Tax Debt Resolution

Los Angeles Tax Debt

Los Angeles Tax Debt
Los Angeles Tax Debt

Many Americans are afraid of the IRS, because they have the power to destroy their lives as well as their livelihoods. Many people have to deal with Los Angeles tax debt, and this has caused a great deal of anxiety for the American taxpayer. The stress level has reached astronomical proportions for many people, especially after the Great Recession.

Fortunately, the IRS is not as callous as many people think. In fact, they have rolled out a series of initiatives that can help taxpayers get back on their feet.

What is an Offer in Compromise?

An Offer in Compromise allows the taxpayer to settle their debt for less than what they owe. It can be a good option for someone who can’t pay all their Los Angeles tax debt, especially if it could cause extreme financial hardship.

The IRS has four main considerations that can determine a taxpayer’s eligibility:

  1. A taxpayer’s ability to pay their back taxes.
  2. How much the taxpayer earns.
  3. The taxpayer’s monthly expenses.
  4. The equity of a taxpayer’s assets.

It’s important to go through a pre-qualification process before you apply for this program. To be eligible, you must:

  • Be up to date with all filing and payment requirements.
  • Not be involved in bankruptcy proceedings at the time you apply.

Be sure to use the IRS’ Pre-Qualifier Tool to see if you’re eligible. Once you qualify, you need to follow the instructions on how to apply, which is in the Offer in Compromise Booklet (Form 656-B). Your completed form will include:

  • File a Form 433-A for individuals, or form 433-B for businesses, as well as all required documentation
  • Form 656 – This is for both individuals and businesses
  • Pay the non-refundable $186 application fee
  • Pay the Initial payment that’s on Form 656.

Once you have submitted a form, you’ll have to select a payment method. Acceptable forms of payment include:

  • Lump Sum Cash Payment: You must pay 20% of the amount you owe once you receive written confirmation of your Offer in Compromise. Then, you will pay the rest of the balance in no more than five installments.
  • Periodic Payment: Make the first payment when you submit your application, and you continue to make monthly payments while the IRS considers your offer. If it is accepted, you will continue to make payments until the debt is paid off.

If you qualify for the Low-Income Certification, you will not have to pay an application fee or a first payment, but you will have to make monthly payments while they consider your offer.

To decide if an Offer in Compromise is right for you, you need to understand the process. While your offer is being evaluated:

  • Non-refundable payments and fees are put towards your tax liability.
  • A Federal Tax Lien may be instituted.
  • Other forms of collection activity may be suspended.
  • Legal assessment and collection periods may be extended.
  • Make the requisite payments associated with your offer.
  • You will not be required to make existing installment agreement payments.

An Offer in Compromise will be automatically granted if the IRS does not make a determination within two years of when the taxes are due.

Choosing The Right Company for Resolving Los Angeles Tax Debt

Los Angeles Tax Debt
Los Angeles Tax Debt

With so many Americans dealing with hard times, there has been an increasing demand for tax debt resolution services. But not all of them are legitimate.

Some warning signs of a questionable tax debt resolution company include:

  • Promising that you will get a lower payment for the taxes you owe.
  • Giving an unrealistically short amount of time to process the debt relief request.
  • Left out applicable information about your assets on IRS financial statements.

Some of the other warning signs include:

  • Asking for upfront fees
  • High-pressure sales tactics
  • “Pennies on the Dollar” Advertising
  • “Guaranteed Tax Solutions”

If you believe that the company you’re working with is questionable, you can report any problems to the IRS by filling out Form 14157 (Complaint: Tax Return Preparer).

Understanding Your Tax Resolution Options

Whether you decide to file for an Offer in Compromise, petition the IRS directly, or work with a tax debt resolution company, make sure you:

  • Understand your rights.
  • Know your options.
  • Explain why you have this tax debt.
  • Request a new review if you cannot get a satisfactory resolution.
  • Offer the IRS solutions to your tax debt.

You have a few options for tax debt resolution, which are:

  • Paying the IRS in full.
  • Setting up a monthly payment plan.
  • Applying for an Offer in Compromise.
  • Asking the IRS to place your account in a “non-collectible status” and pay nothing up front.
  • Declare bankruptcy.

Are you still not sure which option is right for you? Or do you just want someone in your corner while dealing with Los Angeles tax debt?