One of the most sensitive topics tax professionals must face is helping people handle taxes for family members or loved ones who have passed away. 

Family members often wonder if filing taxes for decedents is necessary. The answer is that death doesn’t erase taxes; a tax obligation still stands even if a person passes away. In fact, this is one of the first orders of business to take care of to avoid “surprise” debts that the estate could be responsible for going forward.

If you need to file taxes for someone who has died, you may be wondering where to start. In some cases, you may need to request copies of tax records from the IRS to determine how many years back you’ll need to go when filing taxes on behalf of the deceased. If you are the executor of an estate, you must essentially take on the tax burden as if it’s your own. 

But let’s take this one step at a time. First, we’ll explore the path typically followed when filing taxes for a deceased parent or loved one.

Filing Taxes on Behalf of a Deceased Person

Taxes for a recently deceased person should be prepared and filed using generally the same methods required for any taxpayer. This means reporting all income earned up until the day of death. All relevant deductions should also be claimed to reduce the overall tax burden the same way you would for any filing. Here are some basics to know:

• You may need to file IRS Form 4506-T: Request for Transcript of Tax Return to obtain tax records of the deceased person.
• Form 1040, W-2s for withheld income, and 1099s for untaxed income may be needed.
• The decedent’s income will count from January 1 of the year they passed until the day before they passed.
• Write “deceased” next to the taxpayer’s name when filling out tax forms.
• When a person is deceased, the tax deadline is automatically pushed to April 15 (tax day) of the year after the death.
• A surviving spouse can still file a joint return for the last year that the deceased was living.
  
  

It will be necessary to use Form 1041: U.S. Income Tax Return for Estates and Trusts if the deceased individual is leaving any estate with taxable income. You’ll also need that form for any estate with at least $600 in gross income during the tax year in question.

One issue that family members often come across when attempting to prepare current tax returns for deceased individuals is that unfiled taxes remain from previous years. In this case, it will be necessary to file any unfiled returns on behalf of the deceased. While it may seem odd, it’s important to file tax returns from previous years on behalf of the deceased individual to avoid allowing IRS penalties and interest to accumulate against the estate.

What Happens If a Deceased Person Owes Taxes?

If you discover that your deceased loved one owes money, you’ll need to pay what is owed. If you don’t have the funds immediately available from the estate to do this, you may be able to work out a payment plan with the IRS. Similarly, you may find that the deceased is actually owed refund money. The IRS has a special form called IRS Form 1310: Statement of a Person Claiming Refund Due a Deceased Taxpayer that allows you to claim the refund.

Filing Taxes for a Deceased With No Estate

Typically, the executor of an estate is tasked with filing taxes for the deceased. But not everyone passes away with an estate in place. If no executor has been named, tax responsibilities should be handled by a surviving family member. If there is no estate, the tax situation can get a bit tricky. The responsibility to pay owed taxes may fall on your shoulders if you’re the representative of the deceased. To determine what is owed, it may be necessary to contact the IRS to get tax records dating back a few years. Here’s a look at some of the possible taxes that may need to be paid:

• Federal taxes
• State taxes
• Local taxes
• Self-employment taxes
• Business taxes

How long do you have to worry about taxes owed by the decedent? The IRS Collection Statute Expiration Date (CSED) for all federal taxes is 10 years, even if the person who owed the taxes is no longer living. With that said, each state has its own statute for owed taxes. The expiration date for state taxes ranges from three years to 20 years, and in a handful of states, state tax debts never expire. 

It’s also important to know that the IRS can still audit a person who has passed away, although the worry of an audit generally disappears after three years.

Don’t Ignore Tax Debt After Death

Many families assume that tax obligations evaporate because the person who owed the money is no longer living. Unfortunately, this can set you up for years of pursuit by creditors while penalties pile up. The IRS will not automatically “forgive” a tax debt just because a person is no longer living. If there is an IRS debt after death with no estate, the IRS will take all possible measures to collect that debt before it expires. Expect the IRS to contact beneficiaries of the will to try to recoup tax debts. This often includes children and siblings, and it is also common for both close and distant relatives to hear from the IRS when a debt is pursued. When settling debts on behalf of someone who has passed away, the IRS should be considered the primary creditor above other creditors.

Final Thoughts on Handling Taxes After Someone Has Died

None of us like to think about what happens if a deceased person owes taxes. However, this is a reality that can land on your plate if a family member passes away with unsettled IRS debts. Filing taxes after someone has died can be a confusing process, even if you usually handle your own taxes with no issues. In truth, it is one of the most complicated tax situations a person can encounter. This is why bringing in a tax expert is so important for peace of mind.

At Tax Group Center, we help people take care of any lingering tax obligations that loved ones may have left behind. Let us help you use the correct IRS forms when filing taxes for someone who has passed away. In addition, we can assist with obtaining tax records to ensure that no unfiled tax returns or lingering debts are going unnoticed by you. If a tax debt is owed, our team can help you explore tax relief options for paying the debt over time in smaller installments. Tax Group Center has more than 30 years of experience with IRS issues. If you have any questions about handling taxes after death, contact us today.

The thought of owing late taxes can be terrifying if you’ve never dealt with the IRS before. If you just realized that you forgot to file taxes by the tax deadline, you may even be expecting the IRS to show up on your doorstep. But how worried should you really be?

You don’t have to panic if you’ve forgotten to file your taxes, but you do need to act quickly. Every day that you sit on this problem is one more day for the consequences of not filing or paying taxes to pile up! If you’re unsure about what to do to catch up with the taxes you owe, get expert help with tax preparation to get things moving before you run into bigger problems. Let’s cover the steps you should be taking if you’ve skipped a tax deadline.

What You Need to Know After Missing a Tax Deadline

What happens if I forgot to file my taxes? If you forgot to file taxes last year, you are not out of options. The IRS and your state tax agency want you to get up to speed with your unfiled returns. 

