that below. Remember, once you initiate contact with the IRS, they’ll be looking into your accounts. Depending on how much time has passed since you last filed your taxes, the IRS may have stopped attempting to collect from you. Once they have your current contact information, things might change. To avoid getting hit with collection efforts, criminal charges, or other penalties, it’s advised that you speak with a tax professional about your situation before you get in touch with the IRS.

How to Tackle Your Tax Debt Before Buying a House

So, how can you tackle your tax debt and start to buy your own home? Both are possible! You don’t have to pay off all your debt to qualify for a home loan. You also don’t have to pay off all your debt to avoid penalties, criminal charges, or collection efforts. All you need to do is show the IRS that you aren’t willingly avoiding your tax bill. Here are the most common tax debt negotiation methods Americans utilize when they don’t have money to pay their tax debt right away:

Often, the best solution is to enter into an installment agreement with the IRS. An installment agreement is like a payment plan between you and the IRS. You pay down your tax debt each month, and in exchange, the IRS won’t pursue collection efforts or criminal charges against you for your debt. An Offer in Compromise could help you pay less than what you owe through a reduced payment plan. The IRS must determine that you’re experiencing financial hardship, though. You could also get filed under Currently Non-Collectible status if you can prove that you really can’t pay off your tax debt. Did you know that you could also have your tax debt disappear through Negotiation by Default? There is a statute of limitations on tax debt, which is usually 10 years from the date your tax debt was originally assessed. If enough time passes without the IRS taking action, then you could end up not owing the IRS anything! If you believe you may have tax debt that has already expired, it’s wise to consult with a tax professional to ensure that’s the case.

Are You Considering Buying a House When You Owe the IRS?

If you owe the IRS money in back taxes, then you’re in good company. Right now, a whopping 11.23 million Americans are in the same position that you are. Despite that, many of them own their own homes or plan on purchasing one in the coming years. How is that possible? So long as you’re actively working on reducing your tax debt, the IRS will work with you, too. Keep in mind that there’s no benefit to penalizing you if the IRS knows they won’t be able to collect what you owe. Instead, they have an incentive to help keep you on your feet and working so that you can continue to be a source of revenue for them no matter how small. Are you getting ready to buy a house while owing the IRS back taxes? You don’t have to face this situation alone. The experts at Tax Group Center specialize in providing affordable solutions to individuals who owe the IRS. Our tax attorneys, CPAs, and certified tax consultants will work together with you to create a customized tax debt plan that works for both you and the IRS. Are you ready to get started? Leave your name, email address, and phone number on our online form now to hear back from one of our agents as soon as possible.

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Can You Have 2 Installment Agreements With the IRS?

Can You Have 2 Installment Agreements With the IRS

Can You Have 2 Installment Agreements With the IRSIn 2011, the IRS Fresh Start program created a bridge to debt forgiveness for delinquent taxpayers that continues to help countless Americans settle federal tax debts today. The program is expansive, fairly easy to enroll in, and designed to minimize penalties. While the IRS offers a range of debt relief options that include Offer in Compromise (OIC) and Currently Non-Collectible (CNC), the most widely used option is the IRS Installment Agreement (IA).

While an IA doesn’t forgive your debt, it does allow you to pay it over time without incurring fees and penalties. It’s also the easiest option to qualify for within the IRS debt forgiveness program. Taxpayers who apply for the program are able to set up payment plans with the IRS that can last up to six years (72 months). 

If you’re already enrolled in a payment plan with the IRS for an existing tax bill, you may be wondering what your next step should be if you can’t pay this year’s tax bill. Can you have 2 installment agreements with the IRS? Take a look at the steps to change IRS payment plan terms.

Can You Have 2 Installment Agreements With the IRS?

No, you can’t have multiple installment agreements with the IRS simultaneously. That doesn’t mean you’re out of luck if you have new tax debt. What’s more, there may be a way to figure out how to change IRS payment plan terms, resulting in you owing less than you did with your existing IRS agreement. But first, you have to understand the IRS’s policy on handling new debt when you already have a payment plan.

If you’re already enrolled in an Installment Agreement with the IRS, you may remember that you agreed to some lengthy terms when you were approved for the program. One of those terms was that you promised to stay current with all future tax payments. If you fail to pay or file future taxes, your IRS Installment Agreement for past taxes defaults. That means the IRS will expect you to pay both your past debt and your new debt immediately. You’ll also lose the penalty and interest protection that the IRS Installment Agreement gave you.

