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Avoiding The Irs Wrath

Please remember that prevention better than a cure. The axiom of an ounce of prevention is better than a pound of cure holds true with the IRS and the issuance of IRS bank levies and IRS wage garnishments. Levies and garnishments are strong arm aggressive collection tactics employed when the IRS believes that the delinquent tax payer is being uncooperative and non-responsive.

If you cannot pay all taxes owed when filling your return, submit IRS Form 9465, Installment Agreement Request. Form 9465 provides for an installment agreement. This permits you to pay back taxes owed to the IRS over a period of time while avoiding collection activity. The IRS installment agreement are generally accepted without question when certain conditions are met. Code section 6159(c) provides as follows: (c) In the case of a liability for tax of an individual under subtitle A, the Secretary shall enter into an agreement to accept the payment of such tax in installments if, as of the date the individual offers to enter into the agreement–

(1) the aggregate amount of such liability (determined without regard to interest, penalties, additions to the tax, and additional amounts) does not exceed $10,000,

(2) the taxpayer (and, if such liability relates to a joint return, the taxpayer’s spouse) has not, during any of the preceding 5 taxable years–(A) failed to file any return of tax imposed by subtitle A,(B) failed to pay any tax required to be shown on any such return, or(C) entered into an installment agreement under this section for payment of any tax imposed by subtitle A,

(3) the Secretary determines that the taxpayer is financially unable to pay such liability in full when due (and the taxpayer submits such information as the Secretary may require to make such determination),

(4) the agreement requires full payment of such liability within 3 years, and

(5) the taxpayer agrees to comply with the provisions of this title for the period such agreement is in effect.

The installment agreement plan should be acceptable for tax payers facing a first time tax delinquency under $10,000 that make reasonably aggressive monthly payments. The law also provides, at section (c)(3), that the IRS must determine that you are “financially unable to pay” the tax in full and on time. A financial statement, IRS Form 433-A reflects all income, expenses, assets and liabilities. IRS Form 433-A establishes your “disposable income.” The IRS equates disposable income to ability to pay

The IRS is precluded from collection activities such as bank levies or wage garnishments when an installment agreement is filed or during the pendency of negotiations of the agreement. Code section 6331(k)(2)(A). The IRS may revoke the agreement and undertake enforcement action after thirty days should the taxpayer default on the agreement.

The failure to file Form 9465 when filing a tax return without full payment may result in immediate collections. Th IRS will initially send a simple written notice reminding you you forgot to pay al of the taxes owed. This form letter will appear in five to eight weeks after the return is processed. The IRS asks for payment and calculates interest and penalties. Response and payment in conjunction with this correspondence avoids “further accumulations of interest and penalties.” Penalties and interest will continue to mount if one fails to pay the tax debt owed. The initial notice is not a notice of intent to levy as the requirements mandated by code section 6331(d)(4) are not satisfied. The final notice is marked “final notice” and provides your right to a due process hearing. The hearing is provided under code section 6330. This hearing shall occur before enforcement action may commence. Only the final notice effectuate the IRS’s enforcement rights under code section 6331(a).

All responses to IRS notices to collect back taxes or tax debt should be in writing and sent via certified mail with return receipt requested. Advise the IRS that you cannot pay the entrie IRS tax debt or tax liability in full and that you need an installment agreement. Include Form 9465 and advise on the form how much you can afford to pay on a monthly basis. Submission of the installment plan and submission of an offer in compromise will toll aggressive enforcement actions.

Advise the IRS as follows: “I do not have the income or assets to be able to pay the bill in full and enforcement action will cause an undue economic hardship by making it impossible for me to pay my living expenses.” Request an installment payment amount you calculated based on your actual income and expenses. The IRS will attempt to utilize their table for allowable expenses in your area. The IRS will request additional information via IRS Form 433-A if additional financial information is necessary or needed.

