Frequently Asked Questions - Bullseye Tax Relief
At Bullseye Tax Relief, we take tax resolution seriously. Questions regarding Tax Relief are frequent since it is a complex and complicated issue. One must know the laws that apply and the solutions available. This page gives answers to the most frequently asked questions. Please review and then contact us at bullseye Tax Relief if you have any other questions. Your questions are important to us. We will be happy to answer them for you.
General Questions for Tax Relief - Part 1
Tax Relief is also known as tax resolution or tax problem resolution. It is using the different programs or methods offered by the IRS. Or, tax relief is used by the tax resolution industry to assist taxpayers who have defaulted on their tax obligations. This enables taxpayers to instead meet these obligations. In some cases, these programs may aid the taxpayer in which they pay back their debt. Such options can include the use of one or more programs. For instance, using a payment installment plan, reduction in the principal amount due, penalties being forgiven in part or in whole, or any other combination. Also, relief is available to individuals and businesses, and at every level of income.
Bullseye Tax Relief assesses every situation as a unique case. We decide tax relief is suitable for you and what type of tax relief fits your situation.
Tax Relief depends upon each situation, which is unique to each individual and business. A very large percentage of taxpayers with tax issues can find some form of relief. However, it is not always guaranteed. We balance the amount you owe against the fees to retain our services or similar service. For example, if the fees are higher than the anticipated relief, then tax relief may not be the best for you. Instead, we will direct you to free resources where you manage the situation on your own. In some rare cases, we have situations that cannot be worked out using the tools and programs available. In these cases, we will advise you to save your financial resources.
General Questions for Tax Relief - Part 2
Short answer: it all depends upon your circumstances. Some actions are quick to resolve issues such as a property lien or bank account levy. Emergency measures can stabilize your situation. However, more time may be needed to resolve the underlying problem in providing you relief. Every situation is different.
Some guidelines and best practices can give us a rough estimate of the timeline. Yet, there are always cases that take a lot less or a lot more time than the average case. Ultimately, the length of time is determined by the tax authority handling your case.
We can reduce or eliminate delays by:
- doing things right from the start
- helping you gather the needed information and documents
- keeping on top of the process
- frequent communication with the tax authorities
- presenting the tax authorities with an appealing proposed solution
General Questions for Bullseye Tax Relief - Part 1
At Bullseye Tax Relief, we believe that problem resolution is both an art and a science. The science is the understanding of the tax code and available programs to help taxpayers with outstanding tax debt. This is combined with a deep understanding of the taxpayer’s situation. The art is using all of this knowledge in selecting the best strategy. Then, presenting it to the tax authorities in a way that maximizes the chances for success.
Our 3A process is unique in our industry. Most firms are concerned about how many cases they can push every day. This idea makes them think of themselves more as practitioners, hired to complete a task. Many of them are very reputable and truly care. However, they still miss the importance of the advisory aspect of tax relief. We place a great emphasis in our process on being your advisors. We take the time to tell you your options and what we believe is best for you.
Check our process page for more details.
Lastly, we guarantee all our clients a thorough analysis of their taxes in question. We will work using our secure process to ensure the privacy of your data. We also guarantee that our communication will be frequent enough to keep you informed. All our instructions will be clear so you can act on them. We promise to charge fair fees and make it easy for you to pay them. Finally, we will answer all of your questions.
General Questions for Bullseye Tax Relief - Part 2
Contact us at Bullseye Tax Relief as soon as you are ready to start. You can call, email or send an online inquiry to have someone contact you. We will discuss your situation with you for free and tell you if we can help.
Bring the most recent correspondence from the IRS or other tax authority. In this way, we can assess the urgency of the matter. Then, we can develop a timeline depending upon urgencies. For instance, liens and tax levies must be acted upon immediately.
Please beware of any of any advertising or promises of paying a few cents on the dollar for outstanding taxes. In some situations, taxpayers may pay a few cents on the dollar, but that is not common. Two strategies – Offer in Compromise and at times Partial Installment Agreements – can lower the tax amount to below the outstanding amounts. They both have certain rules and requirements that have to be met to be qualified for those programs. They are not a free pass to lower your taxes or to bargain with tax authorities.
Please be assured that if your tax situation warrants the use of either of these strategies, we will be presenting these solutions to you.
Questions Regarding Fees at Bullseye Tax Relief
Unfortunately, we cannot give you an accurate amount due to the complex nature of taxes. At Bullseye Tax Relief, we first analyze your case thoroughly by speaking with you. Then, we gather some preliminary information. Finally, we ask you some basic questions about your tax situation. We can provide the fee amount once we analyze your case. You can decide to retain us after that. It is our pleasure to inform you that we are a no-pressure company. We will never try to make you commit to anything as fast as possible so we can lock you in as a client. We want you to be sure of the decision you made and feel comfortable about the process, the fees and the timeline presented to you.
