A taxing situation…With the new IRS, coming forward is the best option for late filers, non-filers, and delinquent payers.

By April 15, 2010, 84 percent of Americans filed their tax returns on time. That means 16 percent didn’t. That omission translates to a figure somewhere near $345 billion in taxes owed to the U.S. Treasury Department. With a budget deficit in the trillions and rising, the IRS is expected to increase its audits of both personal and business tax returns as well as pursue greater enforced collection action against individuals and businesses using levies, liens and seizures.  And that puts late filers, non-filers and delinquent payers on notice: Uncle Sam wants you now more than ever.

So, what’s a non-filer or delinquent payer to do? Many will delay dealing with the problem, literally hiding from the IRS. Yet according to Matthew J. Previte, CPA, a local taxpayer advocate expert and owner of TaxProblemsRUs.com, the IRS will get its money and then some from non-filers and delinquent payers in penalties and interest. The key is to be proactive and face the music.

“When we’re children, our parents said if we told the truth, things would be far easier on us than if they found out later. That may sound rather simplistic, but it’s the same with the IRS and your state’s DOR,” said Previte. “There are a number of options that you can work out with the IRS and your state to address your situation.”

Besides a lack of funds, pride, procrastination and a number of other reasons, most people are quite intimidated by the IRS and hesitant to come forward before the IRS comes to them. Since 1997, Previte’s Natick, Mass.-based tax firm has specialized solely in representing individuals and businesses with federal and state tax problems, including audits, non-filers, and delinquent payers.

“What most people do not realize, and that includes many CPAs and tax attorneys, is that dealing with the IRS and state DORs is a specialty unto itself,” said Previte. “We can provide our clients with resolutions to very sticky situations not only because we’re licensed tax professionals but because we have successfully worked with both the IRS and state tax agencies full-time on a daily basis for many years and we know how they work.”

So what are some of the options available to people who owe taxes? Some options include:

  • Offer in Compromise program – This little known program enables qualified taxpayers to negotiate a settlement for a fraction of what they owe. Who qualifies? Those taxpayers who can demonstrate an inability to pay their delinquent taxes in a short period of time.
  • Payment plan – Many people are able to pay their tax debts but just need a little time to pay it off. Negotiating payment terms you can live with is the key. Unfortunately, penalties and interest will continue to be charged on your outstanding balance as you pay the debt off. However, you may qualify to have the penalties removed or abated if you can show reasonable cause for filing late or paying late. For those unable to pay their tax debts in full over time, a Partial Pay Installment Agreement may be available. Under this option, payments are made until the collection statute expires. Any unpaid balance at the end of the collection statute expires and becomes legally uncollectable, leaving the taxpayer free from paying the remainder of any balance due.
  • Bankruptcy – Did you know that taxes in many cases can be discharged or wiped out in a bankruptcy. Many people, as well as attorneys, are not aware of this. For those who qualify, bankruptcy often times can be the solution to resolve their crushing tax problems. Proper pre-bankruptcy planning—for Chapter 7, Chapter 11, or Chapter 13—is key to determining if bankruptcy is or can be a viable solution.
  •  Uncollectible status – Every year the IRS puts many taxpayers into the “Uncollectible Status” category or classifies them “Currently Not Collectible” (CNC). What essentially this means is that the IRS will not proactively seek back taxes from a taxpayer that owes because of validated economic hardship. If their finances improve (as they will monitor) collection efforts will resume.
  • Penalty Abatement – The IRS charges penalties for filing late, paying late, underpaying your estimated tax payments if you’re self-employed, negligence if you make mistakes in preparing your tax return, etc. Many citizens could pay off their tax debts if it weren’t for penalties that double, triple, or quadruple their tax bill. The law does allow taxpayers who have “reasonable cause” to file for a Penalty Abatement.
  • Lien SubordinationSome taxpayers could pay off their tax debt if they could get a home equity loan. Unfortunately, these taxpayers can’t get home equity loans to pay off their old tax debt because the IRS has filed Federal Tax Liens against their property. A Lien Subordination allows the IRS to reduce its Lien priority and give your bank superior Lien priority protecting their loan in exchange for the proceeds from the loan. This way, the IRS gets the equity it had a Lien against and your bank is protected by their superior Lien.
  • Innocent Spouse Relief – When married couples sign a joint tax return, they both become liable for the taxes on that return. If at some future time the IRS audits that joint tax return and determines that additional taxes are due, both spouses become liable for the taxes. Unfortunately, these additional taxes are sometimes due to the misdeeds or fraud committed by one spouse. Sadly, the Innocent Spouse also gets saddled with the tax debt. Innocent Spouse Relief was designed to alleviate unjust situations where one spouse was clearly the victim of fraud perpetrated by their spouse or ex-spouse. If you qualify for Innocent Spouse Relief, you may not owe any tax.

“These are just a few of the scenarios where having a qualified licensed tax professional represent you can literally save you thousands of dollars and dramatically reduce the stress and anguish that comes with having tax debt hanging over your head—and your family’s for that matter,” said Previte.

For more information on TaxProblemsRUS.com, please visit www.TaxProblemsRUs.com. To schedule a free confidential consultation, call 877-259-8200.

Terrified Couple Avoids Date With U.S. Marshall

Don and Alicia knew they were in serious trouble. They had not filed tax returns for several years and owed the IRS over $240,000. Unfortunately, they had ignored an IRS Summons demanding their appearance before IRS Revenue Officers with records relating to both their personal finances and Don’s business. As a result, IRS Revenue Officers referred the case to IRS attorneys who demanded Don and Alicia’s appearance and the production of their financial records or they would refer the case to the U.S. Department of Justice for prosecution by the U.S. Attorney’s Office. At this point they knew they were in BIG trouble. Fear set in and so did procrastination. Like a deer caught in the headlights of an oncoming car, Don and Alicia froze and did nothing. It was only a matter of time before things would erupt into an ugly situation. The case was soon referred to the Department of Justice to be prosecuted by the U.S. Attorney’s Office for failure to comply with the IRS Summons. The next step for failure to comply with the Summons would be a date with the U.S. Marshall’s Office. Don and Alicia called our office just two weeks before their scheduled court appearance in U.S. District Court. They met with our firm visibly shaken and extremely upset. Reality set in and they knew it was time to resolve their problem but were terrified of the possibility of a U.S. Marshall arriving at their home with a warrant for their arrest at an ungodly hour. Our firm helped Don and Alicia prepare the tax returns and financial information necessary to get to the negotiating table with the IRS. We then contacted the IRS and the U.S. Department of Justice and negotiated withdrawal of their suit to enforce the Summons, thus avoiding a date with the U.S. Marshall’s Office. With the imminent threat of danger gone, our firm could focus on resolving their overall tax problem.