The first order of business is to confirm that you were required to file a return for the tax date that has passed. You may not be required to file if you made below a certain threshold for the year, but you may still want to file to see if you qualify for any tax credits. If you are required to file, just file your state and federal taxes using forms for the year you missed. You should also be prepared to pay any money that you owe. If you’re unable to pay what you owe in full, you can explore payment options that will help you to avoid IRS interest and penalties.

Not everyone owes tax money. You may actually be getting a refund even if you filed late. However, you can’t wait too long; you only have three years to file before the IRS keeps your refund. You can also lose your ability to claim tax credits if you don’t file soon. 

In short, you won’t receive any refunds until you’re fully caught up with all returns.

The IRS Might File Your Tax Return for You

Most people don’t realize that the IRS actually has the right to file your tax return on your behalf. This is far from a courtesy, though. Using something called a substitute return, the IRS will file your taxes for you without adding in tax credits, giving you the “worst deal” as the default by only using the standard deduction and one exemption. 

They do this using information gathered from W2 forms, 1099 forms, and third-party sources to identify your income for the year. You will have a 90-day window to dispute what the IRS claims you owe in taxes based on their assessment. However, the IRS can move forward with collection efforts based on their tax assessment if you don’t respond during that window. Call a tax expert if you feel stuck!

Does the IRS Charge Fees for Late Taxes?

Yes, the IRS begins charging fees if you miss your filing deadline for taxes. The first fee is something called the failure-to-file penalty. The total that you’ll be charged if you allow this fee to accumulate is between 5 and 25 percent of your total tax bill. That fee jumps to a maximum of $135 if you still haven’t paid your tax bill 60 days after the deadline. 

Bear in mind that these fees are actually the least of your worries if you’re allowing a tax bill to go unpaid. The IRS can come after you with liens, levies, and wage garnishments to try to collect what you owe. Failing to cooperate with the IRS can even lead to criminal prosecution in some cases. The good news is there’s really no need to let it get to that place when the IRS offers so many options for debt payments and forgiveness.

What Happens When You Forget Something on Your Taxes?

Sometimes you make an honest mistake. For example, it’s not uncommon for people to forget to complete a 1099-R. If you forgot to claim 401k withdrawal on taxes, you can go back and fix the mistake using something called an amended return that you can mail to the IRS. The IRS will need to see the amount you omitted from your original return because it could change your amount of taxable income for the year.

If you have several income streams, you may realize that you forgot to file a W2. You will need to file an amended return that documents the income on the unfiled W2 if you’ve forgotten to file. The process will require you to go back and recalculate your new adjusted gross income for the year with the new total that includes your missing W2. You may have to also submit amended versions of other forms if they are impacted by your new W2 totals. 

For most people, the benefit of getting that missing W2 in as quickly as possible is that you’ll be getting a refund back. If you end up owing money, amending your W2 promptly may save you from fees and penalties.

The Best Strategy: File Even Though You Can’t Pay What You Owe

If you failed to file your taxes by the deadline because you didn’t think you could pay what you owe, it’s time to develop a better strategy. The IRS will know what you earned for the year even if you don’t file your taxes. They use sophisticated software that compares employer records with worker records to track who isn’t paying taxes. That means that the IRS will be contacting you if you didn’t file. It’s better to simply get ahead of the situation by filing if you can’t pay what you owe in taxes. This will enable you to work with a tax professional to apply for relief options like an Installment Agreement (IA), Offer In Compromise (OIC), Currently Non Collectible (CNC), and more.

Who Can Help After I Forgot to File My Taxes?

If you forgot to file taxes last year, you have more options than you realize! At Tax Group Center, our team of tax professionals helps people get their late taxes filed every day. We’ll help you work with the IRS to get a clean slate. Let us help you find what you need to get your late taxes filed as quickly as possible. If you’re unsure about how many years back you need to go with catching up on late taxes, we can help you get a copy of your tax records to see how far back you need to file. If you’re dealing with potential tax debts, we’ll help you explore relief options. We want to help you handle every step the right away to avoid time-consuming, expensive penalties. If you forgot to file taxes, reach out to the Tax Group Center today!

How the IRS Decides Your Ability to Pay When You Owe Taxes

If you owe the IRS money, you’re probably constantly thinking about it. Worrying about your tax debt can be stressful and overwhelming if you know that you don’t have a way to pay it off. 

Many taxpayers are surprised to learn that the IRS actually provides a little bit of leeway for people who are unable to pay what they owe. The IRS does have some strict requirements when it comes to determining who isn’t in a position to pay a full tax bill, however, so take a look at the information we’ve compiled below if you’re considering asking the IRS for debt relief. Don’t forget that relief options are only available if all past returns are filed!

The Form 433 Series: A, B, and F

The IRS uses a series of Form 433s to determine eligibility for relief based on a taxpayer’s ability to pay. You may hear the full series referred to as a Collection Information Statement (CIS). While the 433 F is the most important form for most taxpayers, you may need to pay attention to other documents in the series depending on how you earn income. 

Form 433 A is used exclusively for self-employed individuals, while Form 433 B is only used for tax debts tied to a business. The IRS uses these documents to determine if you qualify for a pay-collection alternative. Form 433 F can be used by either wage earners or self-employed individuals; it’s the most commonly seen Collection Information Statement.

It All Comes Down to IRS Form 433 and Your Collection Information Statement

You will most likely use Form 433 F if you need to ask the IRS for help with paying off a debtThe good news is that you can usually get this two-page form filled out and submitted relatively quickly with help from a tax professional. 

What is Form 433 F used for? You can look at this form as the IRS’s eligibility metric for determining if you qualify for debt relief. The IRS is essentially looking at your income and assets to determine how realistically you can pay back what you owe.

