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IRS – Bankruptcy Chapter 13

September 4, 2014 by admin

Steven A. Leahy
IRS – Bankruptcy Chapter 13

By Steven A. Leahy

There are six things you can do if you owe the IRS money. First, you can simply write the IRS a check for the full amount. For many, that is simply not a realistic option. Often, if the tax obligation is not too significant, borrowing money from another source (friends, family, bank loan, credit cards, etc.) may be a less costly alternative than an installment agreement with the IRS. Second, you can enter into an Installment Agreement; pay the IRS over time. Third, you can obtain an Offer-in-Compromise: A lump sum settlement for less than the tax owed. Fourth, you can be declared Currently Not Collectible; pay the IRS nothing (for a period of time). Fifth, you can file for protection under the bankruptcy code. And the last option – you can do nothing, and let the IRS do what they will to you, your family and your assets.

This article addresses the fifth option – Bankruptcy. The Bankruptcy Code is found in United States Code: Title 11. Think of the Bankruptcy Code as a book, and like other books, it is divided into chapters. That’s why you hear so much about Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, or Chapter 15. Each chapter has a different remedy for a different situation. Chapter 7 is titled “Liquidation,” Chapter 9 “Adjustment of Debts of a Municipality,” Chapter 11 “Reorganization,” Chapter 12 “Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income,” Chapter 13 “Adjustment of Debts of an Individual with Regular Income,” and Chapter 15 “Ancillary and Other Cross-Border Cases.” Generally, individual taxpayers rely on Chapter 7, Chapter 11 or Chapter 13.

This article will focus on the second kind of bankruptcy available for individual taxpayers, IRS Bankruptcy Chapter 13 “Adjustment of Debts of an Individual with Regular Income.” People who file bankruptcy are referred to as “Debtors.”

Chapter 7 is not available to some Debtors. If a Debtors’ monthly gross income is greater than the average income of the average family of the same size, it is presumed abusive to allow a Chapter 7 discharge to Debtors. Many over the mean debtors can overcome the presumption of abuse. But others cannot, making Chapter 7 discharge of their debts unavailable. Chapter 13 and Chapter 11 are available to over the mean Debtors.

Under Chapter 13 the debtor proposes a plan to repay creditors over a period of time – up to 60 months. Generally, Chapter 13 is used by people who are behind in some payments and are trying to protect their assets – a home, a car, etc. Chapter 13 allows debtors to repay arrears over a period of time.

For example, a family may find themselves several months behind on their mortgage payments, due to a temporary job lay-off. Once the lay-off is over, the debtor can return to paying their regular monthly mortgage payments. But, because they are behind in payments, the mortgage company will not accept regular monthly payments unless the family can bring their mortgage account current. Chapter 13 will allow that family to pay the arrears over 60 months and require the mortgage company to accept the regular monthly payments while they are in Chapter 13. In this way the family can avoid foreclosure of their home.

But Chapter 13 can also be used to stop IRS collection actions against a taxpayer – even if the underlying tax is not dischargeable. If the IRS has placed a wage garnishment against a taxpayer – and missing a pay check will have dire consequences (e.g. eviction) – the best option may include filing Chapter 13 to stop the wage garnishment. Under Chapter 13 the taxpayer can set up a payment plan for the portion of the IRS debt that is not dischargeable and discharging some, or all, of the dischargeable tax debt.

Tax issues in bankruptcy are complicated. This is just a general overview. If you owe the IRS and are unable to pay the full tax obligation immediately, bankruptcy may be your best option. Never hire a firm to help you with your IRS problem unless the firm is experienced in helping taxpayers use the bankruptcy code to protect them from the IRS. Before you do anything, you should give me a call. We can discuss your all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Uncategorized Tagged With: “Owe Taxes”, “Tax Relief Chicago”, back taxes, Chicago Tax Help, currently non collectible, Help With IRS, IRS Help IL, irs non-collectible status, Offer in Compromise IRS, Offer in compromise Settlement, tax attorney chicago

IRS Offer In Compromise

August 27, 2014 by admin

Steven A. Leahy
IRS Offer In Compromise

By Steven A. Leahy

There are six things you can do if you owe the IRS money. First, you can simply write the IRS a check for the full amount. For many, that is simply not a realistic option. Often, if the tax obligation is not too significant, borrowing money from another source (friends, family, bank loan, credit cards, etc.) may be a less costly alternative than an installment agreement with the IRS. Second, you can enter into an Installment Agreement; pay the IRS over time. Third, you can obtain an Offer-in-Compromise: A lump sum settlement for less than the tax owed. Fourth, you can be declared Currently Not Collectible; pay the IRS nothing (for a period of time). Fifth, you can file for protection under the bankruptcy code; Chapter 7, Chapter 13 or Chapter 11. And the last option – you can do nothing, and let the IRS do what they will to you, your family and your assets.

This article addresses the third option – IRS Offer in Compromise (OIC). An OIC permits a taxpayer to settle their tax debt for less than the full amount owed. The good news is, in May 2012 the IRS revamped the process with its “Fresh Start” initiative, making it easier for taxpayers to take advantage of an OIC.

