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Surprise! Your Chances of Paying The IRS Less is Better Than Ever!

by

Steven A. Leahy

Surprise! Your Chances of Paying The IRS Less is Better Than Ever!

By Steven A Leahy

On the IRS Radio Hour (heard every Sunday evening at 5:00 on AM 560 The Answer) I often talk about the six things you can do if you owe the IRS. First, you can pay the IRS everything you owe them. Second, you can set up an installment agreement with the IRS. Pay them over time. Third, you can submit an Offer-in-Compromise, to pay a lump sum to settle the debt. Fourth, you can be declared currently not collectible – prove to the IRS you don’t have any disposable income after you pay all your monthly bills. Fifth, you can file for protection under one of the Chapters of the Bankruptcy laws. And, finally, you can continue to do nothing and let the IRS have their way with you.

The third option, and often the most attractive, is an Offer-in-Compromise (OIC). An OIC is an agreement with the IRS to pay a lump sum as a settlement for the entire IRS debt. Often on radio and television ads, this is the option they refer to when they promise you can pay the IRS “pennies on the dollar.” This promise led to the demise of many national tax resolution companies, because they would charge a client for an OIC, knowing the offer would be rejected. Then charge again for the real remedy.

Historically, the OIC was a bad option because only a small percentage of offers were accepted. For example in 2003 only 17% were approved. In 2014, nearly 40% were accepted! What happened? Why did the acceptance rate more than double in 11 years? What changed?

Well in 2011 the IRS put forth the “Fresh Start Initiative” which changed the OIC program. Before the Fresh Start Initiative the OIC program was limited to those few who had little to zero assets, and could prove they could never pay the IRS. The initiative gave the IRS more flexibility when calculating a taxpayer’s “reasonable collection potential.” The amount the IRS will accept for an Offer-in-Compromise depends on three major factors – the taxpayer’s monthly disposable income, the multiplier, and the taxpayer’s assets. The reasonable collection potential is calculated: (taxpayer’s monthly disposable income) x (the multiplier) + (value of assets).

Disposable income is the difference between a taxpayer’s income and their expenses. The IRS uses national standards when calculating expenses, not the taxpayer’s actual expenses. Historically, the IRS did not consider many of the taxpayer’s actual debts. Under the initiative, the IRS will now allow taxpayer’s to deduct student loan payments and monthly payments for state and local delinquent taxes. The national standards now also include a “miscellaneous” allowance. The miscellaneous allowance can be used for credit card payments and other debts that were previously not considered. The additional expenses will reduce the calculated monthly disposable income.

The biggest change concerns the multiplier used to calculate the amount the IRS will settle the debt. Once a taxpayer’s disposable income is calculated, the IRS uses the multiplier to calculate the cash component. If the taxpayer can pay the lump sum in five or fewer months, the IRS multiplier was 48 (4 years). Now, that multiplier is 12 (1 year). If the taxpayer can pay in 6 to 24 months, the multiplier was reduced to 24 (2years) from 60 (5 years). The decreased multipliers significantly reduce the reasonable collection potential calculated to settle an IRS obligation.

The asset calculation has also been reduced. The IRS will use 80% of the value of assets, overlook some dissipated assets and forego any equity in income producing assets in calculating the asset portion of the offer-in-compromise. All of these changes have the effect of lowering the calculated “reasonable collection potential.”

If you have an IRS problem and are looking to find a way out, maybe the Offer-in-Compromise will be your best option. Find out. 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.

How to Stop IRS Collection Efforts – These Secrets may Shock you!

by

Steven A. Leahy

How to Stop IRS Collection Efforts

By Steven A Leahy

IRS Collections can be maddening! The IRS Collection Department can levy your bank accounts, garnish your wages, take your assets, visit your home or workplace in order to collect back taxes. Here is the key to Stopping the IRS Collection efforts – compliance. That means filing your tax returns and paying your taxes in the future on time. It also means setting up a remedy for your past due tax obligations.

There are only 6 things you can do if you owe the IRS money – I talk about these six things over and over again. First, you can pay the IRS everything you owe them. Second, you can set up an installment agreement with the IRS. Pay them over time. Third, you can submit an Offer-in-Compromise, to pay a lump sum to settle the debt. Fourth, you can be declared currently not collectible – prove to the IRS you don’t have any disposable income after you pay all your monthly bills. Fifth, you can file for protection under one of the Chapters of the Bankruptcy laws. And, finally, you can continue to do nothing and let the IRS have their way with you.

Most people who come to see me are just plain scared of the IRS, and believe there isn’t a remedy that will work for them. So, they choose number six – they do nothing. It may take some time for the IRS to focus on your tax problem, but they will get around to it. Do not interpret the delay as proof the IRS has forgotten about you and you are “under the radar.”

One of the most common remedies for IRS problems is the second option, installment agreements. Now, there are different kinds of installment agreements. Most of my clients that enter into an installment agreement with the IRS enter in to a partial installment agreement. That means, the installment agreement will not pay the IRS obligation in full. This is the part most don’t understand. Even if I owe the IRS way more than I could ever repay, I can set up a partial installment agreement and pay the IRS what I can, even if the amount I can pay is $100.00 and I owe $200,000.00.