Unfortunately, not. Payment must be made before work on your case begins. However, we have several payment options that you can take advantage of. Please check our payment page for more details.
Yes. You can use our third-party partner who will help you make payments over time. Moreover, this will allow us at Bullseye Tax Relief to start working on your file right away. Meanwhile, you are still making payments toward your fees.
Questions Regarding Payment Options - Bullseye Tax Relief
Offer in Compromise - Facts
An Offer in Compromise (OIC) allows you to settle your tax debt for less than the amount you owe. The IRS created Offer in Compromise for taxpayers who could not pay off their tax debt in full without experiencing financial hardship.
Although anyone can submit an Offer in Compromise, not everyone is eligible to be accepted for the program. First, they must be currently in compliance with their taxes. As matter of fact, only a minority of the people that request an Offer in Compromise will receive it. At Bullseye Tax Relief we work with you to see if an Offer in Compromise is the best solution for your particular situation. Then, we see if you are better off with other available strategies and solutions.
The Offer in Compromise only covers those years for which no tax returns were filed. In other words, you defaulted on your tax obligation. However, other tax strategies may be used to address other parts of your tax debt.
At Bullseye Tax Relief, after studying your case very carefully, we will determine the best plan of action for your circumstances.
Offer in Compromise - Time Frame
There is no hard and fast rule since each situation is unique. However, many offers can be accepted in about 6 months or less. That is, unless there are delays that increase the time required to process and decide on your offer. The most important thing we do at Bullseye Tax Relief is to help you avoid delays that can increase the time for the process.
How well the Offer in Compromise is prepared is a big factor in influencing the duration of time for a decision. Moreover, errors in the Offer in Compromise will delay any decisions in its acceptance by the IRS.
Another factor is compliance or having filed tax returns during the timeframe that the Offer in Compromise covers. Not being in compliance will also delay any decisions.
At Bullseye Tax Relief, we educate you on what needs to be done to avoid such delays. Furthermore, we also use state of the art technology to help you get and stay in compliance. Thus, you can avoid any other delay factors that we can control.
Currently Non-Collectible (CNC)
You may qualify for a Currently Non-Collectible status if you:
- agree you owe the IRS
- cannot pay without causing financial hardship to yourself
- cannot afford basic living expenses by paying what is due
Furthermore, Currently Non-Collectible is a status that prevents the IRS from collecting on tax debts or liens against you.
This status does not mean your tax debt is forgiven forever. If your financial situation improves, you may be required to pay what you can. As long as the statute of limitation has not expired, you may still be required to pay. However, if your financial situation does not allow for payment, then you will not be required to make any payments.
At Bullseye Tax Relief, we will determine how we can help you by analyzing your tax situation and your financial situation. We will also estimate your possible future income. Then, we will advise you regarding the CNC program and if it is appropriate for you.
Penalty Abatement
Penalty Abatement relieves you from facing penalties for failing to file tax returns or making payments on time. This applies to individuals and to businesses. Penalties can be waived as long as you:
- have compiled with the law
- are unable to pay your taxes due to circumstances beyond your control
The IRS offers three types of penalty relief: reasonable cause, first-time penalty abatement and statutory exception.
Most of the time, most penalties can be abated. However, not all penalties can be abated or removed. It depends upon each circumstance. Furthermore, the IRS more easily accepts first time penalty abatement requests than repeat requests.
Yes, it is possible. We, at Bullseye Tax Relief, will analyze your tax debt obligation, how many tax periods are involved, and the causes of the penalty. Subsequently, we will have a better idea of which penalties are likely to be removed with penalty abatement.
Installment Agreement
Installment Agreements:
- are used when you cannot pay your tax debt in full in less than 120 days
- are monthly installments to the IRS
- help you pay down your debt
- help you avoid wage garnishments, levies, and collections
- demonstrate “good faith” to the IRS
- still accrue penalties and interest but at a lesser amount
No. Once you file, you do not HAVE to make your installment payment until the agreement is approved. However, we highly recommend that you start making these payments right away, as if your plan has already been approved.
Aside from our fees, there is a cost for applying to the program. Check the costs at the IRS site at https://www.irs.gov/payments/payment-plans-installment-agreements#plandef.
Partial Payment Installment Agreement
A Partial Payment Installment Agreement (PPIA) is similar to other types of installment agreements. The IRS allows you to break down your tax debt into affordable monthly installments. Unlike a regular installment agreement, a PPIA allows you to pay only a portion of your debt over an allotted amount of time. Moreover, the IRS determines this time frame, usually two years. To apply, you must provide the IRS with a full financial disclosure indicating your wages, assets and expenses. A PPIA is for those who cannot afford a regular installment agreement. In addition, the amount that you would be paying is unlikely to ever cover the full tax debt. The staff at Bullseye Tax Relief can help determine the best agreement for your situation.
