Changes in the Way the IRS Collects Outstanding Tax Debts
Things are changing for the IRS. Earlier this month, the “Fixing America’s Surface Transportation Act, or “FAST Act” was signed by Obama. At first glance, it seems like the only thing the act impacts is nationwide transportation issues, but if you dig a little deeper, you’ll also see that the new law will also effect the way that the IRS does business. Now that the act is a law, the IRS must use private debt collection companies in order to go after individuals who owe back taxes.
While the idea of hiding something connected into the IRS in a transportation bill might seem unorthodox, it’s a method commonly used by the government in order to get issues passed that wouldn’t pass if they weren’t included with something else.
The interesting thing about requiring the IRS to use private debt collectors is that in the past, this particular method has not been something the IRS has ever managed to successfully use.
Roughly, twenty years ago, the IRS also tried to use private debt collectors and the losses they suffered were staggering. The first time the program was run, in 1997, the government lost approximately $17 million. The government tried again in the mid 2000’s and suffered another loss, this time one that added up to approximately $4.5 million.
The new law requires that the IRS turn outstanding tax debt information over to private debt collectors if:
- The IRS has been unable to pin down the current location of the delinquent taxpayer
- If 1/3 of the limitations period has already passed and an IRS agent has yet to have been assigned the task of collecting the outstanding taxes.
- More than 365 days have gone by since the last time the account has been assigned a receivable
It’s important to note that there are many tax debts that the IRS can’t turn over to a private debt collection company. If the taxpayer in question has appealed to the IRS to be considered for an Offer in compromise or to be placed on an installment payment agreement, as well as any cases that the IRS is currently litigating, or examining. Cases currently pending criminal investigation will remain in the IRS’s hands.
One of the great things the new law does is create the grounds for procedural discretion to be considered if the tax payer is currently living in an areas that the president has deemed a disaster area.
If a case has been handed over to a private debt collector, the agency handling the situation “might” tell the taxpayer they’re speaking to that they represent the IRS, though it doesn’t look like they’ll be required to.
If you’ve been notified by the IRS that you have an outstanding tax bill, don’t panic. Take a few calming breaths and than contact an experienced tax attorney. The tax attorney will review the details of your situation and based on what they find, outline the best course of action. It’s not uncommon for a good tax attorney to be able to convince the government to give you’re a wonderful IRS tax settlement.
Contact us today if you’re in need of a tax attorney. The sooner you do, the sooner you’ll be able to put your tax woes behind you.
Reality Star Charged With Tax Evasion
For a short period of time, Richard Hatch was on top of the world. He’d just won the first season of Survivor and in doing so, netted himself a million dollars, and was enjoying the highs that come with being a celebrity.
Richard Hatch’s world didn’t stay bright and shiny for long. It turned out that when you win a million dollars on a reality show, the IRS is going to take note of your tax return, and will notice if there are discrepancies. When all was said and done, Hatch found out that by failing to claim the money he’d won from Survivor, he was facing 13 years in prison and would need to pay a $600,000 dollar fine.
In addition to failing to properly claim the money he’d won from his time on Survivor, Hatch was also found guilty of failing to pay taxes on two additional sources of income.
It was never presented to the jury, but Hatch’s lawyer felt that there was a perfectly reasonable explanation for Hatch’s failure to pay his income tax. According to the lawyer, Michael Minns, Hatch felt that some of his fellow Survivor contestants had cheated and rather than go public with this knowledge, he struck a deal with the show’s producers that they would pay his income tax for him. While this might have been an agreement made between the producers and Richard Hatch, without a contract, there’s no way to prove anything.
Although the IRS and Hatch don’t agree on all the details of the case, Hatch’s case serves as a reminder that anyone can be accused of tax evasion and that if the accusation sticks, there could be a hefty fine and felony prison time. Don’t assume that because you haven’t been on a reality show, that you won’t attract the attention of the IRS.
In 2012, the IRS decreased the number of audits they conducted by 5%, making it the lowest audited year in history, which made many people assume that they could get lax on their tax returns. Don’t assume that because the IRS is decreasing the number of tax payers they plan on auditing that you don’t have to worry. The IRS will still be looking for red flags, and if something in your return sends up one or two, they will audit you, and if they find any discrepancies, they could decide to file tax evasion charges.
Instead of trying to deal with the matter on yo
ur own, you need to seek the assistance of an experienced tax attorney. The tax attorney will carefully scrutinize every single detail of your case and based on what they find, they’ll offer you sound advice about how you should proceed.
Having an experienced tax attorney on your side makes it possible for you to relax and focus on the other aspects of your life while they worry about your tax evasion case. Instead of you having to field threatening calls and letters from the IRS, you’re attorney will handle all of the communications.
One of the best things about having a tax attorney on your side is that if it’s determined you did in fact make an unwilling mistake on your tax return which resulted in you owing more to the IRS than you originally assumed, your attorney will do everything in their power to lower the amount of interest and fines you have to pay.
The time to contact a tax attorney about your case is as soon as you receive the first notification from the IRS.
Installment Agreements Can Help with Back Taxes
Installment Agreements Can Help with Back Taxes
Back taxes aren’t a problem that will just go away if you ignore them long enough. Sooner or later they’ll need to be paid, and the sooner you resolve the matter, the less money you’ll ultimately have to pay. The longer the debt remains, the more fees and interest the IRS attaches to the original sum until what started out as a relatively small amount has become financially unmanageable for you. The amount of interest that can be attached to back taxes is outrageous. https://www.irsmedic.com/ is place to get all needed help! The debt collectors that purchase the back tax liens from the IRS routinely attach an 18% interest rate to the total, though there have been reports of debt collection agencies charging anywhere from a 20% to 50% interest rate.