The first requirement for an IRS Offer In Compromise, as in all IRS payment programs, is compliance. The taxpayer must have filed all tax returns, made all required estimated tax payments for the current year and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees. The taxpayer must remain in compliance during consideration and, should the OIC be accepted, after approval.

There are three grounds the IRS may use to accept an OIC: Doubt to liability (a genuine dispute as to the existence or amount of the correct tax debt under the law), Doubt to collection (taxpayer’s assets and income are less than the full amount of the tax liability), and effective tax administration (payment of the IRS liability would create an economic hardship or would be unfair and inequitable because of exceptional circumstances). Most OICs are granted as to doubt to collection. An OIC can be paid in two different ways – Lump Sum (paid in 5 or fewer installments) or a Periodic Payment offer (paid in 6 to 24 installments).

A successful OIC must offer an amount equal to, or greater than, what the IRS determines is a reasonable collection potential. The reasonable collection potential is the amount the IRS determines the taxpayer has the ability to pay. The IRS will evaluate the taxpayer’s ability to pay, income, expenses, and equity in assets to make that determination. How that information is presented may be the deciding factor.

Before the Fresh Start Initiative, the IRS calculated the reasonable collection potential by looking at the taxpayer’s disposable income – actual income less “allowable expenses” (not the taxpayer’s actual expenses) multiplied by 60 (number of months for 5 years), plus “net realizable equity” of the taxpayer’s assets. For example, a taxpayer with a monthly income of $5000.00 and allowable expenses of $3000.00, with zero assets, may get an OIC approved for $120,000.00 (60 x $2000.00) – no matter what they owed the IRS. Not really an attractive option.

Under the Fresh Start Initiative, the IRS has allowed more flexibility in “allowable expenses” and the multiple has been reduced from 60 to 12 (if the OIC will be paid in a Lump Sum) or 24 (if the OIC will be paid in a Periodic Period). Let’s assume the new flexibility reduces our example’s disposable income to $1000.00 – the new OIC that may be accepted would be $12,000.00 if paid in a Lump Sum or $24,000.00 if paid in a Periodic Plan. Quite a contrast from the pre-initiative number of $120,000.00!

So, if you owe the IRS and are unable to pay the full tax obligation immediately, you may be eligible to pay the IRS less, much less, than you owe. Before you do anything, you should give me a call. We can discuss your all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Uncategorized Tagged With: “Owe Taxes”, “Tax Relief Chicago”, back taxes, Chicago Tax Help, currently non collectible, Help With IRS, IRS Help IL, irs non-collectible status, Offer in Compromise IRS, Offer in compromise Settlement, tax attorney chicago

IRS Currently Not Collectible

August 22, 2014 by admin

Steven A. Leahy
IRS Currently Not Collectible

By Steven A. Leahy

There are six things you can do if you owe the IRS money. First, you can simply write the IRS a check for the full amount. For many, that is simply not a realistic option. Often, if the tax obligation is not too significant, borrowing money from another source (friends, family, bank loan, credit cards, etc.) may be a less costly alternative than an installment agreement with the IRS. Second, you can enter into an Installment Agreement; pay the IRS over time. Third, you can obtain an Offer-in-Compromise: A lump sum settlement for less than the tax owed. Fourth, you can be declared Currently Not Collectible; pay the IRS nothing (for a period of time). Fifth, you can file for protection under the bankruptcy code; Chapter 7, Chapter 13 or Chapter 11. And the last option – you can do nothing, and let the IRS do what they will to you, your family and your assets.

This article addresses the fourth option – IRS Currently Not Collectible (CNC). The IRS lists a number of reasons to report an account CNC. The reasons include, inability to locate the taxpayer, expiration of the statutory recovery period (statute of limitations), death of an individual (where the IRS can’t collect from the estate), defunct companies without assets, or the taxpayer is out of the country or in a combat zone. The most common reason for CNC status is the existence of a taxpayer hardship.

The IRS may place a taxpayer in CNC status based on a hardship – when the IRS determines that the taxpayer can’t pay their tax obligation AND pay reasonable living expenses. The first requirement for a hardship CNC is compliance. In most cases, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees. The taxpayer must remain in compliance during consideration and, should a hardship CNC be found, thereafter.

In order to demonstrate a hardship, a financial analysis, with detailed financial information, must be completed to determine the taxpayer’s assets and equity, income and expenses. The investigation into the taxpayer’s financial condition begins by completing Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection Information Statement for Businesses, and providing all the necessary documents to substantiate the numbers.

The level of scrutiny depends on the tax obligation – the greater the tax bill, the greater the scrutiny. For example, if the unpaid tax balance is large, the IRS will review the taxpayer’s credit report, motor vehicle records and real estate records to determine if there are any additional sources for collection, in addition to the 433 and supporting documents. Generally, an IRS manager must review the IRS Currently Not Collectible recommendations paperwork and approve granting the CNC status.