The IRS would rather get something from you. From their perspective, it’s better to begin collecting some money from you as opposed to spending time and energy tracking you down for late payments. In fact, the IRS has a variety of payment options that will allow you to pay back what you owe over time. Qualifying for relief may mean having debt reduced or frozen. The bottom line is that it’s worth seeing if you qualify for debt relief if you’re struggling to get a tax bill paid in full.

Preparing the Form 433 Series

You aren’t just “filling in documents” when completing your Form 433 series. Every piece of information you provide must be backed up by documentation! Be ready to pull up bank statements, pay stubs, information related to any businesses you own, and much more. Your ability to qualify for relief hinges on your willingness to provide honest, accurate information. You’ll jeopardize your eligibility if you provide false or inaccurate information to the IRS on any of your Form 433 documents. 

Now, let’s cover what to expect as you fill out your form.

How to Fill Out Your Form 433 

Starting the process is fairly simple regardless of which form you use. You’ll need to fill out your name, address, and Social Security number. Business ownerswill need to supply EINs and information regarding the size of their businesses.

The IRS will also want to know about any lines of credit or asset sources you have. This will help them to determine if you have the ability to pull funds or funding from someplace to cover your debt. Additionally, the IRS will be inquiring about any properties you own. This includes primary residences, investment properties, and vacation homes. Be prepared to supply information regarding purchase price, current value, and equity. You will also be asked to share information about credit cards and current balances.

If you owe other personal or business assets, this is the time to talk about them. The IRS will ask you to detail anything like a boat, car, or insurance policy in your name. If you’re a business owner, the IRS wants to know about things like inventory, assets, liabilities, employees, and pending lawsuits. 

The IRS also wants to know about your employment status. You’ll need to share the name of your employer, your payment schedule, your wages and the amount that’s removed for taxes each pay period. If you have non-wage household income, the IRS will need to know about that. This can include things like child support, unemployment payments, Social Security payments, and passive income. 

Showing the IRS Your Ability to Pay

Sections 5 of Forms 433 A and 433 B and Section H of Form 433 F are where you’ll list all of your costs of living and/or business expenses to help the IRS determine if you can realistically pay down your tax debt. Don’t embellish this section, as the IRS may ask for proof regarding every expense you list in this section down the road. 

If you’re a wage earner or self-employed individual filling out Form 433 F, the IRS will want to know about:

• Food
• Clothing
• Personal care
• Transportation
• Health insurance
• Medical expenses
• Utilities
• Rent/mortgage
• Childcare costs
• Court-ordered payments
  

If you’re a business owner filling out Form 433 B, or a self-employed individual filling out Form 433 A, the IRS will also want to know about: 

• Net business income
• Rental income
• Wages 
• Gross receipts
• Inventory costs 
• Repair costs
• Dividends 

The IRS will use information regarding payments and assets from the top of your form to determine what these living/business expenses mean for your ability to pay. It uses a formula based on standard cost of living to ensure that you aren’t stuck paying more than is “reasonable” under the law. That means that you’ll likely qualify for relief if your monthly living expenses combined with your tax debt would tip you over the edge.

Submitting Your Collection Information Statement

Once completed, your forms can be sent to the IRS. There’s no need to send any supporting documents along to the IRS with your application. If the IRS needs proof or clarification, they will contact you.

What Happens After You Send Your Forms?

The IRS will review your documents once they are received. You should hear back shortly regarding the decision. The good news is that the IRS will stop all collection activity immediately if it’s determined that you qualify. However, make sure you’re addressing the potential for future liens or collection activities with a tax professional. 

Keep in mind that the IRS does have the right to review your case in the future to determine if you’re still eligible based on changing financial circumstances. 

Get Help With Debt Relief From Tax Professionals

The team at Tax Group Center helps taxpayers successfully complete Collection Information Statements every day! If you’re unable to pay your taxes, we can help you submit applications for relief options like an Installment Agreements(AI), Currently Non Collectable (CNC) status, and Offer In Compromise (OIC) along with your statement. Reach out today to explore options for reducing or freezing IRS tax debt!

Can the IRS take your paycheck if you owe late taxes? Unfortunately, the IRS can claim a part of your income through something called an IRS wage garnishment. One of the frustrating features of a wage garnishment is that the IRS will contact your employer directly to have your earnings redirected. Fortunately, the situation isn’t hopeless if you’re proactive about reaching an agreement with the IRS. Many people get into garnishment territory because they’re avoiding the IRS out of fear of penalties after running into tax problems. The reality is that it’s impossible to hide from the IRS. They know how much you owe, which tax years you didn’t file, and all of the personal details needed to track you down. In fact, they will have no trouble finding your employer if they want to get money from you. Avoiding letters from the IRS often just means getting on the fast track to a wage garnishment. This is actually a shame because the IRS only uses wage garnishment as a last resort. If that’s news to you, take a look at the answers to questions that are probably on your mind about the IRS taking your wages.

What Does Garnish Wages Mean?

“Garnishing” your wages means taking a cut until a debt is paid off. A wage garnishment is the legal procedure the IRS uses to take a portion of your earnings by requiring funds to be withheld from each paycheck. Yes, it’s fully legal for the IRS to do this if it is determined that you have neglected your tax obligation. No, the IRS won’t ask nicely for permission to take your money. Your employer must comply when the IRS comes calling to demand that a portion of your paycheck is redirected through IRS Form 668-W.

Will the IRS Notify You If They Garnish Your Wages?

A wage garnishment from the IRS will never come as a surprise. The IRS must first send you a written note detailing the amount you owe using an itemized list of all charges for your tax debt, interest, and penalties. This notice should also include a due date for when the IRS expects your balance to be paid in full. It’s vitally important to contact a tax professional to go over your next step if you receive an IRS Final Notice of Intent to Levy and Notice of Your Right to a Hearing because a garnishment will be just around the corner if you don’t take the right action.

How Much of Your Paycheck Can the IRS Take?

