How to take on the IRS and WIN!
First a word from our sponsors… me.
Having been self employed since the tender age of my first paper route, I have had more than my fair share of dealings with the IRS.
I sometimes joke that if I don’t hear from them occasionally, I’m in fear they’ll forget about me. Fat chance.
NOTE: the following are not specific cases. They are merely scenarios of what transpires thousands of times per day at the IRS.
I DO NOT give legal advice. This is not to be construed as legal, accounting or tax advice. Always contact a legal or tax professional for advice that will keep your butt out of court and / or jail. Al Sharpton apparently doesn’t have to play by the rules… any guesses as to why?
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Like most of my friends here at TRTS I hold the IRS in the same high regard as a rabid dog, in desperate need of being “put down.”
They have long been the ‘Luca Brazzi’ of the federal government. Used as their own personal goon squad by some of our favorite presidents like Nixon, Clinton and of course our current Butt-Clown-In-Chief, Obama.
But until America comes to its senses, scraps the code and abolishes the IRS, they are the rabid dog we’re forced to live with.
We see the commercials on TV, we hear them all the time on talk radio. Testimonials from people just like me and you, who claim to have settled with the IRS for pennies on the dollar.
Is it true? Can people who are in some pretty serious ‘hot water’ with the internal revenue service really settle their tax debt and pay thousands less than they actually owe?
yes… some people can.
Before we get too deep into the subject let’s take a look at some ‘clues’ from the IRS website:
“An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances.”
Ability to pay;
“We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.”
That was taken verbatim from the IRS.gov website.
Read sentence #2 carefully. It says “if you can’t pay your full tax liability, or doing so creates a financial hardship.”
People get themselves in trouble with the IRS for a variety of reasons. We’ll look at two examples and assess the chances of an offer in compromise for each.
Bob starts and runs his appliance repair business for 8 years. It’s tough going for the first couple of years but in year 3, Bob is making enough to pay his bills, live comfortably and put some money aside.
For the next few years Bobs business continues to grow. As he brings in more money his lifestyle improves. Expensive cars, a nicer home, trips and vacations… and taxes that go unpaid.
In year 7 two things happen simultaneously. One, a major competitor move into town and immediately begins to take much of Bobs business away. Two, Bob receives a letter from the IRS, which Bob conveniently misplaces.
Within a year Bobs business is in the tank. Instead of saving money in the event of a business slowdown, Bobs money is tied up in depreciating liabilities like expensive cars, a boat, lots of big boy toys and a mortgage on a house he can no longer afford.
By the end of year 8 Bob is broke. The letters from the IRS are now piled on Bobs desk, but remain unopened.
Bob is now forced to liquidate everything just to survive. He sells the cars, the boat and all the toys. Because he’s upside down in his house, he goes into foreclosure, ultimately losing his house and his credit and now rents a one bedroom apartment and drives a 10 year old truck.
With nowhere else to turn, Bob calls an attorney friend for advice.
The attorney gives Bob good advice and tells him to contact a tax professional who specializes in settling with the IRS.
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Susan has been an independent contractor in the IT arena for over 20 years. She’s good at what she does and gets paid well for doing it. Because she’s an independent contractor, the companies who contract for her services do not withhold any taxes from her earnings.
Business owners (independent contractors should consider themselves business owners) know they are required to pay taxes quarterly. Susan doesn’t pay hers at all. She hasn’t for years.
She has made some good investments though, especially her real estate which has now appreciated into a tidy net worth and good cash flow.
After years of not paying taxes the IRS finally catches up with Susan.
Unlike Bob, Susan has assets. She owns her own home, money in the bank plus the rental properties.
Susan also contacts a tax professional.
Remember what the IRS says on their website: “an offer in compromise may be a legitimate option if you can’t pay your full tax liability.”
Bob is broke. In fact he ended up going to work for the big company who put him out of business. Bob is a perfect candidate for the offer in compromise.
They (the IRS) determined that with penalties and interest Bob owed $89,775.00 in back taxes. The IRS also knows they can’t get blood from a stone, so they accept Bobs tax professionals offer that Bob will pay the IRS $275 per month for a period of 5 years. That’s a total of $16,500.
Bob ended up saving $73,275 by contacting a tax pro who specializes in dealing with the IRS.
As you can imagine, Susan is not so lucky. She knows the IRS won’t settle for anything but the full amount, plus the penalties and interest.
She does hire a highly recommended EA (enrolled agent) and with his help is given an opportunity to pay as much as she can immediately, and a short period to liquidate other assets until she is paid in full.
If you are in pretty serious tax trouble and you’re NOT sitting on a big pile of cash like Susan, may I suggest utilizing the tax professionals over at xxxxxxxxxxxxxx.
they specialize in helping folks in tax trouble settle their debt with the IRS for a fraction of what they owe.
I’ve done my research on this company and their track record is impressive.
And the best part is YOU NEVER have to talk to the IRS. They handle everything. So stop lying awake at night in a cold sweat, tossing and turning. One phone call today to the tax professionals at xxxxxxxxxxx and you’ll be sleeping like a baby tonite.