Factors determining qualification include your financial situation. For instance, your income, cash on hand, and your assets. A Partial Payment Installment Agreement allows for some payment if full payment is not possible. By contacting Bullseye Tax Relief, we can assess whether your agreement will likely be accepted or not. In addition, we can determine if other strategies are more suited to your situation.
Theoretically, the Partial Payment Installment Agreement will be in effect until you reach your statute of limitation regarding that particular tax debt obligation or until you have paid your debt as agreed.
Installment Agreement vs. Partial Payment Installment Agreement
An Installment Agreement is expected to pay off the entire outstanding tax debt obligation while the Partial Payment Installment Agreement is expected to pay an amount LESS than the originally owed amount.
Partial payments are accepted by the IRS in lieu of the full amount due since the IRS recognizes that the taxpayer cannot pay the entire tax obligation without undue financial hardship. Monthly payments are paid to the IRS usually during a two-year period or before the statute of limitation expires.
Questions Regarding Liens - Bullseye Tax Relief
Federal Tax Lien
A Federal Tax Lien affects your financial assets, personal property and your real estate property. Tax liens can vary based upon your individual situation. Furthermore, they are the government’s way of protecting their interest in case you fail to pay your tax debt in a timely manner. If you fail to pay the IRS timely, a lien will be attached to all of your current or future assets until the offending tax issue is resolved. Moreover, if you do not address the tax debt in a timely manner, the lien may develop into a levy where the IRS has the ability to seize said assets.
All assets including cars, home and other real estate, stock, bonds, and more. Having a lien on your assets makes it hard for you to use your assets as you please. For example, if you have a lien placed on your real estate, you will not be able to freely refinance the loan you have on the property until you receive a tax lien subordination, discharge or withdrawal.
Tax Lien Discharge
A tax lien discharge removes the tax lien from the specific property to which it was attached. The IRS grants a tax lien discharge once the tax debt is satisfied. If the IRS accepts your request for a tax lien discharge, they will give you a Certificate of Discharge. A Certificate of Discharge allows you to refinance or sell the property that had the tax lien attached to it.
You would have to contact the IRS or use the services of a licensed professional, such as Bullseye Tax Relief. You must complete several forms to show good reason for the request of the discharge. In addition, you must fill out forms demonstrating the appraised value of the property, a description of the property and a basis for the discharge. Moreover, you must meet one of the reasons that the IRS allows or accepts a tax lien discharge. In addition, you must demonstrate to the IRS that their granting of the tax lien discharge would not jeopardize their interest in the property. In other words, the IRS would still be paid the amount owed without the use of the tax lien.
On average, it takes from 30-60 days to get the lien discharged. However, errors will delay the process.
Tax Lien Subordination - Part 1
Tax lien subordination places a creditor ahead of the IRS in their claims against a property. This may be necessary for real estate transactions, such as a mortgage refinance. Tax Lien Subordination does not remove a federal tax lien on a property. However, a creditor is given prioritized interest to your assets, ahead of the IRS. This makes it easier to acquire a loan or mortgage or to refinance a house.
Lien discharge is best used for the sale, transfer or refinancing of a property. Lien subordination can be used in the refinancing of a property. But not necessarily when selling your property, since it just allows others to put a lien on the same property. Consequently, other creditors take the first priority, moving ahead of the IRS. Creditors, specifically for secured loans, place a lien on a property when funding you. Therefore, a lien subordination or discharge would be absolutely necessary when you want to refinance a property for the purpose of securing a loan.
Tax Lien Subordination - Part 2
To apply for a certificate of subordination, follow the instructions and complete the right forms. Additionally, the IRS has some self-help videos on several topics, including self-help for tax subordination. You will have demonstrate to the IRS that the lien subordination would benefit them. For example, if refinancing your property will improve your financial situation to allow you to make payments towards your tax debt. Or, perhaps to increase the amount of your current payment. Or even, the cash received from a refinance would allow you to pay part or all of the outstanding debt amount. Then, the IRS may accept a Lien Subordination request. Please contact us at Bullseye Tax Relief to discuss your case because each case is unique.
Similar to the process of lien discharge, it can take from 30-60 days on average to get the lien subordinated. However, any errors on the forms or documents can delay the process. It is advisable to apply as soon as you start thinking of refinancing your loan to avoid delays.
Tax Lien Withdrawal - Part 1
The IRS places a tax lien on property or assets when you fail to pay a tax debt. A tax lien withdrawal makes it easier to sell your property or assets if you have a federal tax lien placed on them. Moreover, it removes the Public Notice of Federal Tax Lien from the asset in question. In addition, this means that the IRS is no longer in competition with other creditors. Eligibility includes entering into a direct debit installment agreement or other agreement regarding your tax debt with the IRS.