First, it’s important to know that the IRS can’t take everything you make just because a wage garnishment has been issued. The IRS will leave you with something from every paycheck if your wages are garnished. However, a garnishment can still be steep. In fact, the IRS can potentially take your full pay from a single employer if you have more than one income stream. The IRS uses a formula that takes into account your filing status, pay period, and number of dependents when deciding your expected amount per paycheck. It’s not uncommon for the amount taken to be more than half of your pay. What really hurts is that the IRS can take all of a bonus that you are paid during the span of your garnishment. Again, your employer has no choice when it comes to complying with the IRS’s demands.

Can You Negotiate a Wage Garnishment?

The easiest way to fight back against a tax garnishment is to simply pay your tax debt off in full. However, there’s a good chance that you’re in this situation precisely because you lack the assets or borrowing power to do that at the moment. That won’t necessarily mean that you’re stuck with a wage garnishment. The next steps are crucial because you may be able to get a garnishment stopped in its tracks if you can convince the IRS to work with you.

You’ll need to approach a wage garnishment differently depending on how advanced your situation has become. If a garnishment has not yet been issued, you may be able to request a hearing to contest the IRS’s findings. Once you receive the Final Notice of Intent to Levy letter, time is of the essence. You will have just 30 days to request your hearing and petition the tax court.

What if a wage garnishment has already been issued? You’re not stuck if your garnishment is already in place. The IRS may be willing to negotiate a collection alternative with you. Here’s a look at the options that are available to taxpayers who owe money to the IRS:

• Offer in Compromise (OIC).
  
• Installment Agreement (IA).
  
• Currently Non-Collectible (CNC)/Hardship Status.
  
  

What’s the top thing a delinquent taxpayer should know before pursuing any of these potential relief options? None of these options are on the table if you haven’t filed all past returns. The IRS won’t work with people who are not current with tax returns. What’s more, you’ll be asked to make a commitment to file all future taxes under threat of having your relief plan revoked if you default.

What Happens After a Wage Garnishment Is Paid?

Hopefully, you’ll be able to work with a tax expert to avoid an IRS wage garnishment. However, it’s important to know what to expect if you allow your garnishment to progress. The IRS should notify your employer to stop deducting money from your wages once your debit is paid in full.

A Wage Garnishment Doesn’t Have to Happen

You don’t necessarily have to turn over a big portion of your paycheck just because you owe back taxes to the IRS. In fact, the IRS would prefer not to use this “last resort” option to collect what you owe. This is precisely why IRS tax relief options exist. Getting a tax professional working on your behalf immediately is often the first step to getting on the right course to avoid having your paycheck garnished.

While interrupting a wage garnishment is difficult, it’s not necessarily impossible. Your odds of being able to work out some type of payment plan with the IRS are much higher if you can intervene before the first penny is held back from your paycheck. It’s especially important to get tax help if you believe that the IRS has incorrectly initiated a wage garnishment for a tax debt that you don’t actually owe. Your levy may be stopped if you’re able to prove that your levy is erroneous or the IRS violated the law when issuing your levy.

What should you do if the IRS is trying to garnish your wages. At Tax Group Center, this is something we help our clients solve every day. We’ll help you understand your options for getting a wage garnishment stopped by putting a relief option in its place. If you have unfiled tax returns preventing you from seeking the relief options offered by the IRS, we can start by getting you fully current. Protect your income from the IRS. Call Tax Group Center at (800) 264-1869 to book a consultation today!

One of the big things tax experts see time and time again is the way that fear of the IRS can cause people to miss out on opportunities to properly handle tax problems before the situation becomes critical. If you owe back taxes, the situation may not be as bleak as you think. A tax settlement may be a viable option for getting your IRS debt settled. A settlement allows you to do the following:

• Pay less now.
  
• Avoid liens and garnishments.
  
• Permanently retire your debt.
  
  

A tax settlement is for someone who does not have the funds or means to pay off a tax debt in full even though they’d like to comply with the IRS. When working out a tax settlement with the IRS, you’ll typically qualify for one of two options. The first is a basic tax settlement where the taxpayer qualifies to pay back less than the full tax debt after it is established that the liability amount is too high to reasonably be paid back. The second is an installment agreement (IA) consisting of monthly payments that allow a taxpayer to pay back the full debt over time. Additionally, taxpayers can pursue options for declaring hardship or “uncollectable” status. However, these options focus more on “freezing” debt instead of creating a clear path to retiring debt to the satisfaction of the IRS. The first step to any type of settlement or relief is making sure that all tax returns up through the current year are filed. The IRS won’t work with any taxpayer on a relief solution if they have unfiled tax returns in their closet.

What Is a Standard IRS Tax Settlement?

A tax settlement is simply a mutual arrangement created by the IRS and a taxpayer that allows a taxpayer to settle an outstanding debt for less than the full, original amount owed. While there’s no guarantee that you’ll be granted a settlement, the IRS is often highly receptive in cases where it’s clear that a taxpayer is incapable of paying a full amount owed based on their finances. Both current tax laws and your specific financial details will help to shape the IRS’s decision in your case.

Why Would a Taxpayer Want a Settlement?

A tax settlement is often the fastest path out of legal and financial difficulties for delinquent taxpayers. Generally, tax settlements are approved quickly once a taxpayer files all unfiled taxes. That means that you’re able to begin making reasonable payments that will allow you to pay off your tax debt in a short amount of time. In addition, you can stop living in fear of late fees, wage garnishments, liens and other penalties that can be detrimental. The IRS won’t place liens or levies on your home, wages, business, property, or bank accounts as long as you have a settlement in place.

How Do Settlement Payments Work?

Once your tax debt is reduced, it may be possible to pay off the remaining balance in a lump sum. However, you may prefer to work out a settlement that allows you to pay off what you owe throughout a set, penalty-free window of time using scheduled payments. A tax professional should be able to guide you on the type of plan to request from the IRS.

What Happens After You Pay Off Your Tax Settlement?

