TPRS DEFINITION OF TAX TERMS & FAQ AND PROCESS
There are many options to help reduce, and in some cases eliminate, back taxes, ranging from returns to arrangements like penalty abatement, installment agreements, or offers in compromise.
Collection Stature Expiration Date:The date on which the IRS has to forgo a taxpayer’s debt, 10 years from when the penalty was assessed.
Wage Garnishment: An IRS wage garnishment is part of the IRS levy process and permitted by the Internal Revenue Code. When a taxpayer ignores the IRS notices about taxes owed, the IRS can levy property included wages. The levy notice is sent to the employer and monies are withheld from the taxpayer’s paycheck and sent directly to the IRS. A federal tax levy must leave the taxpayer with some income for living expenses, many state’s tax levies do not.
Delinquent Returns: Tax returns filed after the tax deadline for a particular tax year. Usually, the IRS requires that you file delinquent tax returns for the past six years.
Tax Liens: The IRS can file a lien against a taxpayer’s property or assets, giving them the right to claim any income generated from these things as a means of settling the taxpayer’s debt.
Tax Levies: A direct seizure of property, assets, or income by the IRS. This can affect a taxpayer’s home, car, bank account, retirement funds, wages, and more.
First Time Penalty Abatement: An abatement or reduction of tax-related penalties for one tax period, for taxpayers who have incurred tax debt for the first time. If any penalties are reduced, the related interest associated with the penalties is also reduced.
Injured Spouse: Someone whose spouse has past-due tax debt, who feels their spouse should be wholly financially responsible for this debt.
Offer-In-Compromise: An agreement with the IRS to pay less than what is owed, because a taxpayer cannot pay the full amount due to financial hardship.
Partial Payment Installment Agreement: The IRS and the taxpayer agree to a reduced pay off amount which is paid in installments.
Innocent Spouse: Someone whose spouse or former spouse has made an error on their jointly filed return, who feels their spouse should be financially responsible for the debt.
Current Non-Collectible: Currently Non Collectible status is applied to taxpayers when the IRS temporarily suspends levies, threatening letters and collection enforcement until your current financial situation improves.
Innocent/Injured Spouse: Innocent spouse – A request to relieve you of responsibility for paying tax, interest, and penalties if your current or former spouse improperly reported items or omitted items on your joint tax return.
Injured spouse – A request to get back your part of a tax refund from a joint tax return in cases where the IRS has applied the refund to a tax debt, or other eligible debt, owed by your spouse but not by you.
Reasonable Cause Penalty Abatement: Relief from tax penalties due to reasonable cause or hardship during the time the penalties were accrued. If any penalties are reduced, the related interest associated with the penalties is also reduced.
Frequently Asked Questions:
What Happens During the Free Tax Problem Resolution Consultation? During your free consultation, we will review your notice and assess the situation. We will lay out the tax relief process for you and what to expect in each of the different phases. If you choose to move to the next phase (Discovery phase), we will collect a one-time Discovery fee.
What States are Tax Debt Resolution Services Not Available?
TDR Service is not available in: Idaho, Illinois, Maine, Minnesota, Missouri, Montana, New Hampshire, North Dakota, Ohio, Washington.
TDR Service is limited to federal tax debt only in: Florida, Georgia, North Carolina, Wyoming
How Much will my Tax Resolution Cost? No two tax debt situations are the same. Just because you owe a lot doesn’t mean that the resolution will be expensive. We primarily charge you fixed flat fees, unlike many other providers, who may charge by the hour.
When is my Price Locked? We charge two fees, one for the Discovery and the other for the Resolution. Both fees have our Price Lock Guarantee (the price we quote is the price you get). At the end of our free consultation, if you decide to have us perform the investigation, you can lock in the Discovery fee. At the end of the Discovery, after we have clearly explained your options, you can lock in the Resolution fee.
What is Tax Debt ? When you forget to pay or file your taxes, there is a mistake on your taxes, or the IRS wants to change your taxes, and the IRS says you owe money as a result, you’ve incurred tax debt. However you accrued the debt, it’s your job to make sure it’s paid off.
How can I settle my Tax Debt? If you cannot pay your tax debt in full there are many tax relief options that taxpayers can qualify for based on their financial situation and hardships. Four of the most common resolution options are: Fresh Start Installment Agreement, Partial Payment Installment Agreement, an Offer in Compromise, and Currently Not Collectable.
What is an Offer In Compromise? An Offer In Compromise (OIC) settles your tax debt for less than you originally owed so long as you meet certain requirements.
What are the IRS Penalties for Underpayment? If you didn’t pay your taxes, or if something went wrong with your return, you may have outstanding tax debt. There are two types of underpayment penalties. The first happens with the filing of your tax return because you did not prepay enough taxes through withholding or estimated tax payments This penalty is calculated by multiplying the quarterly underpayment amount by the federal treasury rate for that quarter.The second, and largest, type of underpayment penalty occurs when you don’t pay your taxes by the due date of your tax return. This penalty increases each month until the tax debt is paid. The penalty can be as much as 25 percent of the taxes owed, and is part of the monthly amount that is subject to interest and compounded. The IRS can take your tax refund each year to help reduce the amount owed. The IRS can issue claims on your property and/or assets, or even take money directly from your paycheck.
What happens during the Discovery Phase? During our Discovery phase, we are trying to thoroughly understand your tax situation, along with your financial situation. For your tax situation, we want to discover if this is the actual tax debt owed. Sometimes there could be a misunderstanding or missing information that could alter that tax debt amount. We want to do that homework to see if what the IRS says you owe appears to be correct. For your financial situation, this is one of the primary things that the IRS will look at to assess your ability to pay and whether you qualify for some of the resolution options available. So it’s a really important component for us to analyze and understand. At the end of the Discovery phase, we’ll have a good idea of what your tax relief resolution options are and we’ll create and recommend a resolution plan that’s right for you.