Why you don’t qualify for an offer in compromise (OIC) with the IRS and why they might want you to “apply,” for one.

If you owe back taxes, you have become more popular than you would have ever thought imaginable!  The mailbox is full of promises to settle your tax obligations at “pennies on the dollar,” the phone rings constantly; it seems that everywhere you turn, someone is offering to help you and asking you to pay them for it – ironic, I know.  With the current “Fresh Start,” initiative from the IRS there is more buzz about wiping the slate clean and settling your taxes.  Unfortunately, the buzz and sizzle fall short of what you most likely will end up with.

 

For an individual or business that has fallen behind on their tax obligations, the offer to pay less than what is owed sounds more than appealing.  Collection agents from the IRS will encourage you to complete the paperwork for an OIC; they will even state that you have a right to try it.  What they will not tell you is what the criteria is, how your ability to repay is measured and what the overall consequences are to filing for this specific hardship program when you do not qualify.

 

You can review the OIC (form 656) booklet and form here.  You will find an eight page form to “apply,” for the OIC is included in this 32 page handbook.  As you review the form, it seems simple enough; your personal info, how you earn a living, how much you make, what you own, etc.  It would seem reasonable that the government would ask these questions in order to review your chances for settlement.  Let’s look a little deeper at what they are really asking for.  Providing your employment/earnings information seems simple enough – the IRS probably has it from a previous filing or from someone that has reported income paid to you.  What if you are not in compliance (filings not submitted)?  What if you tell the IRS you cannot afford to pay an installment agreement?  The IRS will now have a direct path on where to collect the funds from you via enforced collections.  Since you will provide your employer’s info, they can easily submit a wage garnishment which ensures that they will be able to collect faster than before.  Additionally, when you provide your bank account info, they now have the correct account to seize.  In short, you are providing exactly what is needed to make collecting from you simple.

 

What about the list of assets you own?  If there is available equity in your home; even your primary home, that is reviewed as a means to collect from you.  Retirement accounts, investments, joint accounts, etc; everything about you financially is required to be disclosed in consideration of an OIC.  As a comparison, take a look at the form 433-A (collection information statement) here.  Oddly enough, the information requested from the Revenue Officer (collection agent – RO) is all required for the OIC.  If the RO is asking you to complete the OIC paperwork and offering an opportunity to settle your tax debt for less than is owed, are you more likely to comply with their request for financials, or is the 433 an easier request?  The new “Fresh Start,” initiative is geared toward exactly that; getting the info necessary to ensure that you pay your “fair,” share!  This might have been one of the cleverest marketing ideas from the IRS in history!

 

Do you think that after reviewing your financials that you cannot possibly pay the tax debts?  What if you stopped paying your credit cards and other unsecured debts?  How about the cost of your living situation?  Is it higher than the average costs for your market place?  The money you are obligated to pay to your creditors, your landlord, the mortgage company; if any of that is higher than what the “norm” is in your area, this would be an available amount to pay the IRS in their eyes!  In summary, even though you do not have the ability to pay the IRS in your opinion, the IRS will require that you change your financial obligations and pay the tax debts, regardless of what that does to your creditworthiness or lifestyle!  Not only will the tax debt inhibit your ability to pay your bills, a lien will most likely be filed against you to encumber your assets and damage your credit further.  As if that is not enough, the OIC program will also extend the amount of time the IRS can collect from you – 10 years from the date of assessment PLUS the time the OIC has been submitted, waiting for review AND the eventual appeal of their denial.  This could increase/expose your situation by another 2 years!

 

As you can see, filing for an OIC when you do not qualify can really hurt you.  The good news is that there are other methods to resolving your tax problems that can save money, preserve your creditworthiness, not disclose all of your assets and once and for all, allow you to close this chapter out and move on with your life.  A true “Fresh Start,” can be had and the experts at Larson can help.  Call or email us today to discuss what other programs are available and how we can help.

 

888-589-0955

Check us out on the web

Tax Deadline Missed?

The deadline for 2015’s Form 1040 – US Individual Income Tax Return has passed, and most taxpayers have filed and paid their returns.  However, some people will not to choose to file their tax return if they do not have the money to pay the tax owed.  This may be because they are scared and unsure on how to proceed, if it’s obvious that tax will be due.  It is always wisest to file all tax returns as they come due, even if there isn’t money directly available to pay the tax owed.  That way, Failure to File Penalties can be easily avoided and also you avoid prolonging a tax bill for months/years beyond what it should ordinarily be. There are also some options for requesting online short-term extensions requesting additional time to pay an individual income tax bill.  If you find yourself in a personal or business tax dilemma that you need some advice or help with, please do not hesitate to contact Larson Financial at 888-589-0955 or learn more at www.larson-financial.com.