Once your payment is complete, you’re considered to be in good standing with the IRS for all tax years covered in your settlement. This means that it’s essentially like your tax woes never happened! If you have a history of defaulting on tax payments, it’s important to get the help of a tax-preparation professional to ensure that you’re filing on time every year going forward. The IRS may not be as willing to provide you with a settlement again if you’re delinquent on future tax returns or payments.

How Does the IRS Determine If You Qualify for a Settlement?

When determining eligibility for a tax settlement, the IRS looks at a number of factors related to your income, expenses, assets and liabilities. In addition, circumstantial factors like job loss or severe financial hardships are explored to get a clear picture of how likely it is that you can actually pay off what you owe. If it’s determined that you are not capable of reasonably paying off your tax debt, the IRS may be willing to accept a reduced amount. It is simply better to get “something” instead of “nothing” from the IRS’s perspective.

Is There Any Downside to Accepting a Tax Settlement From the IRS?

Generally, it is to your advantage to accept a settlement from the IRS if you owe taxes you cannot pay. However, the IRS does claim the right to confiscate all of your future tax refunds to apply the totals to your debt until your debt is fully paid. You will also be back to where you started if you default on any of the terms of your settlement agreement before your debt is paid off.

How Hard Is It to Qualify for an IRS Settlement?

While it’s true that the IRS only grants settlements to a narrow spectrum of applicants each year, there’s room in the program for people who truly need relief. If you can reasonably pay off your debt using assets or borrowing power, you won’t qualify for a settlement. It’s important to get a payment in right away if you currently have enough money or borrowing power to cover your full tax debt because putting off payment will probably result in more needless fees and penalties.

Some Extra Tips for Getting a Tax Settlement From the IRS

There’s no need to “hide” from the IRS if you owe taxes because the IRS keeps close tabs on delinquent taxpayers. A better strategy is to contact the IRS before the situation escalates. If you’re unsure about how to handle the situation, bring in a tax professional to advocate for the best outcomes. The best way to help your odds of being granted a settlement from the IRS is to be as forthcoming and compliant as possible while working your way through the process. When vetting applicants for settlements, the IRS dives deeply into financial statements and records to assess your financial state. Trying to hide income or assets could nullify your application.

What to Do If You’ve Fallen Behind on Taxes

If you know you owe late taxes, don’t let another day pass by without seeking help from a tax expert who can steer you toward a solution. It’s a misconception that the IRS only wants to punish people with harsh penalties if they can’t pay their taxes. Tax Group Center can help you explore settlement options to get your IRS tax debt settled the right way. Our team of tax professionals and lawyers helps people work with the IRS to reduce or forgive back taxes every day using custom solutions. We speak the language of the IRS to the IRS on behalf of our clients. Fill out a Contact Form or call us at (800) 264-1869 if you need help from a Certified Tax Consultant today!

While serious, a tax levy isn’t necessarily unstoppable. You may be concerned if you’ve received an IRS levy notice. Taxpayers have a number of options when faced with the possibility of a levy. First, it’s important to file on time and pay all owed taxes if your goal is to avoid getting into levy territory. You may be able to file for an extension to file that will give you more time without incurring penalties if you’re concerned that you’re not going to make the tax deadline this year. However, you may already be past the point where the IRS is notifying you that it intends to come after your paycheck or assets to settle a debt that’s owed. When you owe unpaid taxes, the IRS will seize your property to cover the value of the taxes owed. This can include seizing assets, seizing bank accounts, and garnishing wages. The IRS will go around you to extract funds directly from banks and employers. This is where it becomes important to explore relief options that will allow you to resolve your debt in collaboration with the IRS. The first step is addressing the levy that’s in place to avoid some very disruptive and irreversible financial repercussions. Take a look at what a levy means for you, how to comply with the IRS, and options for relief that will allow you to stop an IRS tax levy.

What Happens When You Get a Tax Levy?

Tax levies never simply appear “out of the blue.” You will be notified by the IRS prior to the activation of a levy through a Notice and Demand for Payment that is followed by “final warnings” called the Final Notice of Intent to Levy and Notice of Your Right to a Hearing. It is important to act quickly once you receive these notices because the IRS will begin seizures of your paycheck or assets if you don’t work out a relief plan.

Many people underestimate just how comprehensive and intrusive the IRS’s ability to seize assets to settle a tax bill truly are. Typically, the IRS will place a 21-day freeze on your bank accounts once a levy is activated. This is a crucial period for taking action because the bank may send some or all of your funds to the IRS if you do not resolve the issue during this “freeze” period. Similarly, the IRS can demand that your employer redirects most of your wages to the IRS for as long as it takes for your tax debt to be paid off. Even your home and car could be in jeopardy once you’re at the levy stage of your relationship with your IRS.

Is a Tax Lien the Same as a Tax Levy?

Don’t confuse a tax levy with a tax lien. A lien is the IRS’s legal claim to your property. A levy is the actual seizure of that property. If possible, it is recommended that you take remediation actions while your account is still in the lien phase.

Can an IRS Tax Levy Be Stopped?

The best advice on how to stop a tax levy is to act now. The clock is ticking once the Final Notice of Intent to Levy arrives in your mailbox. Taxpayers have several options for entering into agreements with the IRS that will stop levies.

Pay Your Tax Bill in Full

If possible, pay your complete tax bill to stop a tax levy. A lump payment is the fastest way to get the IRS to stop collection activity. However, relief options do exist if you cannot come up with the funds all at once.

Request a Collection Due Process Hearing

Do you believe the IRS has made an error? It’s possible that you received a Notice of Intent to Levy based on an error or misunderstanding. You should never ignore a letter from the IRS just because you assume that it was sent in error. While you may be aware that you’re fully current will all tax payments, the IRS may have you on record as being delinquent with your payments. That means that the IRS will proceed as though you do owe money. Get this untangled as early as possible to avoid unnecessary headaches! You can request a hearing with the IRS Office of Appeals to make your case within 30 days of receiving a Notice of Intent to Levy letter. Due to the complexity and urgency of this strategy, it’s important to seek the help of a tax professional when requesting a hearing to appeal your levy.

