Topics:Travel Dealing with tax debt tax debt facts Choosing a tax relief company Tax audits tax preparation financial planning business taxes Press Releases Tax Relief
By Ashley Lee
January 13th, 2022
This video is the first in a four-part series detailing the basics of tax relief and addressing some common terms that may be helpful for you to know as you navigate the IRS and your own tax situation. We’ve also answered the following tax relief questions: What is tax relief? What makes a good candidate for tax relief? What are some common tax relief myths? What is tax relief? Simply put, tax relief is any help you receive from a company or nonprofit to help ensure you are in compliance with the IRS rules and regulations related to taxes, or reduce or alleviate your tax burden or tax debt. Sometimes, this help will come in the form of consulting or personalized information as to what steps you need to take to make things right with the IRS. Other times, this help will be more in depth, such as a company representing you before the IRS in a negotiation or tax audit. What makes a good candidate for tax relief? A good candidate for tax relief typically has unresolved tax debt with the IRS that has become unmanageable. This could mean you have back taxes you can’t afford to pay, or you have received notices from the IRS that you are at risk of further action if you don’t settle your tax debt. According to Wade Schlosser, CEO and Founder of Solvable.com, “in most cases, tax relief companies want to work with taxpayers – including businesses or individuals – who owe $10,000 or more in tax debt. But, there are many companies out there who will help you if you have $5,000 in tax debt or even less.” A tax relief company will do a deep dive into your current tax situation and help you make a game plan to settle or resolve your tax issue. Thus, if at any point you feel your tax situation is more than you can handle yourself, you are a good candidate for a tax relief company. What are some common tax relief myths? Part of understanding tax relief is debunking any incorrect information you might think you know about it. We reached out to some tax relief industry experts for help. Myth: Once you hire a tax relief company, the company will do everything and the taxpayer doesn’t have to do anything. Fact: The taxpayers will have to work on getting or staying current with their taxes and file outstanding returns. They also have to provide the paperwork that the IRS will be asking for, such as proof of income and expenses and proof of tax filing or payments. Source: Jennifer from Omni Financial Myth: It’s impossible to get relief if you file your return late. Fact: It’s harder to get tax relief from the IRS if you have filed late. However, it’s still possible to get relief even if you have several years of unfiled returns. You need a good representative for that, though. Get ready for some late filing penalties, too. Source: Dmytro from PDFLiner Myth: You have to owe more than $10,000 in taxes to get help. Fact: While some tax debt relief companies only work with taxpayers owing more than that amount, many can help anyone, even if you have a few thousand dollars worth of tax debt. Source: Wade from Solveable.com Myth: You can’t qualify for tax relief if you have a source of income. Fact: If you cannot afford to pay your living expenses and pay down your tax debt at the same time, you may qualify for tax relief. And even if you don’t qualify for full forgiveness of your debt or what’s known as “currently not collectible” status, you may qualify for a partial pay installment agreement or other arrangement that will allow you to pay your tax debt over time with reduced penalties. Source: Wade from Solveable.com Myth: Tax debt relief companies are scams or fly-by-night operations that take your money and run. Fact: There are many reputable tax firms run by certified public accountants, tax attorneys, and IRS enrolled agents that help millions of taxpayers get out of debt. Source: Wade from Solveable.com The bottom line Tax relief may have some complicated ins and outs, but knowing the basics can give you confidence to communicate with a tax professional about your situation and what you need. Check out the rest of the videos in our tax relief series to learn more.