If you have a new tax debt when you’re already enrolled in an Installment Agreement, do not just avoid paying your taxes! The IRS won’t technically allow you to apply for a new Installment Agreement, but you can learn how to change IRS payment plan terms to account for the new debt. 

Keep in mind that you’ll need to check if you still qualify for an IRS Installment Agreement with your new debt figured into the equation. The requirements are:

  • Long-Term Individual Payment Plan: You owe $50,000 or less in combined tax, penalties, and interest with all of your returns filed.
     
  • Short-Term Individual Payment Plan: You owe less than $100,000 in combined tax, penalties, and interest with all of your returns filed.
  • Long-Term Business Payment Plan: You owe $25,000 or less in combined tax, penalties, and interest with all of your returns filed.

It’s crucial to contact the IRS to reapply for a modified agreement that folds your new tax debt into the balance of your payment plan. You need to do this before your taxes are due. If your balance is too large to handle in monthly payments, you may actually be able to switch to a new type of loan forgiveness option based on your updated debt total. Just remember that nothing can be done until you file all tax returns that are owed to the IRS.

How to Modify an IRS Installment Agreement

Act quickly, because your existing agreement with the IRS will be in default as soon as the IRS assesses your new tax balance. If you’re unsure about what to do, have a tax professional contact the IRS on your behalf to request a modification. If you disagree with the debt balance that the IRS has provided, you can also submit Form 9423: Collection Appeal Request to contest your tax bill.

If you agree with the tax bill, you can request to have the new balance added to your existing Installment Agreement. While the IRS won’t allow you to have two separate Installment Agreements, you can consolidate your tax debt into a single payment plan fairly easily. 

The process is the same for both individual and business IRS Installment Agreements. If you’ve already allowed your current agreement to lapse by default, you may be required to pay a reinstatement fee. There’s also a chance that you may not be able to make your new monthly payment amount based on your monthly income once all of the numbers are plugged in. This might make you eligible to move from an Installment Agreement to another IRS forgiveness option.

If your new total is unpayable based on your monthly income, you can fill out IRS Form 433-F: Collection Information Statement. This is the form that the IRS uses to determine if delinquent taxpayers are eligible for Offer in Compromise or Currently Non-Collectible status. If you are eligible, you may be able to negotiate your tax debt down to a lower figure.

You Don’t Have to Learn How to Modify an IRS Installment Agreement Alone

If you know a tax bill that you can’t pay is coming, don’t wait until your current IRS payment plan goes into default. At Tax Group Center, we help taxpayers modify their Installment Agreements to continue taking advantage of the IRS Fresh Start program. Contact us today to work with a team of lawyers and CPAs with 30 years of experience to find out how to change IRS installment agreement terms!

Get Tax Help Now!

Call (800) 264-1869 or Contact Us Online Today!

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What to Do About a Tax Lien on Your Home

What to do about a tax lien on your home

What to do about a tax lien on your homeWhat happens if the IRS puts a lien on your house? 

You may be in this situation if you have an outstanding tax debt with the IRS that hasn’t been addressed. If you’re worried about the potential for a lien, it’s important to get up to date with all unfiled tax returns to apply for debt relief options or payment plans through the IRS Fresh Start program. If a lien is already in place, it’s time to get serious about taking care of it before you see even deeper long-term financial repercussions.

What Is a Tax Lien on a House?

What happens when a lien is placed on your home? We want you to know that a tax lien will never “sneak up” on you. The IRS will notify you that you owe tax funds through something called a Notice and Demand for Payment. A lien will only be placed on your property if you ignore the notice without paying the full debt on time. If you don’t make an arrangement with the IRS after receiving your notice, the IRS will then file a public document called the Notice of Federal Tax Lien. The purpose of this document is to alert creditors that the federal government has a legal right to your property.

Here’s Why You Don’t Want an IRS Tax Lien on Your Home

An IRS tax lien stifles your ability to utilize your home as a financial asset. It will be difficult to sell or refinance your home until the lien is satisfied. Even filing for bankruptcy won’t clear the lien. What’s more, a lien can hinder your ability to be approved for credit with lenders. 

The best option is to stop running from the IRS. In fact, you as a taxpayer have many different options for getting rid of an IRS lien on your house.