Get an Installment Agreement (IA) Worked Out

An IRS Installment Agreement (IA) is the most common relief option for taxpayers facing tax levies due to unpaid taxes. Generally, the IRS is receptive to requests for payment plans. Typically, a taxpayer is given 72 months to pay off what they owe through an installment plan. When applying for an installment plan, you’ll be asked to provide proof that you have the funds or access to funding that will allow you to comply with the terms of your plan. You must also be able to prove that you are not currently capable of paying off your debt in full by providing bank records. Lastly, Installment Agreements are only granted to taxpayers who are current with all tax filings.

Request an Offer in Compromise (OIC)

For some taxpayers facing levies, an Offer in Compromise (OIC) is the best option. An OIC is a request to settle what you owe in taxes for less than the full amount owed to create a more manageable route to full repayment. The requirements for requesting an OIC are being current with all filed returns an agreeing to stay current with all future tax payments. OIC is not available if you are currently being audited or processing a bankruptcy. It’s so important to vet your chances of being accepted into the OIC program before submitting an application because the IRS accepts less than half of all requests for OICs each year.

Pursue Bankruptcy

Yes, bankruptcy is technically an option for stopping an IRS levy. This is a complex process that requires lots of consideration regarding the weight of your debt versus the consequences of bankruptcy. Talking with a tax professional about the pros and cons of bankruptcy versus other relief options is highly advised.

How Tax Group Center Can Help

Don’t put off taking action for even one more day if an IRS Notice of Intent to Levy has arrived in your mailbox. Many taxpayers lose more than they need to because they think that ignoring the problem will make it go away. Our team may be able to show you how to stop an IRS tax levy before any of your assets are frozen or seized. Each option available for stopping an IRS tax levy requires very specific steps. At Tax Group Center, we’ll work hard to help increase your chances of being accepted into an IRS relief program or having your appeal recognized by the IRS. Our team of tax professionals, lawyers, and accountants has been helping taxpayers get tax relief and comply with the IRS for 30 years. We help clients avoid IRS penalties effectively because we speak the language of the IRS. Reach out today to have a conversation about how you can stop a tax levy!

Any experienced tax preparer will tell you that tax season isn’t an event. Tax “season” should be the lens that you view your finances through all year long. Let’s talk about how to prepare for tax season in a way that keeps you ready and shielded. Even a person who feels confident about filing their taxes may suddenly have questions if they’ve had their business or personal finances disrupted by things like unexpected business or school closures.

What Do I Need to Do My Taxes?

Getting and staying organized is crucial when it comes to preparing your taxes. You’ll need to compile a mix of IRS worksheets and your own personal documents when sitting down to prepare your taxes. Your state may also require you to submit a copy of a government-issued photo ID when you file your taxes.

The list of what you’ll need to have in front of you before you can start your taxes can actually be a little overwhelming if you don’t have a lot of experience with filing. Of course, the specifics of what you’ll need to produce in terms of documents and records will vary based on how you file. For instance, a person who owns a home or claims dependents will need to deal with extra paperwork that may not be in play for someone who doesn’t own any property or have any dependents. Here’s a rundown of some of the basic information you’ll need in front of you when preparing taxes:

• Social Security number and tax ID number.
  
• Dependent(s) information.
  
• Sources of income.
  
• Records related to deductions for home ownership, charitable contributions, medical expenses, childcare expenses, education expenses, state and local taxes, retirement savings, and K-12 educator expenses.

Successfully gathering all of the information related to these core tax-preparation categories will have you feeling pretty confident that you’re ready to dive into filing your taxes. However, you may not be fully ready just yet. The IRS requires you to use specific documents depending on how you choose to file. Next, let’s dive into some of the forms that you may need when getting your taxes done.

Documents Needed for Taxes

The common form used by taxpayers when filing tax returns is the W-2 form. This is the form that all employers must issue by the end of January. You won’t be able to file your taxes as an employed filer if you don’t have this form. That means that it’s time to contact any employer that paid you over the course of the previous tax year if you haven’t received yours. You may also need to deal with a 1099 form. 1099 forms come with a number of different suffixes that are used to differentiate how you were paid. Many sellers and freelancers who are paid through platforms like Amazon and PayPal need to file 1099-K forms that they receive from those platforms. However, someone who receives payouts for dividends may need to file a 1099-B. Let’s take a look at some specific forms that you may need to deal with based on particular tax circumstances:

• Employment income (W-2).
  
• Self-employment income (1095-A).
  
• Unemployment state tax refund (1099-G).
  
• Pension/IRA/annuity income (1099-R).
  
• Interest dividend income (1099-INT, 1099-OID, or 1099-DIV).
  
• Income from sales of stock or other property (1099-B or 1099-S).
  
• Health Savings Account (HSA) reimbursements (1099-SA or 1099-LTC).
  
• Marketplace/exchange health insurance (1095-A).
  
• Gambling income (W-2G).
  
• Royalty income (1099–Misc).
  
• Mortgage interest (1098).
  
• Student loan interest (1098-E).
  
• HSA contributions (5498-SA).
  
• IRA contributions (5498).

This is by no means an exhaustive list of forms that the IRS uses. The IRS provides a plethora of forms that cover specialized industries and filing statuses. Getting these forms in your hands and completed is just part of the job. You’ll generally need to produce receipts and records tied to the income or expenses being claimed on your return. Self-employed filers will need to provide details regarding income records, expense records, business-use assets, and records of estimated tax payments.