It's tax preparation season: tax returns for 2022 are due on April 18. You might receive a refund after filing, but it's also possible you'll owe more taxes. But what happens if you can't afford to pay your income tax bill? You might consider setting up an IRS payment plan or paying your taxes with a credit card. But what about taking out a loan? Here's what the experts say about getting a loan to pay taxes. Key Takeaway: A loan is not your only option. Consider other options first, such as an IRS installment agreement or an offer in compromise. Prequalify with several lenders to compare costs. Don't consider a loan a long-term fix. When should you consider using a loan to pay taxes? First, consider any options the IRS may offer for resolving your tax debt, such as an installment agreement or an offer in compromise, before turning to another lender. "Getting a loan to pay taxes should be the absolute last resort, after going through the ‘process’ of options that taxing government agencies offer," says Anthony J. Viola, a CPA and senior partner at KVLSM. If you don't have good credit, "the IRS might actually offer more affordable rates and terms," adds Anna Serio, loans writer for Finder. "Even if you have good credit, the longer terms that come with a personal loan can result in a higher overall cost, since it allows more time for interest to add up." On the other hand, Serio continues, if you have good credit, you might pay less in interest on a personal loan than you would in fees for an IRS payment plan. How does using a loan to pay taxes affect your credit score? Ryan Guina, founder of The Military Wallet, warns that paying your tax debt by taking out a loan would have the same effect on your credit score as taking out any other unsecured loan. Taking out the loan itself may not affect your credit score significantly, but other factors could. "However, your credit score may take a hit if you have other underlying problems, such as not being able to make timely payments, or you have maxed out your line(s) of credit," Guina says. If a potential lender uses a hard inquiry to check your credit score, that could hurt your credit at first, Serio confirms. "But it can ultimately boost your credit by adding to your record of on-time repayments and diversifying the types of credit you have on file if you don’t have any other loans in your name," Serio adds. Furthermore, regularly making a monthly payment to the IRS “mostly just keeps your credit score from dropping,” while making consistent payments on your loan will improve your credit score, explains Morgan Taylor, CMO for LetMeBank. Sean Messier, a credit industry analyst with Credit Card Insider, agrees that consistently paying down your debt on time could improve your credit score. "But, ultimately, the impact a loan has on your credit can vary based on your unique credit situation," Messier says. What are the advantages and disadvantages of using a loan to pay taxes? Taking out a loan to pay taxes is a good idea only if you know you'll be able to repay the loan quickly and if not paying your taxes on time would cause more financial trouble than the loan, according to Guina. "This could come from IRS penalties, backup withholdings, or wage garnishments that could cause additional financial troubles for you," Guina says. "In general, it's best to avoid negative attention from the IRS." Also be aware that taking out a loan to pay taxes might limit future debt you can accrue, such as for a student loan or home mortgage, Taylor warns. If you do decide to use a loan to pay your unpaid taxes, Serio suggests prequalifying with more than one lender so you can compare the cost of both the monthly payment and other fees. What options does the IRS offer for paying your taxes when you don’t have the money to pay your tax debt? If you owe less than $50,000, the IRS may agree to an installment agreement, according to Kathryn Dalli, a partner at Twomey, Latham, Shea, Kelley, Dubin & Quartararo. “In most cases, a taxpayer would save money by choosing an IRS installment agreement over a personal loan,” advises James Garvey, CEO of Self Financial, Inc. And an IRS installment agreement comes with an additional advantage, says Dalli: "An installment agreement with the IRS would not appear on your credit report and would not affect your credit." You can also apply for an offer in compromise, which allows you to settle your debt for a lower amount than you owe. Generally, youll need to prove that you owe more than you’re able to pay based on your income, assets, and living expenses,” Serio notes. According to Serio, less than 50 percent of taxpayers who apply for an offer in compromise are accepted. But no matter what, make sure you file your tax return on time. This will help you avoid penalties for failing to file your return,” Garvey says. And taxing government agencies are less likely to work with taxpayers when there are open tax year filings and/or late tax filings, Viola adds. “It’s never a good idea to borrow money you can’t afford to repay,” Garvey explains. “But defaulting on a personal loan will negatively impact your credit while defaulting on an IRS installment agreement can have more far-reaching consequences. What are other options for paying your tax debt? The IRS doesn't accept direct credit card payments, but you can pay taxes with a credit card through an approved third-party payment processor. "Those payment processors charge fees ranging up to a couple percent of the payment amount," Garvey says. "Plus, you’ll have to pay interest on the balance to your credit card company — usually at a higher rate than you’d pay with a personal loan or IRS installment agreement." On the other hand, you might be able to find a credit card with an introductory 0 percent APR offer. "These credit cards allow you to carry a balance interest-fee for a set period of time," explains Messier. "As long as the full balance is paid by the time that period ends, you won’t have to pay a single cent in interest." But also keep in mind that if you carry a high credit card balance for a long period of time, that could hurt your credit score. Using the services of a tax relief company is another potential solution for dealing with your tax debt. Tax Defense Network, Optima Tax Relief, Tax Network USA, and Community Tax are currently some of the best tax relief companies on BestCompany.com. What’s next? The experts agree that using a loan to pay your tax debt isn’t a long-term fix. "A loan is not a good solution if you aren't willing to change the underlying issues that caused you to owe the money to the IRS," Guina concludes. Also keep in mind that tax debt often requires different solutions than other kinds of debt. If you’re looking for debt relief related to taxes, be sure to look for a specialized tax relief company rather than a more general debt relief company.