The IRS withdraws a lien if it is in the best interest of the taxpayer and the IRS. Having an installment agreement or a partial payment installment agreement will likely get your lien withdrawn. Of course, paying off your debt is the surest way to have your lien released or withdrawn. However, we understand that circumstances may not allow you to do so. To learn more, contact us at Bullseye Tax Relief. We will assess your situation and inform you of the best way to deal with your lien.
You are eligible if you:
- provide evidence that the tax lien was not in accordance to IRS procedures or it was filed prematurely
- entered into an Installment Agreement to pay off the past due tax lien
- owe a tax debt under $25,000
- entered into a direct deposit installment agreement
- believe that the withdrawal of the tax debt is in the best interest of the government and yourself
- can pay the tax debt more easily if the lien is withdrawn
Tax Lien Withdrawal - Part 2
Forms can get a bit complicated. Moreover, you must be clear and detailed to the IRS as to the reasons you believe the lien should be withdrawn. Multiple errors can be made on the forms. For example, missing information or a missing signature. Reasons must be stated in clear language. Also, they must be supported by evidence.
We strongly recommend you be very careful completing these forms. Instead, get the help of a licensed professional to maximize chances of getting your withdrawal request approved.
A tax lien withdrawal denied can impact your financial situation, affiliations, home ownership, job placement and more. According to the IRS, you have several options if your withdrawal request is denied. For instance, you can contact the manager overlooking your request and file an appeal.
To increase chances of success, first familiarize yourself with the forms and instructions. Carefully complete all sections of the forms. Then, attach the appropriate supporting documentations. Finally, sign the form. Another option is to hire a third-party licensed professional, such Bullseye Tax Relief.
Questions Regarding Releases - Bullseye Tax Relief
Wage Garnishment Release - Wages
The IRS obtains a wage garnishment against your wages and earnings through your employer to satisfy your tax debt. When you obtain a wage garnishment release, the IRS agrees not to take any part of your wages to satisfy your tax obligation.
Similar to any other tax levy, the IRS obtains the right to your property, i.e. your paycheck. In this manner, they can collect the debt you owe. For this method, your employer withholds a portion of your paycheck. Then they send that portion to the IRS to pay off your tax debt. Consequently, wage garnishment can affect your gross wages, salary, bonuses, commissions, and retirement benefits. It and can even affect your disability. Moreover, this can affect your VA and social security benefits.
The IRS typically sends you a number of notices of the amount you owe in taxes before garnishing your wages. If you do not attempt to pay off your debt in full or through an installment agreement, the IRS will then garnish your wages. Moreover, the IRS will not notify you that your wages are being garnished. Instead, the IRS will directly issue a notification of garnishment to your employer. Then, your employer will notify you that your wages are being garnished.
Wage Garnishment Release - Facts
A Wage Garnishment Release is just as the name implies. In this way, the IRS releases your wages from garnishment. In order to obtain a Wage Garnishment Release, you must first request it from the IRS. There are three main reasons that the IRS will consider releasing your wages from being garnished:
- your tax debt is paid in full
- you have entered into a collection agreement
- you can prove that a wage garnishment would lead to financial hardship, making it harder to pay
When you obtain a wage garnishment release, the IRS agrees to not take any part of your wages to satisfy your tax obligation.
As long as you pay as agreed with your payment agreement, the IRS will not impose another wage garnishment. However, if you miss any payment, then the IRS can impose a new wage garnishment against you. Keep in mind that the IRS will more than likely not accept another wage garnishment release from you if you have violated the terms of the first one.
If you have received notices indicating that your wages may be garnished, or if your wages have been already garnished, please call us immediately or seek other help as soon as possible.
Wage Garnishment Release - Qualify
Since the IRS sends several notices warning of a wage garnishment, they are reluctant to release the wage garnishment once it is imposed. However, wage garnishment is not an ideal method for obtaining payment of a tax debt. In addition, the IRS must abide by various rules and fees.
By being in full compliance (filed all required tax returns), you are likely eligible for a Wage Garnishment Release. In other words, you may be able to release your wages from garnishment if you:
- file for an Extension to Pay (ETP) – if you have not previously filed for an extension to pay and you have followed through on previous payment agreements. The IRS will typically accept an extension to pay which would automatically release your wages from garnishment.
- enter a payment plan with the IRS – If you file for any type of installment agreement or other form of payment (OIC, CNC), the IRS typically releases your wages. However, the IRS will garnish your wages again if you do not pay.
- are able to prove that garnishment of your wages would cause severe financial hardship. Thus, you could not meet your basic living expenses.