Unfortunately, the IRS does make you work a bit to receive deductions. This is one of the reasons why so many people simply find it worth it to hand over their taxes to a professional tax expert. The reality is that it’s so easy to miss what can turn out to be very lucrative tax deductions that can significantly reduce your tax burden. Yes, it’s more than worth your time to put the effort into tracking down every deduction possible. For instance, homeowners have the advantage of being able to submit records for things like property taxes and energy-saving home improvements to receive what work out to be very generous deductions. Similarly, someone who pays for childcare stands to receive a very generous benefit at tax time. However, it takes understanding what does or doesn’t qualify to maximize tax benefits. It’s also important to understand that not every deductible item is fully deductible. Many tax credits are only provided up to a certain percentage.

How to Prepare for Tax Season

Again, preparing for tax season should not be like cramming for a test at the end of the semester! The process really does require you to keep impeccable records to avoid missing out on beneficial deductions. What’s more, failing to report income fully and accurately can land you in hot water with the IRS in terms of penalties and fees. Unfortunately, the IRS doesn’t distinguish between “calculation errors” and fraud when scanning through tax returns to find mistakes and discrepancies. An inaccuracy on your return can trigger an audit even if you simply made a clerical error.

The first thing to do is to make sure you have every document needed. It’s possible that your employer, bank, or childcare provider has failed to supply with you the right forms needed for filing your taxes. You’ll need to reach out to request replacement forms if you notice that you’re missing anything. Employers and financial institutions have until Jan 31 to get that information to you. That means that Feb. 1 is often the best day to conduct a little “audit” to make sure you have all that you need to begin your tax journey in anticipation of the April filing deadline.

Tax Prep Checklist 2020

What should you focus on getting in front of you right now if you’re putting an essential tax checklist together? You’ve hopefully received the forms needed from your employer and financial institutions if it’s past January. However, you can still begin preparing even if the deadline for those key documents hasn’t arrived yet. Here’s your quick checklist for documents needed for taxes:

• Bring out last year’s federal and state returns. Giving them a good glance will help you to remember which documents you used to file in the previous year. They will serve as good guideposts if not much has changed with your situation since then.
  
• Gather up any Social Security numbers for yourself, your spouse, or your dependents if you can’t remember them off the top of your head.
  
• Get in gear for deductions by gathering records for charitable donations, state and local taxes, property taxes, mortgage interest, medical bills, education expenses, traditional IRA or self-employed retirement contributions, childcare costs, and any other deductible expenses.

Just how much time you end up devoting to tax preparation will come down to just how exotic your tax situation looks. One big thing to remember is that tax laws changed significantly after 2018. That means that your default formula for maximizing deductions may not be applicable any longer. It’s worth having your tax situation looked at by a professional to discover new opportunities that could significantly lower your tax burden this year.

Tax Group Center Can Help

Tax Group Center has been helping taxpayers file their taxes for 30 years. We’re here to help you comply fully with IRS requirements to reduce the odds of facing penalties stemming from errors. Let us comb through your records to discover tax deductions you may not have known applied to your situation. There’s no need to lose days and nights trying to get your taxes filed on your own. Reach out today to book your appointment to experience your easiest tax season yet!

Tax lingo doesn’t come naturally to people who don’t work for the IRS. That’s one of the reasons why there’s some confusion regarding the difference between a levy and lien. The two terms are not interchangeable. However, they are linked. Let’s break down what there is to know about these IRS penalties that should never be ignored!

Levy vs Lien

A levy refers to the legal seizure of your property by the IRS to satisfy your tax debt. However, a levy does not simply come out of nowhere without warning. You will be notified of a lien prior to a levy being activated. A tax lien is the IRS’s legal claim to your property that precedes an actual seizure. This is an important distinction because it’s wise to consult with a tax professional after a lien has been initiated to try to prevent a levy from being activated. The easiest way to look at it is that a lien refers to the IRS’s statement of intention for seizing your property. A levy is the actual seizure process.

What Is a Levy?

A levy is the IRS’s attempt to seize property to satisfy what you owe in unpaid taxes. The IRS is lawfully entitled to seize your personal property, real estate, cash, bank savings, and other assets. What’s more, the IRS can also activate a wage levy (garnishment) that forces your employer to hold back a certain percentage of your pay each pay period until your debt is satisfied.

Typically, you will receive a notice of intent to levy about 30 days prior to a levy being initiated. This is a very crucial period for reacting. You may be able to stop a levy in its tracks before harm is done to your finances or credit record by working with a tax professional to obtain a relief option.

What Is a Lien?

The IRS will notify you of a tax lien if you do not pay a tax bill after the agency assesses a tax against you. A lien is considered a “warning” from the IRS. However, it is far from an empty threat. An IRS lien is a public record that provides notice of the IRS’s claim to your property. An IRS Notice of Federal Tax Lien serves the purpose of alerting creditors to the fact that the government has a legal right to your property. As a taxpayer, you do have the right to appeal a tax lien.

What Is the Difference Between a Levy and a Lien?

A lien is a legal claim on the part of the IRS against your property. The IRS is asserting its claim to your property because you’ve failed to pay a tax debt. By contrast, a levy is the actual legal seizure of your property to satisfy the tax debt that you owe. A tax lien will precede a tax levy.

How Long Before a Tax Lien Becomes a Tax Levy?

This is where a document known as the IRS Final Notice of Intent to Levy is going to become crucial. A notice will either be mailed to you or delivered in person. The clock is actually already ticking loudly if you’ve received this letter. The IRS cannot seize your property within 30 days of sending you a notice of final intent. This 30-day window provides you with an opportunity to request a Collection Due Process (CDP) hearing with the IRS Office of Appeals. Unfortunately, the levy process may begin if you allow that 30-day window to come and go without action. There are some exceptions to that 30-day window. For instance, the IRS does not need to obey the 30-day window when it comes to levying your tax refund(s). The IRS may also circumvent the 30-day requirement if collection of a tax amount is in jeopardy.

