Here at Tax Resolution Center...

Here at Tax Resolution Center...

10 Common Myths About Tax Debt

From Kip Sharp, Esq., owner and lead attorney, and the Team at TRC

Myth #1: I Can Take Care of This Debt by Myself

Let’s face it; most of us won’t even take the time to read 3 pages of instructions! So who’s going to read the 7,000 pages of the IRS tax code?
Do you really think you’re going to get the results you deserve without understanding all the rules? One mistake could cost you thousands, maybe even millions of dollars. Are you prepared to make that mistake?
If you have had a tax liability for more than a year or you owe more than $10,000, then you have had your chance to do it yourself, now it’s time to bring in the experts!  Dealing with a tax liability is a full time job. Taking that time away from your business and family can cost your income or even your business. If we don’t think we can save you more money than our fees, we won’t take your case.

Myth #2: If I Ignore it, it Will Go Away

A lot of people think that if they wait a certain number of years, their tax debt will disappear. Sadly, this is not always true. Taking the right steps to close your business properly, submitting your file returns, and notifying the proper authorities are some of the steps required to close your business. Doing it wrong may cost you thousands of dollars. If you haven’t closed your business properly and brought everything up to date, the collection clock hasn’t even STARTED to run!

Now may be a great time to talk to a professional. Remember, it’s never too early, OR too late, to get help!

Myth #3: I Missed the Filing Date. Now It's Too Late to File My Taxes

No! It's never too late to file your taxes. It's better to file late than not at all. You may be assessed a penalty for late filing, however the penalty for not filing at all is much larger. Filing your taxes, even if you can't pay what you owe, is very important. Don't treat your taxes like a past due bill, but rather like the legal issue that they are.      

There are several options for those who can't pay in full. We may even be able to get your penalties abated. Knowledge is power! Call me and we'll discuss the options that are available to you.

Myth #4:  An Offer in Compromise is Easy to Do

The Offer in Compromise (OIC) was created by the IRS in an effort to assist those taxpayers who are struggling to make ends meet and cannot afford to pay their back taxes within the statute of limitations. (Note: The statute of limitations for tax debt is 10 years from the assessment date.)

The IRS uses several factors to determine if an individual taxpayer qualifies for an OIC and to determine their ability to pay including, but not limited to the following:
  • Age
  • Assets
  • Ability to pay
  • Potential future income
  • Reason for the accrued liability
  • The taxpayer’s income and expenses vs. national standards

According to IRS statistics, approximately 40% of all the Offers in Compromise submitted in 2014 were accepted. This figure includes those that were accepted but required the taxpayer to pay more than originally offered.

When our attorneys prepare an Offer in Compromise, we thoroughly analyze the taxpayer’s financial information from the viewpoint of the IRS and make changes that will improve your offer before its submitted. We take into account: age, health, ability to work in your given field, issues involving family and work and why the taxes were accrued in the first place. We then present a compelling argument that personalizes your offer and increases your chance for acceptance by the I.R.S. of your Offer in Compromise.

For this reason, our client’s success rate in obtaining an Offer in Compromise is more than double the national standard.  

So is it easy to submit an offer?  The answer is no; not if you want to optimize your chance for success and ultimately pay the least amount of money.

Myth #5: 
If I Shut Down My Business, it will Go Away
Say you have a business that is suffering and you want to close. Debts are higher than revenues and there is no sign of improvement. You see no way to get ahead of this landslide unless you close the business.

Closing the doors and walking away from your business isn't the best way to shut it down. How you handle the assets, inventory and accounts receivable are some of the factors that will determine how much personal liability you will end up with. If you don't follow all the necessary steps, any outstanding tax liability will often follow you and become a personal liability.

Our attorneys are trained in how to close your business correctly. Often the smallest of details can save you thousands of dollars. We'd love to talk to you about how we can help.

Myth # 6: Anyone can Work Directly with the IRS. They are there to Help.  

False: They are not there to help you, they are there to collect money from taxpayers and make sure you don’t accrue any new taxes.

Don’t get me wrong, they can be helpful and they are generally nice, especially if you are paying them lots of your money, but it’s like saying that collection agents are helpful because they call you at dinner time and remind you that you owe money and file lawsuits against you to help motivate you to pay off your debt.  
A revenue officer is not required to tell you your options or how to save money.  Don’t treat a tax liability like it’s an outstanding bill. A tax debt is a legal issue and knowing you legal rights saves you time and money.

Remember: the federal government created special laws so that the IRS can levy and seize the assets of US citizens without any judicial oversite.  So when you are up against the IRS, you are more likely to get the results you need if you have attorneys on your side who are skilled in dealing with the collections division of the IRS and state taxing authorities, than if you try to deal with the IRS on your own. This is what we do every day and that is why we are so successful.