Collection actions stop once a taxpayer’s account is placed in IRS Currently Not Collectible, including bank levies, wage garnishments and collection letters. The problem with CNC is that interest and penalties continue to accrue even though IRS collection activity has been suspended. In addition, if the balance is greater than $10,000.00, the IRS may still issue a Notice of Federal Tax Lien against the taxpayer (although the taxpayer can still appeal that action).

The good part about CNC is that the Collection Statute Expiration Date (CSED) is not tolled while the taxpayer’s account in a hardship CNC status. It is possible for a taxpayer to continue in hardship CNC status until the CSED passes. Once the CSED passes, the IRS cannot collect on that IRS obligation. Hardship CNC cases, however, can be reactivated if it appears there is a change in the taxpayer’s ability to pay indicating collectibility. And, the IRS may ask the taxpayer to reestablish CNC hardship status periodically.

So, if you owe the IRS and are unable to pay the full tax obligation immediately, you may be eligible for your account to be placed in a Hardship CNC status. Before you do anything, you should give me a call. We can discuss your all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Uncategorized Tagged With: “Tax Relief”, back taxes, Chicago Tax Help, IRS Help, IRS Help Chicago, IRS Levy, IRS Lien, irs non-collectible status, irs options, Offer in Compromise IRS, Tax Debts, Tax Solution

IRS Installment Agreement: Making Payments to the IRS

June 19, 2014 by admin

Steven A. Leahy

IRS Installment Agreement: Making Payments to the IRS

By Steven A Leahy

In Chicago and Considering An Installment Agreement as a Solution to Your IRS Tax Problem? You have several options for dealing with a tax problem with the IRS. An Installment Agreement is one of them. In this video we’ll tell you what an Installment Agreement is and information on it works.

An installment Agreement is just what it sounds like… You agree to pay your tax Debt to the IRS in a monthly payment. There are some restrictions on installment agreements, but many times this is a good option for both businesses and individuals who owe taxes to the government.

There is a downside though; if you owe alot in taxes, the required payments on the installment plan can quite often be very high and can interfeer with paying your monthly bills. In addition, you may still be subject to interest and penalties on the debt that you owe.

The good news is: It is possible to negotiate lower payments with the IRS. To determine if this option is good for you, and to discover other strategies on how you can break free from the IRS and reclaim your life, Call Opem Tax Resolution – The Law Office of Steven A. Leahy, PC (312) 664-6649. Call to schedule your FREE 1 hour Consultation!

Filed Under: Uncategorized Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

What is Compliance And Why Is It Important?

June 19, 2014 by admin

Steven A. Leahy

What is Compliance And Why Is It Important?

By Steven A Leahy

When I meet with new clients I often begin our discussion on how our office goes about resolving tax issues by writing “Compliance” at the top of the screen in BIG letters. Compliance, to the IRS, means complying with all tax obligations – payment compliance; filing compliance; and reporting compliance. Filing compliance refers to filing of tax returns. Reporting compliance refers to accuracy of the filing. Finally, payment compliance refers to the payment of the reported taxes.

In order to resolve a tax problem the taxpayer must be in filing compliance. In addition, if the taxpayer is a 1099 employee or self-employed, the taxpayer must be in payment compliance, at least for the current year. That means that any unfiled returns must be filed, and any quarterly payments must be paid, before the IRS will agree to stop any collection efforts. The IRS will generally begin collection efforts by sending notices, applying a previous tax year’s refund to tax due, filing liens and, finally, seizing your property and assets.

If a taxpayer receives a Notice of Levy on Wages, Salary, and Other Income and has unfiled returns and/or unpaid quarterly payments, it will be very difficult to stop the levy before the taxpayer can get into compliance. That is why it is so important to work to resolve your tax problems before levies are issued. If you ever receive Form CP 297 – Notice of Intent to Levy and Notice of Your Right to a Hearing you need to act immediately – that may be your last chance. So, OPEN ALL MAIL YOU RECEIVE FROM THE IRS.

The Notice of Intent to Levy and Notice of Your Right to a Hearing is a form that alerts the taxpayer that the IRS intends to begin taking assets from them – normally it begins with bank accounts and wages. The notice will include the balance due, and the taxpayer’s right to appeal that action. You must request an appeal (Collection Due Process) within 30 days from the date of the Notice of Intent to Levy and Notice of Your Right to a Hearing. If the appeal is filed within the 30 days, IRS collection efforts are stopped while the appeal is pending. The appeal will give the taxpayer an opportunity to get into compliance and work out a resolution with the IRS.

Compliance is also important once a resolution has been reached. If a taxpayer is granted an Installment Agreement, Offer in Compromise or Currently Not Collectible status, part of the agreement between the IRS and the taxpayer is for the taxpayer to remain in compliance with all tax obligations going forward. That means the taxpayer can’t be late filing future returns – an extension is NOT compliance – all taxes must be paid in a timely manner. The tax reported on your tax return and all quarterly payments must be paid as they come due. If a taxpayer defaults on that agreement, the IRS will cancel the agreement and begin collection efforts again, taking the taxpayer right back where they left off.

So, if you are facing IRS problems, you should work with a local law firm that will work to get you in compliance with IRS tax obligations AND help you stay in compliance after you reach a resolution. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Uncategorized Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

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