Larson Financial Earns Top Workplace Award

We are honored to announce that Larson Financial has earned a Top Workplace award for the fifth year running, having placed on the list every year since the Denver Post began the Top Workplaces program.

Owners RTWP_Denver_Portrait_2016_AWon and Jack Larson have always recognized the importance of providing a top quality workplace by combining employee recognition, flexibility, fun, and perks around the office. The Larson’s have a great understanding of how creating a great workplace ultimately translates to great results and happy clients. On-going training keeps Larson at the cutting edge of tax resolution and yoga balls & exercise mats, a ping pong table, cooking classes and treats around the office help team members come to work each day ready to be engaged and energized to provide their best to the clients. Ron Larson, co-owner and head of corporate engagement notes that “empowering our employees by showing them how much they are valued truly helps inspire them to reach their full potentials.”

The Top Workplaces are determined based solely on employee feedback. The Denver Business Journal teamed with Quantum Workplace to compile results from employee surveys to determine the outcome. The surveys measured corporate culture such as having a clear sense of direction, work/life balance, job expectations, trust with co-workers, individual contribution, manager effectiveness, trust in senior leaders, feeling valued, work engagement and people practices. For more information, visit www.topworkplaces.com and www.workplacedynamics.com.

Tax Deductions You Don’t Want to Miss Out On

If you still haven’t filed your taxes and you are rushing to get your 2015 tax returns filed, make sure you are not missing out on any potential deductions that could lower your tax bill or increase the amount of your refund!  Below are some of the Top Tax Deductions that you may be able to take advantage of:

  • Moving expenses may be deducted if your relocation is due to a new job or a transfer to a new location for your current employer. In order to qualify the move must be closely related to the start of work (moving expenses incurred within 1 year from the date you first reported to work at the new location), must meet the distance test (your new job must be at least 50 miles further away from your former residence than your old main job) and the time test (if you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location).
  • Child and dependent care credit may be able to be claimed if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. There are limits to the amounts as well as who is considered a qualifying individual.
  • Health insurance premiums may be deductible in some cases. If you are self employed and are not eligible for an employer-sponsored health plan through your spouse or domestic partner you may be able to deduct the premiums. Additionally, if you paid your health insurance premiums with your own after tax money, those payments may be deductible. You may not write off your health insurance premiums that were paid by your employer or that were paid with pre-tax money.
  • Disaster recovery from events such as hurricanes, floods, earthquakes, tornadoes and wildfires may entitle you to special tax relief or may qualify you for an extension of time to file. The IRS website has a list of recent tax relief for disaster situations.
  • Charitable contributions such as cash, checks, household goods, cars or other appreciated property may be deductible. The contributions must be made to qualifying organizations and have a bank record or receipt with the charity’s name and amount. There is a limit to how much you can deduct and household goods valued at more than $500 will require Form 8283. Out of pocket expenses and travel expenses for volunteer work you perform may also provide a write off.
  • Qualified education expenses for yourself, your spouse or your dependents may be deductible and may be able to reduce the amount of your taxable income by up to $4000.

IRS Tax Season Now in Full Swing

While most individuals will get an extra few days to get their 2015 individual tax returns filed, don’t wait until the last minute! The tax filing season is now in full swing and you should start gathering all the documents you need and preparing your return before it is crunch time!

Most individual tax returns are due on April 18th this year due to an overlap of tax deadlines and Federal/State holidays. Did you know that Emancipation Day is an official public holiday in the District of Columbia, normally celebrated on April 16th? Turns out April 16th falls on a Saturday this year, thus Emancipation Day is legally observed on the preceding day and it takes precedence over the April 15th tax deadline. This also pushes back the deadline for the first installment payment (Form 1040-ES) of estimated income taxes to Monday, April 18th. Residents of Massachusetts and Maine only, will get even one more day due to the statewide legal holiday, Patriots Day in those two states, making their tax return deadline Tuesday, April 19th. Patriots Day does NOT affect estimated tax payments, so those are still due on April 18th even for Massachusetts and Maine residents.

If you need more time to prepare your return, and are not able to file your taxes by the deadline you should file for an extension to avoid an assessment of penalties (Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return). Remember, an extension of time to file your return does not grant you any extension of time to pay your taxes. Even if you do not have the money to pay your taxes at the time the tax filing is due, always file your taxes on time!

Do you owe taxes or have unpaid taxes from previous years and you are not sure what to do? Please give us a call to discuss your situation in detail, with zero cost or obligations. After speaking with one of our Senior Consultants you will 1) know your options and rights, and 2) have the information you need to make the best financial decision for you and your family or your business.

Larson Financial represents clients in all 50 states with both State and Federal tax issues. Our goal is to give you a fresh start. If you can afford to pay your taxes but just need more time and breathing room, we will make that happen. If you cannot afford to pay what the government claims you owe, we will find the best option for you to get a permanent solution. Call us at 888-589-0955 to learn more.tax-season-2016