Now, most taxpayers think, “that means I will be paying the IRS forever.” But, here is a secret about IRS problems: The IRS has a set amount of time to collect an IRS debt. This date is referred to as the Collection Statute Expiration Date (CSED). Once that date is reached, the IRS must end all collection efforts, including releasing any liens that had been filed.

The best partial installment agreements leave you room to pay all your monthly obligations. We do this by collecting your financial information on an IRS Form 433. On this form, you list all your assets, your liabilities, your income and your expenses. Calculating your disposable income is a simple equation – all of your income, from whatever source, less your “allowed” expenses. The IRS scrutinizes the taxpayers expenses and disallows many of them. By disallowing reasonable expenses, the IRS is inflating your disposable income.

The real negotiations revolve around what expenses are allowed before your disposable income is calculated. That’s why taxpayers need help. The IRS will calculate a disposable income that will not allow you to pay all your other obligations. That guarantees the taxpayer will default some time in the future.

If you owe the IRS, a partial installment agreement may be your best remedy. Let’s find out. If you contact my office and mention this article, we will complete an IRS Analysis Report, that will tell you exactly where you stand with the IRS, for FREE. Call me, attorney Steven A. Leahy at 312-664-6649. Tell Bonnie, my scheduler, you want a FREE report.

Who Files Bankruptcy – The Answer Will Surprise You

by

Steven A. Leahy

Who Files Bankruptcy – The Answer Will Surprise You

By Steven A Leahy

With the Trump Bankruptcies in the news lately, you may be wondering “Who Files Bankruptcy?” The answer may surprise you. Bankruptcy is a Federal Law and is administered by the Federal Court System under the rules of the U.S. Bankruptcy Code. “The primary purposes of the federal bankruptcy laws are to give an honest debtor, either a person or a business, a ‘fresh start’ in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.”

In the first three months of 2016, 201.906 bankruptcy cases were filed nationwide – a vast majority (195,679) were consumer cases. There are 90 Bankruptcy Courts – each a unit of a U.S. District Court. The Northern District of Illinois is comprised of the Eastern and Western Divisions, and has 10 bankruptcy judges. 11, if you count the retired Judge that handles a limited case load. The Northern District of Illinois encompasses 18 counties – with court locations in Chicago, Joliet, Rockford, Lake County and Geneva.

The Northern District of Illinois leads the nation in bankruptcy filings with 47,535 case filings over the 12 month period ending March 2016. That is actually a decrease of 6.6% compared to the previous 12 month period. A recent study revealed the top reason people file for protection under the bankruptcy code is – Medical Bills! The second reason is – Job loss! Both of these reasons may have nothing to do with the person filing bankruptcy.

I help people resolve their IRS problems. As I have mentioned many times – there are only 6 things you can do if you owe the IRS money. One of those six things is bankruptcy. Many of my clients are reluctant to even consider bankruptcy as a remedy. They believe it isn’t morally available to them. They have always paid their debts, and filing bankruptcy would go against that value.

First, often a tax debt includes an unreasonable amount of penalties and interest. A debt that may not hold the same moral obligation as the underlying debt. Second, as I explain to my clients, bankruptcy does not protect you from your moral obligations. Bankruptcy only protects you from some legal obligations. My favorite example is Abraham Lincoln. That’s right Honest Abe sought protection under the bankruptcy laws. You see, he had creditors taking legal action against him after a failed partnership in a General Store.

The Bankruptcy Code protects a person from their creditors. Most creditors are prohibited from collecting on the debt. It does not, however, prevent that person from repaying their creditors if they elect to do so. Honest Abe is a good example of this concept. Once granted legal protection from his creditors, Abraham Lincoln felt he still had moral obligations to repay his creditors. He paid every creditor back. It took some time to accomplish this – but in the end, his creditors were paid.

If you were to seek legal protection from your creditors, like the IRS, you could still repay the debt, at your convenience, should you feel a moral obligation to do so. Maybe you feel a moral obligation to pay the underlying debt, but not the unreasonable penalties and interest. You could do that. The IRS would accept the money!

If you have IRS problems and need the help of a professional to resolve it – I encourage you to call my office. Opem Tax Resolutions and the Law Office of Steven A. Leahy, PC helps taxpayers resolve their IRS problems

IRS Problems: Know Where You Are Before You Can Get Where You Want To Be

by

Steven A. Leahy

Find Out Where You Are So You Can Get Where You Want To Be

By Steven A Leahy

Too often clients come to see me with IRS problems and tell me how to solve their problem. When I ask, how much they owe? How old is the debt? How much is penalties? How much is interest? They don’t have an answer.

How can you know how to solve a problem, if you don’t even understand what the problem is? IRS problems are no different from any other problem. Understanding the problem goes a long way to figuring out how to solve the problem Radio and television ads always push to pay the IRS pennies on the dollars – an offer-in-compromise. So, that’s the remedy clients want. They want to pay pennies on the dollar. The problem is, an offer-in-compromise is NOT the right answer for every case. In fact, putting an offer-in-compromise forward may be exactly the wrong way to solve your IRS problem.