Getting Help Before a Tax Lien or Levy Becomes a Problem

Looking at tax lien vs tax levy shows taxpayers that these two tax terms are not interchangeable. The one thing that a levy and lien do have in common is that no taxpayer wants to deal with either issue. That’s where Tax Group Center can come in to help you avoid the “snowball” effect that can occur once you receive a lien notice. It could take anywhere from a few days to a few months before the IRS tracks you down with a lien notice after assessing that you owe taxes. However, the truth is that most taxpayers who are late on tax payments begin suffering the consequences before a lien notice ever arrives. That’s because interest rates and late-payment penalties can begin accruing the moment you miss the tax-day payment deadline.

At Tax Group Center, we’re able to help you address or appeal liens and levies using the IRS’s own language. Our team of licensed tax professionals, lawyers, and accountants has been helping taxpayers understand their options regarding late tax payments for 30 years. Let us help you explore options for penalty relief or forgiveness if you have concerns about a lien or levy stemming from unpaid taxes. We can also assist you if you believe that an action has been improperly applied to your account. Call our office today for a consultation.

What does a Freedom of Information Act (FOIA) request have to do with your taxes? You might assume that an FOIA request is something that only happens in big court cases. However, this resource can be beneficial if you’re managing a tax issue with the IRS. Taxpayers use documents obtained through FOIA requests all the time to get a better picture of the data the IRS is using to pursue tax matters. 

Let’s discuss what all taxpayers should know about using the Freedom of Information Act for obtaining IRS documents.

What Is a Freedom of Information Act Request?

The Freedom of Information Act asserts that any person has the right to request access to federal agency records or information. Yes, document exemptions do exist, and we’ll cover the types of documents that you aren’t entitled to view in just a moment. The detail that’s important for you, if you’re dealing with a tax issue, is that all IRS records are eligible for FOIA requests. You don’t need the help of a lawyer to make an FOIA request for IRS documents, but many prefer to seek help from legal and tax professionals to ensure the process is handled correctly.

What Information Can You Request Under the FOIA?

You can make a FOIA request for any agency record. Both printed and electronic forms are available. The FOIA does not require agencies to create new records, conduct research, or perform data analysis. In addition, agencies are not required to answer any questions submitted along with requests for information – you’re only entitled to receive copies of documents that already exist without commentary.

Why would you want to submit an FOIA request when dealing with a tax issue? Many people pursue this option when they feel they are hitting a wall when communicating with the IRS. Taxpayers are often concerned that the IRS may be working off of files that contain errors. The information you dig up in your file may help you better prepare when working out a matter with the IRS. Getting documentation in your hands allows you to see the origins of the tax issue from the perspective of the IRS. You may also get access to a clearer breakdown of things like tax totals, penalties, and interest.

FOIA requests can help you to make a breakthrough if it turns out that an error or inaccuracy could be behind your tax problems. You’re essentially getting an unfiltered view of what the IRS sees when it looks at your case. This can be essential when trying to plot your next step for working toward a favorable tax resolution.

There is no initial fee to submit a request, but in some cases, charges may be added. You won’t be charged for the first two hours of search time. You will also receive up to 100 pages of duplication for free. However, some cases require additional search time and pages. You will receive written notification if the agency estimates that you will incur more than $25 in fees. You will have the option to either narrow your request to reduce fees or pay search fees. Keep in mind that agreeing to pay additional search fees does not guarantee that more information will be discovered.

You will receive a written response once your request is processed. All reasonable documents will be included in the response. You will also be informed if FOIA exemptions caused the agency to hold back specific documents.

How Can You Make a FOIA Request?

Any person can make a FOIA request – you don’t even need to be a U.S. citizen. The process varies based on the agency you are contacting, and there is a very specific process for making FOIA requests to the IRS.

All FOIA requests for the IRS must be sent in writing to the Disclosure Central Processing Unit. Written FOIA letters should be brief and direct, and there’s a specific formula to follow to ensure that your request can be processed quickly. A request letter should contain these four parts:

• A statement that the request is being made under the Freedom of Information Act.
  
• Identification of the records that are being requested.
  
• The name and address of the requester. Requests for tax records of any business or individual must be accompanied by a copy of the requester’s driver’s license or a sworn or notarized statement confirming identity.
  
• A statement of commitment to pay any fees that may be incurred during the search process.

Composing a clear, complete letter will help to ensure that the IRS accepts and processes your request promptly. This is important if you’re motivated by looming penalties and liens when attempting to settle a debt case. 

The IRS is required to determine its ability to comply with your request within 20 business days. The IRS will provide reasons for denial if your request is partially or wholly denied. Additionally, you will receive information regarding your right to appeal the decision. Options for both administrative and judicial appeals exist.

What Is Exempted From the FOIA?

There are nine exemptions in place for FOIA requests. There’s a good chance you won’t bump into any of the exemptions if you’re requesting your own personal or business taxes, but it’s essential to understand the limitations of FOIA requests if you’re counting on new information to overcome tax issues. 

Here are the nine FOIA exemptions:

• Classified documents pertaining to national defense and foreign policy.
  
• Internal personnel rules and practices.
  
• Information exempt under other laws.
  
• Trade secrets and confidential commercial or financial information.
  
• Inter-agency or intra-agency memorandums or letters.
  
• Law enforcement.
  
• Financial institutions.
  
• Geological information.
  
• Personnel and medical files.

Knowing your rights makes all the difference in getting the right information in front of you, and getting a tax professional who is familiar with IRS FOIA requests on your side can streamline the process. It’s recommended that you seek assistance from a tax professional if you feel that obtaining IRS documents will help you to dispute an IRS ruling or settle a case.

Do You Need Help With a Freedom of Information Request?

Do you want to find out if a FOIA request could be beneficial for solving your tax problem with the IRS? Providing help with FOIA requests is just one of the many services offered by Tax Group Center. Our team of tax professionals, lawyers, and CPAs will show you how to use information obtained through a FOIA request to support your claims. In addition, we offer a full spectrum of tax relief solutions to help you get your debt settled or forgiven. Give us a call today!