How To Get a Lien on Your House Removed

If you need to figure out how to get a lien off your house, you have several choices. The simplest one is to pay your tax bill. Once you pay your full tax debt, the IRS will release your lien within 30 days. You still have other options if you’re not able to pay the full amount today. When the IRS determines that conditions serve both the government and taxpayer, it will actually approve other options for reducing a lien’s impact.

Option 1: Ask for a Discharge of Property

The IRS may allow for a discharge of the lien from a specific property that you own. Taxpayers can use this if they intend to sell or refinance a property. When you get approved for a discharge, you’ll be free to sell or refinance one specific property without the lien attached, even if the lien still applies to other properties and assets.

Option 2: Request Subordination

With subordination, the IRS isn’t technically removing or freezing the lien. However, the IRS is allowing other creditors to move head ahead of the IRS. This could help the taxpayer qualify for a mortgage or loan in cases where the primacy of the IRS lien was preventing that from being approved. Subordination is typically used when taxpayers intend to refinance as a way to use home equity to pay an IRS debt.

Option 2: Request a Withdrawal

IRS lien withdrawal is the most dramatic option. A lien withdrawal formally removes the public Notice of Federal Tax Lien that was placed on your property by the IRS. This signals to other creditors that the IRS is not competing with them for rights to your property. However, an IRS lien withdrawal does not actually remove your liability for the amount of the lien. The lien is still in place, even though your record is not “tarnished” by it publicly for other creditors to see. Keep in mind that under ordinary circumstances, a tax lien will stay on your record for seven years.

Under the 2011 IRS Fresh Start program, the IRS will approve the withdrawal of your Notice of Federal Tax Lien after the lien’s release as long as you’re in compliance with all filings of all individual returns, business returns, and information returns for the past three years. You must also be current on all estimated tax payments and federal tax deposits, as applicable. Taxpayers may also be eligible for lien withdrawal for a Notice of Federal Tax Lien if they have entered into a Direct Debit installment agreement with the IRS. To utilize this option, you must owe $25,000 or less in tax debt. If your current tax debt is above $25,000, it’s possible to pay down the balance to reach $25,000 before making a request. You must also be in full compliance with all other filing requirements.

Final Thoughts on Handling an IRS Tax Lien on Your Home

If you’re in any phase of managing an IRS tax lien on your house, the Tax Group Center team can offer guidance. While preventing a lien by taking advantage of IRS payment options now is the best choice, we can help you take advantage of relief and payment options, even if a lien is already in place. Ready to work with a team of tax lawyers and CPAs with 30 years of experience? Contact us today and we’ll get to work for you!

Get Tax Help Now!

Call (800) 264-1869 or Contact Us Online Today!

IRS Resources:

  • https://www.irsvideos.gov/Business/IRSLiens/LienSeg1
  • https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien
  • https://www.irs.gov/newsroom/what-if-there-is-a-federal-tax-lien-on-my-home
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What Can the IRS Put a Lien On?

What can the IRS put a lien on

What can the IRS put a lien onCan the IRS take your property? 

An IRS lien is one of the most stressful events that can happen to a taxpayer. Uncertainty regarding just how far the IRS’s claims on your property can go is the biggest source of stress. An unaddressed lien can lead to a levy, when the IRS seizes your property to pay the tax debt. If you have an IRS lien, you need to understand the different types and their scope. Let’s take a look at the basics of IRS liens.

What Can the IRS Put a Lien On?

Federal tax liens can attach to all property and property rights possessed by a taxpayer. Yes, the IRS’s scope for property extends to both tangible property and rights to property. What’s more, the IRS’s definition of property also includes the following:

  • Future interests
  • Contingent interests
  • Executory contracts

Once a lien exists, it automatically attaches to any properties acquired by the taxpayer throughout the entire duration of the lien. That means a property you purchase or inherit after the IRS has placed a lien on your account will be subject to that lien. 

What’s more, property that you’ve owned for decades is also subject to the lien. 

Now, let’s take a look at what’s behind some of the specific property claims used by the IRS.

Future Interests

When the IRS applies a lien on future interests, it’s stating that a postponed “right to property” does not negate the lien. For instance, a taxpayer may have a right to property under a trust or contract that distributes periodic distributions. The IRS will attach the lien to a taxpayer’s entire share of the rights, regardless of what the distribution schedule looks like.