We highly advise you to not ignore IRS notices. Instead, respond to them as soon as possible. If you are not sure how to respond to them, get the help of a tax professional. Bullseye Tax Relief is here to help. This is one way to avoid a wage garnishment.
Bank Levy Release
The IRS can freeze a bank account and seize the money in it with a bank levy. Then, the IRS can use this money to pay your tax debt. However, the IRS must give several warning notices to you before using a bank levy.
A Bank levy release will do just that, release your bank account so the IRS does not seize funds. The IRS uses bank levies and wage garnishments to collect tax debts. Furthermore, the IRS sends warning notices to you of their intent. So, it is very important to respond to them even if you disagree.
Respond immediately if you just received your notice. Then, enter into an agreement with the IRS to take care of your outstanding balances. In addition, you can request a hearing with the IRS as long as you respond within the 30 days period. Especially, if you disagree or you feel that there is error with your tax situation.
Moreover, contact our office if you have received a letter for intent to levy, or if your bank account has already been levied.
Yes, if you make contact fairly quickly, and make arrangements to pay your taxes or if you challenge it through applying for an appeal, you may be able to get the funds that were levied back. Please note, the faster you make arrangements, the bigger your chances of getting that money back.
Innocent Spouse Relief - Facts
Innocent Spouse Relief relieves you from paying any penalties, interest or taxes for which your spouse is ultimately responsible for. Furthermore, Innocent Spouse Relief applies if your spouse (or former spouse) omitted or improperly reported items on your tax return without your knowledge. Consequently, this relieves you from paying any penalties, interest or taxes on the misreported or unreported items on the returns, if it approved by the IRS. Moreover, the IRS may also relieve you from some but not all of the responsibility for the misreported taxes. In which case, you are responsible for paying whatever fees apply to the portion which the IRS did not approve for relief. The IRS will calculate for you what fees you are and are not responsible for after you file the form for Innocent Spouse Relief (IRS Form 8857).
The average time is approximately 6 months. However, the time can increase if there are issues while processing your request. Such issues include: contacting your spouse and/ or how fast you are able to submit requested documents. Therefore, we advise our clients to carefully consider Innocent Spouse Relief as it is not the fastest or the best strategy in many cases. If we determine that Innocent Spouse Relief is the best option for your case, we will advise so. Moreover, we will provide you with all the support and guidance throughout the entire process. Just give us a call to see how we can help you.
Innocent Spouse Relief - Spouses
Yes, the IRS will contact your spouse regardless of the marital status, whether you are still married or divorced.
You will not qualify for Innocent Spouse Relief if you knew of the action your spouse did, resulting in owing money to the IRS. There are many situations where the spouse may not have known what the other spouse had done to manipulate, overstate income, understate expenses, or whatever else was the reason for the tax liability. You must have had reason to know or should have known regarding the actions of your spouse for you to be liable. So, if the spouse requesting relief was the accounting manager for the S corporation that had an understated amount on the tax return, then this spouse would not receive relief since he/she was a manager and should have known as to the truthfulness of the tax return filed.
Innocent Spouse Relief is one of the more complicated strategies that require careful study before determining if it is the right strategy. We highly recommend seeking help from licensed professionals when attempting to claim Innocent Spouse Relief.
Statute Of Limitations
The Statute of Limitation is the time period established by law for the IRS to assess, review and resolve any tax related issue. Once the time period passes, the IRS forfeits any claim to additional taxes, interest, penalties, fees or collection actions. Likewise, the taxpayer forfeits any claims for refunds. There are several factors that impact the calculation of the statute, when it starts and when it ends. We greatly caution taxpayers in making these calculations on their own without first learning all the rules and exceptions. If you need help, please do not hesitate to contact us.
There are several statute of limitations regarding taxes: for claiming a refund, for assessing your tax, and in the collection of the taxes due. When the Statute of Limitation has expired in these cases, the IRS will not take any actions. So for example, in the case of a refund, the IRS has three years from the date of when a tax return is due to process a refund related to that tax year. After the limitation is reached, the IRS will not process a refund for you, even if you are due a refund based on tax calculations of your refund. The same rule applies to assessment and collections. Once the limitation is reached, the IRS can not assess or collect any more taxes.
Questions Regarding Appeals - Bullseye Tax Relief
Collection Appeal
A Collection Appeal challenges the IRS’ actions for the collection of past taxes. In many cases, this challenge will stop or reverse any collection processes and relieves you of any collection actions.
Whenever you fall behind on your tax obligations, the IRS will begin collection proceedings on any outstanding balances. Consequently, the IRS places liens and levies on your property and assets. Usually, the IRS will begin their collections proceedings by sending you collection notices. Despite being a government entity, the IRS is not perfect. They can be wrong in assessing penalties and interest on tax debt. Moreover, they can even be wrong in declaring that you have not met your tax obligations. Any wrongful actions done by the IRS can be reversed.