Begin with an Investigation

So, let’s start at the beginning. First learn exactly where you are. Only then can you chart a course to get you where you want to be. To learn where you are, my office completes an complete investigation. The investigation begins by gathering all of the information we can from the IRS. The IRS has account transcripts for every year, wage Transcripts, tax return transcripts, just to name a few. These transcripts contain lots of information about your IRS problem. At my office, we have access to a a propitiatory software package that takes all that IRS information and puts it into a form we can use to understand it.

The report will detail how much you owe; how much is penalties, and how much is interest. The report will analysis the dates of assessments, the number of tolling days, the Collection Statute Expiration Dates, and the important dates concerning the dischargability of taxes in bankruptcy. The report also provides a breakdown of every payment the taxpayer has made and how they were applied. The report will also reveal if the IRS prepared a tax return for the taxpayer (known as a Substitute for Return, or SFR) or if some returns are still unfiled.

Once we know where the IRS puts you, we gather information about your particular financial situation. We gather this information on IRS Form 433. This form collects the taxpayers income, assets, liabilities, income and expenses. Only after we have all this information can we compose a strategy to solve your IRS problems.

The Six Things You Can Do If You Owe The IRS

Remember, there are only six things you can do if you owe the IRS money. You can pay the IRS what they claim you owe. You can enter into one of several kinds of installment agreements. You can submit an Offer-in-Compromise (offer a lump sum settlement). You can have the IRS place you in a Currently not Collectible status (get the IRS to leave you alone for a time without payments). You can seek protection under the bankruptcy code. Or, finally, you can do nothing and let the IRS have their way with you.

Don’t let someone tell you they know how get you where you want to be (solve your IRS problem) – unless they know where you are now. That’s why a complete investigation is so important.

If you are facing IRS Problems, call Opem Tax Resolutions at 312-664-6649. If you mention this blog post, we will complete the first step, the IRS analysis report, for FREE.

Time Limits to IRS Collection Efforts

by

Steven A. Leahy
Time Limits to IRS Collection Efforts

By Steven A Leahy

One of my clients recently experienced a wonderful event. Something he has been waiting a number of years for – an IRS claim for more than $900,000.00 in back taxes, penalties and interest along with the IRS Tax Lien that went along with it, has expired. That means he and his wife can sell their house, free and clear of the IRS claim. Great news!! But to understand this we have to go back to the beginning.

This client ran a company with a number of employees. The manager of the company failed to pay payroll taxes for two quarters. Instead, the manager took that money for himself. The IRS obligation totaled more than $900,000.00! The resulting effects cost my client his business – and a personal tax obligation in the form of the Trust Fund Recovery Penalty for more than $500,000.00.

He battled the IRS for a number of years before he contacted my office. He insisted that an Offer-in-Compromise was his best option. I never reach a conclusion until we gather all the facts and complete an investigation. First thing we did was protected him from IRS collection efforts – so the IRS could not attach his bank account or levy his social security any more. Next, we conducted an investigation and determined the best course of action. He was already 5 years into his battle with the IRS, and he had some equity in his home, that made an Offer-in-Compromise unattractive.

What many don’t know is the IRS has a time limit to collect IRS obligations; a sort of Statute of Limitations. Each tax assessment has a Collection Statute Expiration Date (CSED) – a date after which the government’s right to pursue collection ends. Normally the CSED date is 10 years from the date of assessment of a tax liability.

There are numerous events that can delay, suspend and/or extend the CSED. For example, an Offer-in-Compromise, Bankruptcy, entering a combat zone, moving out of the country and a Collection Due Process Appeal stay the tolling of the CSED, adding time for the IRS to collect. That’s why a full investigation should be completed to deduce the actual CSED date.

For my client, trying to resolve the IRS obligation through other means, such as an Offer-in-Compromise may have worked against him. As it turned out, he was granted Currently Not Collectible status with an outstanding balance at the time of more than $800,000.00! Then he rode out the remaining CSED time. In the interim, the IRS did come back, several years later, and required us to re-establish his Currently Not Collectible Status. But all in all, not a bad result – he walked away from more than $900,000.00 in taxes, penalties and interest.

Now, the IRS can bring an action to collect a tax obligation in court. Once a judgment is entered, the CSED date is no longer applicable. Judgments do not have a statute of limitations. But, in most cases, the IRS does not pursue court action against taxpayers. Court is generally reserved for those egregious cases you may read about in the news. Also, depending on the case, the IRS may ask a taxpayer to waive the CSED date – sometimes that’s a good thing – sometime it isn’t. That should be determined on a case by case basis after consultation with your IRS attorney. That isn’t the kind of decision a taxpayer should make without a complete understanding of the consequences.

So, if you have an IRS problem, you should consult with a local attorney. The strategy you use will make ALL the difference in how your life progresses. Before you do anything, you should give me a call. We can discuss your options, complete your an investigation and determine the best course of action. – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

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