Excessive delays and failure to respond to the IRS will result in issuance of the final notice or notice of intent to levy. This notice requires immediate response. Absent immediate response, the IRS will initiate aggressive collection tactics. Contact the Tax payers advocate service or retain professional help. I provide help for reasonable payments that are generally easy to meet because I understand your situation.

Correspondence to the Taxpayer Advocate should include the final notice, the date that your received the final notice, and an explanation why you cannot endure enforcement. Include an installment agreement with this correspondence.


Uncollectible status may arise when a tax payer simply cannot pay and cannot meet a reasonable installment plan obligation. Uncollectible status results in a freeze of collections, but it also tolls your statute of limitations. Uncollectible status requires unemployment, health reasons, very low income, or a showing of undue financial hardship. Uncollectible status may be requested via IRS Form 9465. Line 11 reflects how much you can pay so put $0.00 “Zero” and advise at the bottom that you are “seeking uncollectible status.” Advise why you cannot make a payment due to your harsh financial circumstances.

Penalties and interest will continue to accrue even when the account is marked uncollectible due to financial hardship. Seek professional help to discuss options such as an Consider an Offer in Compromise, bankruptcy or other strategy to reduce or eliminate outstanding and mounting back tax obligation.

Wage and Bank Levies

Bank levies and wage garnishments are extremely difficult matters to handle, but there is recourse. A wage levy attaches to the next paycheck. All money beyond current tax withholdings and the minimum exemption amounts will be taken by the IRS. The IRS can take all money in your bank account[s]. Bank levies are governed by section 6332(c). Section 6332(c) mandates that a bank surrender your money to the IRS after 21 days. Your bank account is frozen in the interim of this process. You only have 21 days to act or that money is gone. NSF fees will accumulate and you will not be able to utilize your account or even get another account. The bank will charge an additional $ 100.00 fee for good measure. Bank levies are serious and difficult matters to handle. You should immediately consider consulting with a professional if your bank account has been levied.

How To Successfully Gain Credit Card Debt Forgiveness

It is possible for you to gain credit card debt forgiveness in the present financial system. Debt forgiveness is a much more viable option to declaring bankruptcy. A lot of people with over $10000 in card debt have been able to get off up to 60% of their debts. If you are seeking debt relief, debt settlement and consolidation are the most popular options open to you. Read on to learn more on how you can get rid of credit card debt.

There is a proposed program in place in the financial industry that gives credit card companies the ability to write off debts for certain categories of customers. As the government grant the institutions relief, consumers should also benefit from debt forgiveness. You might qualify if you are enrolled with a debt management plan. Up to 40% of debts can be forgiven. Banks and the credit card companies don’t want pardon programs to be known to customers.

The credit card company can also wipe off what you owe if it falls under bad debt. Writing off bad credit card debt helps companies clear up their books. This makes them financially healthier. According the Nilson Report, financial institutions are expected to write off over 390 billion dollars over the next five years.

You can contact the company directly or through a debt settlement agent to negotiate a reduction in your debt. Negotiation can bring down your debt down by as much as 50% depending on your negotiation skills. When your debt is settled you are required by the IRS to report the write off amount as income on your tax forms.

Debt consolidation involves signing up with a company that negotiates your loans and consolidates them into one convenient monthly payment. It usually comes with less interest. Check the internet for a list of accredited DMPs.

These are the various options available for you to get rid of your credit card debt. However, when debt is written off your credit score could be reduced by as much as 60-130 points. This makes it a bit difficult for you to get credit at favorable interest in the next few years.

Check out the link below

Debt Information Center the internet’s No.1 center for free information on debt management and consolidation.

How To Handle Your Inheritance Wisely

The receipt or notification of an inheritance is often accompanied by various conflicting emotions. On the one hand, you are happy to except the inheritance, be it a priceless heirloom, an object rich in sentimental value, or a cash windfall. On the other hand, you are faced with the fact that you are receiving this inheritance because someone, and likely someone that you cared very deeply about, has passed on. Mixed in with these sentiments is the urge-in the case of a monetary inheritance-to splurge on something that you have always wanted, be it a new car, a cruise, or an upgraded home.