You've gotten a letter from the IRS regarding your taxes. You owe money. Problems with the IRS can lead to further financial consequences, which you'll want to avoid. Take your next step in a timely manner, whether you decide to contact the IRS yourself or reach out to a tax professional. Be careful with how you prepare to work with the IRS because there are pitfalls that you’ll want to avoid. Here’s what you need to know about tax debt and contacting the IRS: Understand tax debt consequences Prepare to talk with the IRS Contact the IRS Understand tax debt consequences If you don’t take care of your tax debt, it will accrue interest and late fees. Depending on how long you let your tax debt sit, you may have to deal with levies or liens. Liens are how the IRS lays first claim on any money resulting from the sale of your property, like your car or house. Levies allow the IRS to seize assets and use them to pay your tax debt. Assets include current income, retirement accounts, and bank accounts in addition to valuable property. Once you’ve received notice, you’ll want to know your options and determine the best way to approach your tax debt before you respond. Back to Menu Prepare to talk with the IRS Before you contact the IRS, you need to be prepared and respond to the IRS’s notice thoughtfully. Here are five things you should do before you call the IRS: Understand the IRS Know your situation Know your options Meet with a tax professional Be phone-ready Understand the IRS Understanding how the IRS works and what to expect will help you be prepared when you contact it.“Taxpayers are often terrified of the IRS, and rightly so. The IRS is one of the most powerful and feared government agencies in the United States with access to information beyond our imagination,” says Alissa K. Hollinger, CPA, CTRS and Hollinger Tax Resolution Owner.Having realistic expectations of what dealing with the IRS entails will help you decide the best way to move forward with your tax debt.The IRS’s purpose is to collect taxes. It will collect as much as it can as soon as it can, whether or not that deal is the most favorable to you.“People tend to forget that the IRS is merely a collections agency. It is their job to collect as much of the balance as quickly as possible. So, they often don’t really ‘work’ with the taxpayer to get them into an agreement to repay debt that actually functions for the taxpayer. Taxpayers often find themselves bullied into agreements that they can’t actually afford and then end up defaulting,” says Danielle Dryden, attorney and tax resolution specialist.The IRS is not on your side, and it has a lot of power to make your financial situation difficult if you fail to pay your tax debt.Because the IRS isn’t on your side, it may not bring up alternatives that can help keep you in a stable financial situation.“The IRS is notorious for placing taxpayers in payment arrangements when they qualify for an uncollectible status or even for an offer in compromise. The taxpayer needs to make sure they don’t agree to any type of arrangement that they cannot keep or that they do not understand. This simply causes the taxpayer to pay taxes they may not have to pay, or default on their agreement, incur additional fees, and possibly trigger aggressive collection activity,” advices Hollinger.You should also understand that you’ll run into inconsistencies when working with representatives.“First, know to expect a long phone wait and that every representative can be different, with some being more helpful than others,” says Vincenzo Villamena, Global Expat Advisors managing partner.The inconsistencies may be even sharper due to training and experience.“The IRS has had some trouble lately with personnel training. You’ll remember the government shutdown last year. New hires for the upcoming tax year are generally trained in late December and early January. Last year they couldn’t be trained because of the shutdown. This year, the IRS has hired hundreds of new employees all at once,” says Dryden.However, government shutdowns and hiring practices aren’t the only reason that you can expect inconsistency when speaking with an IRS representative.“Training isn’t consistent in collections departments across the country either. The result is that you have a taxpayer calling the IRS and talking to a representative that could very well have no idea what they’re doing. This is where a professional would come in handy. We know the rules when the IRS doesn't and can make sure a taxpayer doesn’t pay any more than they have to,” advises Dryden.You also need to be able to identify scams. The IRS will always send written notice before using other methods of communication.“The IRS will rarely call taxpayers or visit you in person, except for under special circumstances. If you have already received several letters about a longstanding tax debt, IRS collection employees may contact you via phone or visit your home or business.They will never call demanding immediate payment or threatening to send law enforcement to arrest you. If you receive a call like that, it is most likely a scam.They might assign private debt collectors to contact you, but only after giving you written notice.They might send an IRS representative to visit you, but only after giving you written notice. They will provide two forms of official credentials,” says Josh Zimmelman, Westwood Tax & Consulting LLC President.If you get any kind of communication about owed taxes that doesn’t come from the IRS, contact the IRS directly before proceeding further. If it is a scam, you can also report it to the IRS. Back to "Prepare to talk with the IRS" Know your situation While it may be more comfortable initially if you keep your head in the sand regarding your tax debt, it will ultimately harm you and make your situation worse. Take steps to become informed about your finances and tax debt. The notice you received from the IRS is a good place to start because it has valuable information.