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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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Last year I made the most money in my life as a small business

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Last year I made the most money in my life as a small business owner and we owed the irs $140k. Well the reccesion hit us and we have no back log and now no cash. We are now going to have to start missing payments on Credit cards and loans. We are now getting collections letters from the IRS. I want to call them and say hey we had a great year and since we have lost business and now we have a nothing. But what should I really say and what are my options with them?
Submitted: 2 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 2 years ago.
Hello, THANK YOU for choosing Just Answer. My goal is to help make your life...a little...LESS taxing.

I'm sorry to hear about your situation. I have found that sometimes "LIFE" happens...and when it does, it is seldom at a time of our choosing. You do have a few options. First decide which option works better for your situation (options listed below), secondly, call your local IRS office and schedule an informal face to face meeting with preferably a supervisor to discuss you situation. You may attend this meeting alone, or you may attend with a qualified tax professional. Having a tax professional with you might be more advantageous. What you DON'T want to do is to ignore the notices. I suggest that you take action sooner rather than later. It is also best to have all of your tax information handy when attending a meeting with the IRS. You can request Wage and Income Tax Transcripts and Tax Account Transcripts (Free), by calling 1-800-829-1040, or the Business Hotline at 1-800-829-4933.

-------------------------------------------

OPTIONS:

CNC (Currently Not Collectible)
OIC (Offer In Compromise)
Installment Agreement

Listed below are details of each:

CNC:

Currently Not Collectible means that a taxpayer has no ability to pay his or her tax debts. The IRS can declare a taxpayer "currently not collectible," after the IRS receives evidence that a taxpayer has no ability to pay. Such evidence is usually obtained from the taxpayer on IRS Form 433-F, Collection Information Statement. A taxpayer can request "currently not collectible" status by submitting Form 433-F to an IRS Revenue Officer or the IRS Automated Collection System unit.
Once the IRS declares a taxpayer currently not collectible, the IRS must stop all collection activities, including levies and garnishments. The IRS must send an annual statement to the taxpayer stating the amount of tax still owed. This annual statement is not a bill.

While in not collectible status, the 10-year statute of limitations on tax debt collection is still running. If the IRS cannot collect the tax within the 10-year statutory period, then the tax debts will expire.

----------------------------------------

OIC:

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;
Income;
Expenses; and
Asset equity.
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.

Make sure you are eligible

Before we can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding.

Submit your offer

You'll find step-by-step instructions and all the forms for submitting an offer in the Offer in Compromise Booklet, Form 656-B (PDF). You can also view the "Complete Form 656" video. Your completed offer package will include:

Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
Form 656;
$150 application fee (non-refundable); and
Initial payment (non-refundable).
Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

Option 1: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.

Option 2: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer.

You can refer to the following IRS webpage for more detailed information regarding OICs.

http://www.irs.gov/individuals/article/0,,id=243822,00.html

--------------------------------------------

Installment Agreements

ou can make monthly payments through an installment agreement if you're not financially able to pay your tax debt immediately. However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full. Before you apply:

File all required tax returns;

Consider other sources (loan or credit card) to pay your tax debt in full to save money;

Determine the largest monthly payment you can make ($25 minimum); and
Know that your future refunds will be applied to your tax debt until it is paid in full.

Avoid the fee for setting up an installment agreement

Pay the full amount you owe within 120 days to avoid the fee. You should apply online to specify this option (or call if you owe more than $50,000). If you cannot pay the full amount within 120 days, the fee for setting up an agreement is:

$52 for a direct debit agreement;
$105 for a standard agreement or payroll deduction agreement; or
$43 if your income is below a certain level.
Apply for an installment agreement

Apply online if you owe $50,000 or less in combined individual income tax, penalties and interest;

Call the phone number on your bill or notice;
Complete and mail Form 9465-FS, Installment Agreement Request (PDF). If you owe more than $50,000, you will also need to complete Form 433-F, Collection Information Statement (PDF).

For more detailed information on installment agreements, you can refer to the following IRS webpage:

http://www.irs.gov/individuals/article/0,,id=243335,00.html

--------------------------------------------

After you have decided on which route you want to take, you should also request a penalty abatement. This is done by submitting the Form 843. See below for links to form and instructions.

http://www.irs.gov/pub/irs-pdf/f843.pdf
http://www.irs.gov/pub/irs-pdf/i843.pdf
Customer: replied 2 years ago.
Is there anything I should not say? I would not lie and I do not want to say anything that would hamper my options. Should I fill out the forms you suggested first and bring them with to a face to face? We have not finished 2011 books and taxes. The over due taxes are from 2010 tax year and we filed and extention so the collection process has only been going since Oct of 2011. Your thoughts please.
Expert:  Tax.appeal.168 replied 2 years ago.
Hello again,

Do try to schedule a meeting as soon as possible. In regards XXXXX XXXXX to say and not say...DON'T VOLUNTEER ANY INFORMATION OR DOCUMENTATION. Wait for them to request whatever it is they need. though you will be going in with some knowledge under your belt, don't act too knowledgeable about what's going on, nor do you want to appear to be nervous or fearful. What forms are you considering filling out taking to the meeting...? Absolutely NO offense to anyone,...but you know how dogs and other animals sense when you are afraid of them. Same with the IRS, if you don't appear to be intimidated and keep your cool, you should do fine.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2574
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
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