The two types of collection appeals are: Collection Due Process (CDP) and the Collection Appeal Program (CAP). Both options apply to specific circumstances which sometimes overlap.
Collection Due Process allows you to appeal a Notice of Federal Tax Lien, both before or after a levy is placed on property, depending on the type of levy enforced.
CDP (Collection Due Process)
- Works for liens and levies
CAP (Collection Appeal program)
- Rejection or termination of an Installment Agreement
- Before or after the IRS has placed a lien, levy or any seizure action against your property
A Collection Appeal allows you to challenge the IRS’ actions (liens, levies, seizures) for the collection of past taxes. In many cases, this challenge will stop or reverse any collection processes and relieves you of any collection actions. Especially if the collection is found to be a mistake or to cause financial hardship.
Collection Appeal - Timeline
To be eligible for Collection Due Process, you must file for an appeal of the IRS’ ruling and actions within 30 days of the receipt of the first notice of a right to a hearing. This stops any collection actions by the IRS until a final decision is made. You can file after the 30-day window. However, this will not stop the IRS from taking collection actions against you.
The Collection Appeal Program is more lenient in filing for an appeal. Although it is best to take immediate action, this appeal allows you to file before or after any action is taken by the IRS. If you file before the IRS takes any collection action, the CAP will usually protect you from any action being taken in the first place unless the IRS feels that the collection of the tax debt is at risk.
If you received a notice for your right to appeal, and you are not sure what action to take, please contact us immediately to guide you on the best action to take.
Administrative Appeal - Facts
An Administrative Appeal allows you a second chance in reversing or stopping an IRS’ decision or action that is unfair or incorrect. Consequently, this may lead to a more favorable outcome for your tax situation.
The term Administrative Appeal applies to any appeal filed regarding action taken by the IRS. The IRS allows you to appeal any decision or action taken by them including decisions made during an audit or decisions to collect on tax debt. As a taxpayer, if you feel that the IRS has made any unfair or incorrect decisions in regard to your tax situation, you may appeal said action without going to court through their Office of Appeals, a separate entity from the IRS themselves.
Administrative Appeal - Office of Appeals
All Administrative Appeals are filed through the IRS Office of Appeals. If you find yourself in a dispute with the IRS or are going through a tax audit, you have the right to appeal any decision made before going to court. The appeal method is often more cost effective than going to court.
In some cases, after an appeal is filed, the IRS will request either written arbitration or a hearing (usually over the phone) with an official within the IRS Office of Appeals in order for a final decision to be made. However, arbitration is optional. Most appeals to the IRS are made through a tax professional. If for any reason you apply for an appeal and the appeal is rejected, you are able to appeal the rejection of the appeal as well.
When an Administrative Appeal is filed, the IRS will halt any collection actions taken against you until the appeal is resolved and a decision is made. The Office of Appeals is separate from the IRS so that one does not influence the other in the decision making process.
Administrative Appeal - Apply
The amount of tax assessed determines the method of applying for an Appeal. For example, a taxpayer can request the appeal with the IRS personnel who assessed the tax for an amount less than $2,500. For a tax amount between $2,500 and $25,000, the taxpayer must complete forms or give a complete and detailed written statement explaining the specifics of the dispute. However, when the amount is greater than $25,000, a full request must be submitted. In addition to forms, the taxpayer must provide information related to the request such as supporting documentation.
Carefully review all facts before filing an appeal. Research the different types of appeals available to you and the different use for each type. Complete all required forms or statements carefully. Make sure the information is complete and accurate.
We, at Bullseye Tax Relief are available to help. Please take advantage of our free consultation. Then, we can discuss your situation and discuss your alternative solutions.
Questions Regarding Trust Funds - Bullseye Tax Relief
Employment Tax Resolution - Facts
Employers are expected to pay federal, and state taxes for and on behalf of their employees, referred to as “payroll tax”. When these taxes are not paid, a series of collection steps are enforced, with some devastating results at times. Tax resolution can help avoid or deal with these collection activities.
The term “Trust Fund” applies to wealth management rather than employment taxes for most people. To clarify, a Trust Fund is the payroll tax amount assessed to the officers of the business. When the IRS refers to a trust fund, they mean the funds recovered from the taxes withheld from employees, for which the employer is responsible for depositing into the federal tax deposit. These are called trust fund taxes because the employer holds the money in trust until it is deposited. A Trust Fund Penalty is enforced when taxes are held by the employer, but not used for the taxes for which they are intended. Tax resolution can help reduce and/or arrange for the payment of these taxes.