Contingent Interests

Even potential property rights are not overlooked by the IRS. When the IRS puts a lien on contingent interests, it means that they are putting a claim on property or property rights that will be received by the taxpayer if certain events or circumstances come into play. This most frequently applies for a living trust.

Executory Contracts

A lien on executory contracts can apply before performance under a contract. That means that contract rights under a partially executed contract are considered a “full right” to a property because of the realizable value attached. As a result, the IRS considers this part of a lien.

What About Joint Property?

Yes, the IRS can attach liens to joint and shared property. However, the IRS can only attach a lien to the portion of property that is owned by the taxpayer with the tax debt. While the other party technically isn’t subject to the lien, they are greatly hindered regarding what they can do with the property as a result of the lien. The most common problem is that a lien acts as a barrier to selling a piece of real estate. 

Even borrowing against the value of the property can be impossible. When homeowners borrow against their homes, they essentially go through a closing process. Liens that show up when a bank or lender goes through the approval process will stop a borrowing application in its tracks. While the IRS won’t necessarily seize a piece of property that has a lien, the lien essentially reduces or nullifies the value of the property as an investment.

Types of Property to Which a Lien Can Attach

Liens can be placed on any property that you own. This includes cars, assets, personal possessions, and more. Liens can also attach to business properties. Even a company’s incoming payments through accounts payable are subject to IRS liens.

Can You Get Rid of a Lien on Future Property?

An IRS lien applies to both current and future property. Even if you purchased property after the IRS placed the lien, that new property can still be affected by the lien. The easiest way to get rid of a lien on all of your property is to pay your IRS debt in full. If you’re unable to pay the full amount, you should be able to apply for IRS tax lien relief or withdrawal if you meet certain qualifications under the expanded IRS Fresh Start program. 

Above all, the IRS just wants you to be compliant with trying to make payments. The first step to getting any type of lien forgiveness is to be current with all past tax returns. It’s important to get caught up on all unfiled tax returns, even if you can’t pay what you owe; the IRS won’t approve you for relief options if you’re missing any returns.

What Should I Do If I’m Worried About IRS Tax Liens?

If you’re concerned that the IRS is going to place a lien on your property, you should take action right away. If the lien is coming because of an unpaid tax bill, you can apply for IRS forgiveness options like an Installment Agreement (IA), Offer in Compromise (OIC), or Currently Non-Collectible (CNC) status now to avoid the lien being put in motion. Again, qualifying for one of these options is often as simple as just being current with all of your previous tax returns.

What can the IRS put a lien on? If you’re still worried, it’s time to talk to an expert. An unaddressed lien can follow a person around for decades. What’s more, it can also negatively impact a taxpayer’s spouse and family members because shared property is subject to liens. At Tax Group Center, our experts have been working with the IRS to resolve liens and tax debts on behalf of our clients for three decades. Contact us today if you need help removing an IRS lien.

IRS Lien on Property

If you don’t pay your tax debt, the government can make a legal claim, or lien, against your personal or business property. This lien applies to all physical property and financial assets you own. Yes, that means that the government can come after your real estate, personal property, financial assets, and earnings. Liens will apply even if you’ve paid some of your debt.

Prior to instating a lien, the IRS will notify you that you’ve failed to pay your full tax bill. You will receive something called a Notice and Demand for Payment in the mail. If you ignore this document, the IRS will then file a Notice of Federal Tax Lien. The purpose of this document is to let creditors know that the government is making a legal claim to your property.

How To Get Rid of a Lien

If possible, focus on avoiding a tax lien instead of getting rid of one. Try to file and pay all your taxes on time. If you do fall behind, don’t ignore the IRS’s requests for payments. You have a window after you’ve failed to file or pay taxes where you can apply for debt relief options that include an Installment Agreement (IA), Offer in Compromise (OIC), and Currently Non-Collectible (CNC). These options can help you to avoid fees, penalties, and liens from the IRS.

Paying your full tax debt is the best option for getting rid of a lien after it’s in place. Once your debt is paid, the IRS will release your lien within 30 days of payment. You also have several other avenues to pursue if you’re unable to pay your bill. Here’s a look:

  • Discharge of Property: You may be able to file for a “discharge” that removes the lien from a specific property that you own. The IRS has very strict rules for eligibility for this option.
  • Subordination: While this option doesn’t remove your lien, it does provide relief by allowing creditors to go before the IRS. This can be important if you need to apply for a mortgage or loan. Again, the IRS has strict eligibility rules.
  • Withdrawal: This option removes the IRS’s public Notice of Federal Tax Lien without removing your liability.