“I would recommend that they read the entire notice before calling the IRS. The information on the notice is usually time sensitive and is intended to help a taxpayer preserve their rights. The taxpayer can get very useful information about their notice and their taxpayer rights by visiting www.irs.gov,” advises Hollinger. Your situation will affect your options for resolving your tax debt. Before you reach out to a tax relief professional or the IRS you need to understand your situation and be prepared for how it will affect next steps.“It is important to know that compliance will be a key factor in the options available to a taxpayer. In fact, if a taxpayer is out of compliance, there is very little that can be done to prevent or stop aggressive collection action,” says Hollinger.Compliance refers to filing and paying taxes correctly.“Non-filers (someone who has unfiled tax returns) may find the process most challenging. Compliance is required to be eligible for any of the programs that the IRS has to help taxpayers who can’t pay their debt. Often, taxpayers have lost their tax records and struggle with this part. This is often when a professional can be extremely helpful and save the taxpayer a lot of time, aggravation, and even money. Fortunately, the IRS has policies in place to help non-filers get into compliance, even if they have years of unfiled returns,” continues Hollinger.If your tax debts have moved to collections, your options may be different. “If the taxpayer’s account is old and inactive, the IRS is moving many of these to a third-party collection agency. The assignment will impact the options available to a taxpayer and they should receive notification via postal mail if this has happened,” says Hollinger.If you’ve been contacted by a collections agency regarding your tax debt, you should proceed with caution to avoid scams. The IRS only uses four private collection agencies and has verification processes in place. Understanding your situation will help you evaluate options and be prepared to meet with a tax relief specialist. Back to "Prepare to talk with the IRS" Know your options When it comes to discovering that you owe taxes in April, of course it’s best to pay the full balance then. “Taxpayers who are going to owe in 2020 need to either pay the amount in full or get on a payment plan by April 15. Never put it off. Doing so only makes the situation worse,” advises Robert Farrington, TheCollegeInvestor.com Founder.However, that may not be possible in every situation. Whether you can’t pay the full balance in April or you’ve delayed tax payments long enough to have received additional communication from the IRS, you’ve got some options. Dispute what you owe In some cases you may want to dispute what you owe, but sometimes it’s not worth it.“If it is less than a couple of hundred dollars just pay it and move on. Right, wrong, or indifferent. If it is substantial, find a professional that practices in that area of tax law and hire them. It will be money well spent,” advises Charles Read, CPA, US Tax Court Practitioner and GetPayroll President and CEO. Make an installment agreement Installment agreements are payment plans agreed upon by the taxpayer and the IRS. While installment agreements allow you to avoid liens and levies, you’ll still pay interest on your tax debt. You may also pay late fees.Zimmelman explains how to set-up an installment agreement for yourself:“To request an installment agreement, you can apply online with the Online Payment Agreement Application or in writing with Form 9465.You will need to provide the following information: your name, address, email address, date of birth, filing status, social security number (or individual tax ID number), and the amount you owe. You’ll also need to be able to confirm your identity via a financial account number, mobile phone number (registered in your name), or an activation code received by mail.You may need to pay a set-up fee. You can request a waiver or reimbursement of the user fee if your adjusted gross income is under a certain amount.” Negotiate an offer in compromise An offer in compromise is a settlement payment. You can make the IRS an offer to settle your tax debt for less than you owe. If the IRS accepts, you’ll pay the settlement and the remainder will be forgiven.Zimmelman explains how to approach requesting an offer in compromise:“To request an offer in compromise, you must have filed all your tax returns and made required estimated tax payments for the current year. You must not be involved in an open bankruptcy proceeding.You can check if you are eligible for an offer in compromise (OIC) by using the Offer in Compromise Pre-Qualifer tool and then file for an OIC with Form 656-B.” Check eligibility for currently non-collectible status or innocent spouse relief If you can demonstrate hardship, the IRS can mark your account as currently non-collectible. This status marking prevents the IRS from taking aggressive action to collect, but your debt