The Tax Resolution Center, Inc. does not have a boiler room full of commission-based sales guys calling you all the time and making promises they can’t keep.  We are attorneys who understand your situation and care about getting the results you need.

Myth #7: It's Too Expensive to Hire Professional Help

When you're struggling with a tax debt and can't make the payments, it may seem like the last thing you can afford is to hire an attorney to help you. You think attorneys are expensive, right? So is having a tax debt! What's worse, a tax debt is a sensitive legal issue and if you don't fully understand what you're getting into, even a slight mistake in the process can cost you a great deal in money, time and stress.

However, getting the best possible resolution, which allows you to focus on the day to day operations of your business, can be priceless. It is often less expensive in the long run to hire a pro. We have saved our clients thousands of dollars and reduced their total liability sometimes up to 90% of what the IRS originally said that they owed. 

This could not be achieved without a thorough understanding of the ins and outs of the constantly changing tax laws, as well as years of experience dealing with exactly this kind of problem. Benefits of hiring a tax attorney include:
  • A tax attorney is legally bound by attorney-client privilege. This means that they cannot be made to testify against you if your case should go to court. The same cannot be said of a CPA or enrolled agent.
  • A tax attorney is qualified to make the right decisions. Only tax attorneys understand the full implications of tax law and how to present your case to your best advantage.

Tax issues can often make you feel like no one can help you. The pressure can affect all parts of your life - both personal and professional. We know we can help get you the best possible resolution and get this problem out of your life.

Myth #8: Entering into a Payment Plan with the IRS is My Only Option

The IRS recently made it easier to apply and qualify for a payment plan, or Installment Agreement. It’s often the first solution people think of when they want to resolve a tax debt. An installment agreement can be a good way to get caught up with your unpaid taxes if you can’t afford to pay the taxes in full and you have filed all of your returns.

However, there are definite drawbacks; the biggest drawback is that penalties and interest don’t stop when you enter into an installment agreement.  Penalties and interest start accruing the day after they were due, and they are compounded daily. The combined rate is often 13% – 15% per year compounded daily.  We were recently hired by a taxpayer who had been in an installment agreement for over a year and owes more than when he started. Furthermore, unless specifically designated otherwise, any payments you make towards your tax debt will be automatically applied to the penalties and interest, NOT to the TAXES!

Don’t assume that an installment agreement with the IRS is the best payment plan for you or that it is your only option – and don’t enter into a payment plan you aren’t sure you can afford.  There are many installment agreement options and getting the right one can save you money and time. Depending on your circumstances, you may have several other options available as well, such as Offer in Compromise, Partial Payment and Currently Non-Collectible, to name a few. Talk to us before you agree to a payment plan that will only end up getting you into deeper debt and more headaches.

We’d love to review your case with you and discuss your options, for free.

Myth #9: Tax Issues are Just a Past Due Bill (Not a True Legal Issue)

It's easy to think that if you miss filing your taxes for a year or two (or even longer), it just means that you have another past-due bill -- much like a past due credit card bill. It's easy to think that you'll catch up as soon as you sign on with that new client, or receive that inheritance, or recover from the latest business slump, or whatever it may be.

Not true! Tax issues can't be handled like a past due bill! A tax debt is a legal obligation with the IRS and if you don't pay, the IRS can legally lay claim to your business as well as personal assets.  Tax issues can often have far reaching consequences, not the least of which being the exorbitant fees and penalties that continue to accrue for the lifetime of the debt. If not handled properly, a tax issue can sometimes become a criminal case as well.

If you have a past due tax issue, you need to treat it like the legal issue that it is. The best thing is to get qualified legal representation on your case as soon as possible.

Myth #10: The Internal Revenue Service (IRS) cannot take away my rights.

Surprise, a bill was introduced to congress to REVOKE or DENY a passport for anyone who owes $50,000 or more in federal taxes including all interest and penalties. With the high rates of penalties, your tax liability will grow very fast.

The bill has passed the congress and the senate and is expected to become law starting January 1, 2016!

If you think you might be traveling outside of the United States, including Canada or Mexico, then you know how serious this is. But what if you don't have a passport and don't plan on getting one?  If the IRS can take away your rights to travel outside of the United States, think about how easy it would be for them to take away your right to have a driver's license. After all, they already have scoff laws that stop a person from registering their vehicle if they don't pay their parking tickets.

This is a serious matter. The IRS is going to get a very powerful law to force you to address your taxes. Do not wait for this to happen to you - call us now to discuss your tax liability and legal rights with a knowledgeable attorney. The confidential consultation is free. 

© Tax Resolution Center, Inc., 2015. All Rights Reserved.

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