In some cases, you may decide that using the equity in your home to satisfy your tax debt is the best option. You can request for the IRS to discharge the lien for an IRS tax lien sale of property. Only by getting approval from the IRS can you transfer the property to the new owner without the lien. Keep in mind that the IRS will closely monitor and document this transaction.

The IRS introduced robust options for IRS lien withdrawal as part of its 2011 Fresh Start program. These options can put you on the fast track to getting your record cleared, even if you aren’t able to pay your tax debt in full. Here’s a look at some of the qualifying factors for IRS lien withdrawal beyond paying your debt in full:

  • You’re in compliance for the three consecutive years for filing all individual, business, and information returns.
  • You’ve made three consecutive direct debit payments.
  • You’re current on all applicable estimated tax payments and deposits.
  • You owe $25,000 or less in taxes. If you owe more than $25,000 in taxes, you’re able to request a withdrawal once you’ve paid down your balance to $25,000.
  • You’re fully compliant with other IRS filing and payment requirements.
  • You haven’t defaulted on any payments in a Direct Debit Installment agreement.

One of the biggest mistakes a taxpayer can make is to avoid speaking with the IRS out of fear. Explore all your options if you can’t pay your tax bill in full. While a lien is never ideal, the lien forgiveness options above can help you to avoid serious damage to your financial records.

How To Know if There Is a Lien on Your Property

Fixing a federal tax lien on property begins with confirming a tax lien. The IRS will send you a Notice of Federal Tax Lien when it places a lien on your property. If you suspect that you’ve overlooked or misplaced a lien notice that arrived, you can inquire about a potential lien by contacting the IRS’s Centralized Lien Unit at 1-800-913-6050. 

If you prefer not to contact the IRS on your own, it’s recommended that you authorize a tax professional to call the IRS on your behalf.

What Happens if You Don’t Get a Property Lien Removed?

You may be unable to sell your home if there is an IRS lien on the property, as the title search that’s conducted prior to closing will pull up any federal tax lien. 

IRS tax liens impact all aspects of your personal, business, and financial life. First, all of your current and future assets are up for grabs for the duration of the lien. This includes property, vehicles, and securities. Even more devastating is the fact that an IRS lien can severely limit your ability to obtain credit in the future. This means that you may not be able to borrow money for a home mortgage or business loan.

Liens can also attach to business properties. This gives the IRS rights to all business property. Even your accounts receivable could be claimed by the IRS for as long as the tax debt remains outstanding. An IRS tax lien won’t go away if you file for bankruptcy; they will continue to pursue your lien even afterward.

Get Help for a Property Lien Release With a Professional

A lien on property is one of the most complex and financially devastating consequences of running afoul of the IRS. In many cases, taxpayers don’t realize that they have options for softening the repercussions of a tax lien even if they can’t pay off the lien in full. At Tax Group Center, we help clients get untangled from IRS liens every day. Reach out to our experienced team if you have a federal tax lien on your property to receive guidance backed by 30 years of working with the IRS. Contact us today!

Get Tax Help Now!

Call (800) 264-1869 or Contact Us Online Today!

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What to Do About a Tax Lien on Property

Tax lien on property

Tax lien on property

What To Do About a Tax Lien on Property

Can the IRS take your property? 

It’s what you’re probably wondering if you’re facing a federal tax lien on property. The critical thing to know is that a lien doesn’t happen without warning, as the IRS provides plenty of notice prior to instating a lien. 

Take a look at what you need to know about tax liens. You may be able to stop, prevent, or correct a lien if you act quickly.

Don't Wait Any Longer, Get Tax Help Now!

Call (800) 264-1869 or Contact Us Online Today!

IRS Lien on Property

If you don’t pay your tax debt, the government can make a legal claim, or lien, against your personal or business property. This lien applies to all physical property and financial assets you own. Yes, that means that the government can come after your real estate, personal property, financial assets, and earnings. Liens will apply even if you’ve paid some of your debt.