Guaranteed Installment Agreements
Even though it might seem like the IRS is a force unto its self and that they can do whatever they want, they’re really not. There are laws in place that restrict the actions the IRS can and can’t take with regards to collecting back taxes. You can make some of these laws work for you. Best tax attorney in connecticut for you!
When you contact a tax attorney for help with back taxes, you’ll learn that as long as the current amount you owe is $10,000 or less, the IRS has to agree to let you create an installment plan. In order to automatically qualify for this installment plan:
- You have to be able to pay off the balance of your back taxes in at least 36 months
- This is the only installment plan you’ve created with the IRS in five years
- You’ve filed all of your tax returns
- You not only resolve the matter of your back taxes on time, but you also file all of your future tax returns on time
How Your Installment Payments are Calculated
The IRS has a pretty good method for working out how much your monthly payments will be. They simply take the balance of what you owe and divide it by thirty-six. Once you enter into an installment plan with the IRS, it’s crucial that you make each payment on time.
Why You Should Take Advantage of the Guaranteed Installment Plan
Any good attorney you’ve enlisted to help with back taxes will tell you entering into the guaranteed installment agreement with the IRS is a very good idea. The best thing about the guaranteed installment plan is that once you’ve entered into it with the IRS, they will not be able to take the steps to ile a federal tax lien against you, so you won’t have to worry about the tax debt having a negative impact on your credit history. Click for source.
What if You Owe More than $10,000
Don’t assume that just because you owe more than $10,000, you won’t be able to get help with back taxes. You can. Programs the IRS has created to help with back taxes of larger amounts include:
- The Streamline Installment Agreements for those who owe between $10,000 and $50,000 worth of back taxes
- Non Streamlined Installment Agreements for individuals who owe more than $50,000 in back taxes
If you receive notification from a debt collector regarding outstanding back taxes, the best thing you can do for yourself is to seek help with back taxes from an experienced tax lawyer. Not only will the attorney help you understand how to set up installment payments, they will also mediate between you and the IRS to get the amount of fees and interest connected to the back taxes decreased.
The risk of outsourcing tax debt collectors
It has occasionally been said that the government has failed to learn from its mistakes. It is well known that failed policies are often brought back in a desperate effort to try and make them work.
Previous failed policies
Recently the government has attempted to bring back another failed policy. A policy which allows private companies to collect outstanding tax debts has re-appeared as part of the Highway Trust Fund Bill. It sounds strange though becauseyou would have thought that a policy to do with tax debts has appeared on the highway trust bill as the two subjects seem totally unrelated.
It isn’t the first time congress has put two seemly unrelated subjects together in the same bill. Last year the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 affected the date that tax returns were due. Another example waswhen the credit card reporting requirements were part of the Housing and Economic Recovery Act.
Some might say congress are desperately trying to repair the already dilapidated Highway Trust Fund, which actually ran out of money on October 29th. As well as this, congress have tried a few other tactics in an attempt to try and move things forward.
One particular approachto save this act which has been hidden away inside the Highway Trust Fund may look excellent but on closer inspection most certainly is not.Baffling as it may be congress have tried again to make another go at a bill which has already failed multiple times. It’s only because of politics that this hasn’t been passed. The House is not keen on the Inland Revenue Service (IRS) at the moment which could be seen as a move to take down the IRS.
This might sound awesome as to be fair who realistically likes the IRS? Not many. However, it may surprise you to know that the IRS is actually pretty good at what it does which is collections. This does means that there is a lot less government waste due to the IRS collections work.
The tax gap
The tax gap is the difference between what the IRS expects to collect in taxes and what they actually end up 
collecting. In the U.S. the tax gap is said to be $385 billion. This is all uncollected tax debts as well as non-filers and those who underreport. The IRS claims that the people who underreport are the biggest contributing factor to the tax gap. This does not mean that there are lots of people out there that owe the IRS lots of money.
A good tax attorney will know that although there are people that try to cheat and get around the system, some people just don’t understand it. A tax attorney can help with this however, using private debt collectors will not. In fact they could even make it worse could even make it worse. Recent research has found that 79% of cases that would be affected by private debt collectors have an income 250% below poverty level so won’t be able to pay anyway.
Complaints about private debt collectors is higher than any other industry
The last time private debt collectors were used it resulted in lots of complaints of unfair practises and harassment which is why it was abolished. The private debt collectors ended up making a net loss of $17 million and they weren’t even that successful.
The second time the program was tried in the mid-2000’s resulted in a loss of $4.5 million. This isn’t even the cost of the program the cost of both times this program was tried out cost over $112 million.
A chunk of that money was used to ensure the security of taxpayers’ data. The IRS may isn’t 100% secure when it comes to all of the data it holds on taxpayers.It does have strict protections in place though to ensure it is kept as safe as possible. Private debt collectors are much less reliable. The Federal Trade Commission receives more complaints about private debt collectors than any other industry. The Consumer Financial Protection Bureau (CFPB) also reports that the largest amount of complaints they receive are regarding debt collectors.
Fraud and scammers
Another reason to favour the IRS over private debt collectors is the fact that part of their job is to help resolve the issue alongside you. The IRS will work with you and with your tax attorney whereas private debt collectors are there simply to collect debt by which ever means possible.
The final reason the IRS should be favoured over private debt collectors is the issue of fraud. A whopping $23 million has been paid to scammers posing as the IRS over the last 2 years. The IRS do not normally initiate contact by phone, unlike private debt collectors. This could be very confusing and could create lots of new opportunities for thieves.
All the reasons that have been highlighted prove just how ridiculous and full of risk outsourcing tax debt collectors is and could be should congress continue to push this bill.