Employment Tax Resolution - Penalty
The IRS implemented the Trust Fund Recovery Penalty to encourage business owners to pay their employment taxes. Sadly, when someone owns a small business and they fall on hard times, they may feel tempted to tap into the tax funds that they collected from their employees to stay afloat. This action has dire consequences. Taxes collected from employees are called trust fund taxes because that money is held in trust until you deposit it to the IRS. Unfortunately, when an employer fails to deposit their employees’ tax funds, they may have a penalty assessed against them.
A Trust Fund Recovery Penalty Interview and investigation permits the IRS (Internal Revenue Service) to collect unpaid taxes from businesses and assets of the individuals involved in the finances of the business. If the IRS believes you are responsible for the trust fund taxes, they will request an interview with you. The purpose of trust fund penalty assessment interview is to figure out if you are responsible for the recorded unpaid taxes or not. The interview is called a 4180 interview because the IRS agent will ask questions from the Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty).
Employment Tax Resolution - Hearing
A Collection Due Process (CDP) hearing could be your last chance to resolve whatever tax controversy you have with the IRS. The IRS will issue a IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing or it will send IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it imposes a levy. After that notice you must have a CDP hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153.
Trust Fund Penalty - Facts
A Trust Fund Penalty is an amount paid to the Department of Treasury for a business’ failure to timely deposit Trust Fund Taxes collected from its employees’ paychecks. Moreover, it includes the full amount of the unpaid trust fund tax as well as interest. Employers withhold certain monies from their employees’ paychecks for income tax, Social Security and Medicare. These amounts are held in trust by the employer until he/she deposits the amounts with the Department of the Treasury. Furthermore, if an employer uses these monies to pay for expenses other for what they are intended, they are penalized.
The monies employers withhold from their employees’ paychecks are called Trust Fund Taxes because employers hold them in trust before depositing them with the IRS. They are payments for Federal income tax, Social Security, Medicare and the employer’s matching amount for FICA (Social Security and Medicare).
Trust Fund Penalty - Responsibility
The person responsible for collecting and paying the Trust Fund Taxes is anyone responsible for collecting or paying withheld income taxes, employment taxes or excise taxes. This person either performs or directs the collection, accounting and paying of the Trust Fund Taxes. These people may include:
- An employee or officer of a corporation
- A corporate shareholder or director
- A person with authority and control over the disbursement of funds
- An employee or member of a partnership
- A member of the board of trustees of a non-profit entity
- Another corporation or third-party payer
- Payroll Service Providers (PSP) or their responsible parties
- Professional Employee Organization (PEO) or their responsible parties
- Responsible parties within a common law employer or client of PEO/PSP
- Sole Proprietor
Willfully failing to collect or pay Trust Fund Taxes will result in being personally liable for the full amount of taxes due plus penalties, also known as Trust Fund Recovery Penalty (TFRP). “Willfully” means to intentionally, voluntarily, or consciously failing to collect and pay these taxes despite being aware of the responsibility to do so. Furthermore, intentionally disregarding the law or being indifferent with or without malice or paying other creditors instead constitutes willfulness.
Trust Fund Penalty - Assessed
The IRS will send you a letter stating that they plan to assess the TFRP against you. You have 60 days to respond or 75 days if you are outside the United States. They will conduct an interview with you to determine if you are the person responsible for the taxes or if you are directed by another. The penalty is equal to the amount of the Trust Fund Taxes (income taxes, withheld FICA taxes and excise taxes) uncollected and unpaid. Nevertheless, once the IRS has assessed the penalty, they will take collection action against your personal assets, including using Federal tax liens, levies and seizure actions.
The best way to avoid paying the TFRP is to always collect and pay the withheld amounts to the IRS on time. Do not use these funds for other expenses. If a TRFP is assessed against you immediately, pay it in full. You could also admit being liable by signing the Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then try to set up a payment plan or apply for a settlement. If the bill is under $25,000, the business should be able to pay it back over a 24-month period. Fortunately, once a business sets up payments, you no longer have to worry about any personal assets being at risk.
Trust Fund Penalty Assessment - Facts
The IRS assesses a penalty against the person responsible for collecting and paying the Trust Fund Taxes and yet failed to do so. Trust Fund Taxes are held in trust by the person responsible for collecting them. This person must then deposit these monies with the IRS by the deadline.
According to the IRS, the TFRP can be assessed against any person who is:
- Responsible for collecting or paying withheld employment taxes.
- Willfully fails to collect or pay the taxes.
Therefore, any of the following can be responsible:
- An employee or officer of a corporation
- A corporate shareholder or director
- A person with authority and control over the disbursement of funds
- An employee or member of a partnership
- A member of the board of trustees of a non-profit entity
If the IRS determines that you are the person responsible for the failure to pay Trust Fund Taxes, they will send you a letter stating that they plan to assess the TFRP (Trust Fund Recovery Penalty) against you. The letter will explain your right to appeal. You have 60 days to respond (75 days if you are outside the United States). Then they will conduct an interview with you to determine if you are the person responsible for the taxes or if you are directed by another. Nonetheless, if you do not respond to their letter, they will assess the penalty against you and send a Notice and Demand letter.