Prior to instating a lien, the IRS will notify you that you’ve failed to pay your full tax bill. You will receive something called a Notice and Demand for Payment in the mail. If you ignore this document, the IRS will then file a Notice of Federal Tax Lien. The purpose of this document is to let creditors know that the government is making a legal claim to your property.

How To Get Rid of a Lien

If possible, focus on avoiding a tax lien instead of getting rid of one. Try to file and pay all your taxes on time. If you do fall behind, don’t ignore the IRS’s requests for payments. You have a window after you’ve failed to file or pay taxes where you can apply for debt relief options that include an Installment Agreement (IA), Offer in Compromise (OIC), and Currently Non-Collectible (CNC). These options can help you to avoid fees, penalties, and liens from the IRS.

Paying your full tax debt is the best option for getting rid of a lien after it’s in place. Once your debt is paid, the IRS will release your lien within 30 days of payment. You also have several other avenues to pursue if you’re unable to pay your bill. Here’s a look:

  • Discharge of Property: You may be able to file for a “discharge” that removes the lien from a specific property that you own. The IRS has very strict rules for eligibility for this option.
  • Subordination: While this option doesn’t remove your lien, it does provide relief by allowing creditors to go before the IRS. This can be important if you need to apply for a mortgage or loan. Again, the IRS has strict eligibility rules.
  • Withdrawal: This option removes the IRS’s public Notice of Federal Tax Lien without removing your liability.

In some cases, you may decide that using the equity in your home to satisfy your tax debt is the best option. You can request for the IRS to discharge the lien for an IRS tax lien sale of property. Only by getting approval from the IRS can you transfer the property to the new owner without the lien. Keep in mind that the IRS will closely monitor and document this transaction.

The IRS introduced robust options for IRS lien withdrawal as part of its 2011 Fresh Start program. These options can put you on the fast track to getting your record cleared, even if you aren’t able to pay your tax debt in full. Here’s a look at some of the qualifying factors for IRS lien withdrawal beyond paying your debt in full:

  • You’re in compliance for the three consecutive years for filing all individual, business, and information returns.
  • You’ve made three consecutive direct debit payments.
  • You’re current on all applicable estimated tax payments and deposits.
  • You owe $25,000 or less in taxes. If you owe more than $25,000 in taxes, you’re able to request a withdrawal once you’ve paid down your balance to $25,000.
  • You’re fully compliant with other IRS filing and payment requirements.
  • You haven’t defaulted on any payments in a Direct Debit Installment agreement.

One of the biggest mistakes a taxpayer can make is to avoid speaking with the IRS out of fear. Explore all your options if you can’t pay your tax bill in full. While a lien is never ideal, the lien forgiveness options above can help you to avoid serious damage to your financial records.

How To Know if There Is a Lien on Your Property

Fixing a federal tax lien on property begins with confirming a tax lien. The IRS will send you a Notice of Federal Tax Lien when it places a lien on your property. If you suspect that you’ve overlooked or misplaced a lien notice that arrived, you can inquire about a potential lien by contacting the IRS’s Centralized Lien Unit at 1-800-913-6050. 

If you prefer not to contact the IRS on your own, it’s recommended that you authorize a tax professional to call the IRS on your behalf.

What Happens if You Don’t Get a Property Lien Removed?

You may be unable to sell your home if there is an IRS lien on the property, as the title search that’s conducted prior to closing will pull up any federal tax lien. 

IRS tax liens impact all aspects of your personal, business, and financial life. First, all of your current and future assets are up for grabs for the duration of the lien. This includes property, vehicles, and securities. Even more devastating is the fact that an IRS lien can severely limit your ability to obtain credit in the future. This means that you may not be able to borrow money for a home mortgage or business loan.

Liens can also attach to business properties. This gives the IRS rights to all business property. Even your accounts receivable could be claimed by the IRS for as long as the tax debt remains outstanding. An IRS tax lien won’t go away if you file for bankruptcy; they will continue to pursue your lien even afterward.

Get Help for a Property Lien Release With a Professional

A lien on property is one of the most complex and financially devastating consequences of running afoul of the IRS. In many cases, taxpayers don’t realize that they have options for softening the repercussions of a tax lien even if they can’t pay off the lien in full. At Tax Group Center, we help clients get untangled from IRS liens every day. Reach out to our experienced team if you have a federal tax lien on your property to receive guidance backed by 30 years of working with the IRS. Contact us today!

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