When faced with all of these feelings and emotions at the same time, you may begin to feel overwhelmed, particularly if you are smart enough to realize that you should be investing at least some of your inheritance, but arent sure exactly how to go about it. This article is written with the assumption that you have received (or have been named beneficiary) of a monetary inheritance, and has been written in order to provide you with suggestions for managing said inheritance in a wise fashion. Listed below are five tips for handling your inheritance.

Determine exactly what you currently have, and what you are owed. In most cases, dispersal of your inheritance involves more than just a check from the executor of an estate. Instead, you will likely receive separate monies from individual investments. Usually, you receive these monies on a stepped-up basis, which means that the cost bases of the assets are determined as of the date of death. You should also be aware that you wont necessarily receive all of the assets at the same time. For these reasons, it is essential to sit down with your financial planner and determine exactly what the monetary value of your inheritance is, how it is invested, and what the cost basis is. It is also important to know where the money is coming from, since different types of accounts (like Individual Retirement Accounts or Insurance benefits) have different protocol for withdrawing funds. Remember that this is your money, so dont be afraid to be proactive and ask for it.

Make a list of your short-term and long-term goals. Of course, it is very tempting to spend sudden windfalls on short term goals such as buying a car, sending children to private school, taking that cruise around the world, etc. What you need to consider before you splurge, however, are your long-term retirement goals, and whether you will be able to sufficiently meet them. This is where your financial planner can be an invaluable asset, as they can work with you to help you develop a plan that provides you with future financial security and hopefully a little splurge room as well.

Decide on exactly how much money you want to use for a splurge. Once your spending plan is in place, and you are able to see how much money is available for meeting your short term goals, the next step is to decide how much of it to use to purchase splurge items. Most experts recommend setting up a separate account for this money. This way, when it is gone, you will be less tempted and able to spend any more of your inheritance.

Put the equivalent of three to six months of regular expenses in an emergency fund: This is something that you and your financial planner should discuss, and it is a potentially life and credit saving strategy in case of any type of emergency. This money should be put into a short-term, fixed-money market account.

Develop an investment strategy for meeting your long term goals: With proper investing, the money that you have set aside to meet your long term goals can grow substantially. While there are many options for investing, here are three that you may want to consider:

Life Insurance: Your long term goals may include providing financial security for your loved ones, and if so, you should consider putting some of your inheritance into a permanent life insurance plan. Life insurance beneficiary proceeds are usually not subject to probate, and permanent life insurance can also offer many living benefits such as tax-deferred cash value accumulation, the ability to borrow from cash value on a tax-free basis, and the eligibility to earn dividends as declared by the insurance company, although it should be pointed out that dividends are not always guaranteed.

Annuities: Many people decide to place their inheritance money in annuities to grow long-term funds for the future. Annuities are flexible, tax-deferred investments that can be used to help achieve long-term goals and provide a source of retirement income. The money in an annuity accumulates tax-deferred, which means that you will only pay taxes on your earnings when the money is withdrawn. You should know, however, that any withdrawals made prior to age 59 may be subject to a 10% IRS penalty tax.

Bonds: There are many different types of bonds available, and your financial institution as well as you financial advisor, can help you decide which bonds are right for your investment purposes. US Government bonds carry some tax deferment benefits, while other types, like mortgage bonds, require higher investment yields but are generally considered more aggressive. The type of bond that you choose should also reflect your investment personality and be consistent with both your short and long term goals.

However tempting it may be to spend your entire inheritance in one fell swoop, remember that the person who provided this inheritance to you did so in hopes that you would use it both wisely, and in their memory. You owe it to this person, as well as to yourself, to spend your inheritance wisely, and your certified financial planner is the person most qualified to help you do so.