Trust Fund Penalty Assessment - Penalty
No. The IRS will assess the penalty against anyone they believe participated in the non-payment of the trust fund taxes. If the IRS believes an individual “willfully” withheld trust fund taxes, they will be assessed the penalty. For willfulness to exist, the responsible person must have been, should have been or was aware of the outstanding taxes. Once they were aware of these taxes, they either intentionally disregarded the law or were plainly indifferent towards the requirements. Moreover, the IRS will sometimes even impose it against those who had no knowledge or control in the disbursement of the funds. In order to be liable and possibly assessed, you must have had a duty to collect and pay taxes, but willingly refused to do perform that duty. The penalty will remain owed against everyone deemed responsible until it is paid off by one or more the parties.
The best way to avoid paying the TFRP is to always collect and pay the withheld amounts to the IRS on time. Do not use these funds for other expenses. If a TRFP is assessed against you immediately, pay it in full. You could also admit being liable by signing the Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then try to set up a payment plan or apply for a settlement. If the bill is under $25,000, the business should be able to pay it back over a 24-month period. Fortunately, once a business sets up payments, you no longer have to worry about any personal assets being at risk.
Trust Fund Penalty Assessment Interview
A Trust Fund Recovery Penalty Interview and investigation permits the IRS to collect unpaid taxes from businesses and assets of the individuals involved in the finances of the business. If the IRS believes you are responsible for the trust fund taxes, they will request an interview with you. Moreover, the purpose of trust fund penalty assessment interview is to determine your responsibility for the recorded unpaid taxes. The interview is called a 4180 interview because the IRS agent will ask questions from the Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty).
There are two ways to avoid an interview:
- Pay the bill and cancel the interview.
- Admit liability by signing Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and set up a payment plan or settlement. In this case, your personal assets would no longer be at risk. But first, consult a tax professional.
Arguing that you were not responsible for the payment of Trust Fund Taxes is extremely difficult. Perhaps you accidentally signed off on a tax but you were not really responsible for the collection and payment of those taxes. Perhaps you acted carelessly, were “bullied” into signing off or did not understand the severity of the situation. Consulting a tax professional is highly recommended. He or she will have to prove that you are not responsible for the unpaid tax even if you were involved with the company finances.
Collection Due Process - Facts
A Collection Due Process (CDP) hearing could be your last chance to resolve whatever tax controversy you have with the IRS. The IRS will issue a IRS Letter 1058, Notice of Intent to Levy and Right to Request a Hearing or it will send IRS Letter 3172, Notice of Federal Tax Lien File and Your Rights To a Hearing before it imposes a levy. After that notice you must have a CDP hearing within 30 days of the notice. To request a hearing, you must fill out IRS Form 12153.
It is best to speak with a tax professional when requesting a CDP. The tax professional will file IRS Form 12153, Request for a Collection Due Process Equivalent Hearing. The form will require some background information and the reason why you believe the IRS should not pursue the lien or levy against you. You send this form back to the return address displayed on the envelope containing the notice. You will have 30 days from the date of the letter. They are extremely strict with this requirement and failing to file within the 30 day period will result in you losing the right to a CDP hearing.
If the CDP request is filed on time, the IRS must put a hold on collecting the debt amount pending the outcome of the hearing. If you happen to miss the 30 day deadline, you can still file for an Equivalency Hearing. However, the IRS is already authorized to pursue the debt against you. You only have 30 days to act once you have received notice from the IRS regarding liens and levies so contacting a tax professional immediately is your best action.
Collection Due Process - Collections
Liens are recorded against properties indicating that you owe someone money. When the property is sold, the amount of money owed to the lien holder is distributed to that lien holder. Liens against properties make it difficult to sell or refinance them. A Federal Tax Lien indicates you owe money to the IRS for back taxes. Paying taxes on time, entering into payment agreements or offering compromises will help you avoid liens against any of your properties.
A levy is more serious than a lien since the IRS can seize any funds or properties to settle your account owed. This means seizing bank accounts and personal properties. A levy under U.S. Federal law is an administrative action by the IRS to seize property to satisfy a tax liability. The levy “includes the power to seizure by any means”. Once the IRS levy is in place, they will begin to seize assets until the tax liability is paid in full. If you happen to disagree with anything the IRS says you owe, you can file the CDP (Form 12153) request only within 30 days of these notices. Otherwise, you forfeit your right to object. Requesting a CDP hearing, entering into an installment agreement, requesting an offer in compromise or appealing the levy in the Collections Appeal Program will stop the levy.