will accrue interest until you pay it off.Zimmelman reviews how to request and qualify for this status:“You will be asked to complete a Collection Information Statement (Form 433-F, 433-A, 433-B).You will need to provide proof of your financial status including assets, income, and expenses.” If you're experiencing IRS problems because of how your current or former spouse filed taxes, you may be able to have penalties removed and no longer be held responsible for the debt. The IRS has specific eligibility requirements that must be met for relief to be granted. Working with a tax relief professional can help you navigate those requirements and advocate for you to the IRS. Back to "Prepare to talk with the IRS" Meet with a tax relief professional Meeting with a tax professional or taking advantage of a free consultation from a tax relief company is a good idea because they have knowledge and experience to help you plan your approach to the IRS. (It’s also the advice overwhelmingly given by the experts who responded.)“I would recommend paying a CPA or lawyer to help you decide the best course of action, and also protect your credit score as much as possible which will save you money in the long run. If you try to go it alone I recommend spending a lot of time on irs.gov learning the process and options,” advises George Birrell, CPA, GetTaxHub Founder.As you determine who to meet with, you should consider professionals with the right experience and expertise.“A tax resolution specialist will know the rules, when a tax preparer may not. Unbeknownst to many, a traditional tax preparer is seldom familiar and experienced with the resolution rules and options. The rules are completely different; similar to the difference between a heart doctor (the tax resolution specialist) and a general practitioner (the standard tax preparer),” says Hollinger. Meeting with a tax relief professional is advantageous for you because they know how the resolution process works and have experience with the IRS.Don’t worry about spending too much time meeting with tax relief professionals. Once you’ve chosen a reputable professional or tax relief company, the consultation shouldn’t take too long and the benefits of taking the time are high.“I do not recommend an uninformed taxpayer contact IRS without talking with a local CPA or Enrolled Agent for an hour so that the taxpayer has a plan on how to proceed. It should not take longer than one hour to determine the best plan for the taxpayer. Plus, the taxpayer will be much less intimidated by IRS,” says Robert Allman, Professional Public Accountants, LLC President.Depending on how your initial consultation goes and the complexity of your tax situation, it may be in your best interest to hire a tax relief company or tax resolution professional to take your case.“The Internal Revenue Code (as revised) runs over 5,000 pages of fine print. The regulations, manuals, and case law fills a substantial library and increases daily. As a CPA and USTCP there are tax cases I will not take because with only forty years of experience I am incompetent in many areas of the law that I don’t practice in on a regular basis. I refer those cases to an expert in that portion of the law.You cannot ignore the IRS, don’t make that mistake. But just like a defendant representing themselves in court has a fool for a lawyer, a taxpayer who tries to deal with the IRS is a fool. I see them afterwards and many times they have done something wrong that is irrevocable and is to their disadvantage,” says Read.On your own, you may not have time to go through and understand all the ins and outs of tax law or how the IRS works. You may also not be aware of the most recent updates on tax regulations.“Third, a tax resolution professional knows the alternatives available to you – they constantly take education in changing tax regulations and will be able to inform you of options you didn’t know existed,” says Dane Janas, Enrolled Agent and Boundless Tax Owner and CEO.The IRS may also take you less seriously if you’re on your own.“Some say professional representation causes the IRS to take the taxpayer more ‘seriously.’ Although there is no hard documentation to support this, I have had numerous clients that are basically disregarded by the IRS on their own, and I achieve resolution for them quite swiftly when representing them,” says Janas.In addition to benefiting from professional expertise and knowledge, you’ll likely save yourself time on the phone waiting to speak to a representative.“Your tax professional has shortcuts into the IRS phone system. Where the taxpayer is forced to call the number published on their notice and wait on hold up to an hour (or get the dreaded courtesy disconnect) — licensed tax professionals (CPAs, EAs, and tax attorneys) can call the IRS’s Practitioner Priority Line, likely cutting their wait time in half and getting a desired result much more swiftly. There is even a company called enQ that has built a service just for tax professionals that waits on hold at the IRS using robots, cutting IRS hold times on certain lines to just three minutes. (Unfortunately, individual taxpayers cannot subscribe to this service.)” says Janas. Back to "Prepare to talk with the IRS" Be phone-ready If you do decide to handle your tax relief yourself, make sure you’re ready. Have your research done and understand your options. “Be as prepared as possible before you speak with the IRS. Pull together your tax information and financial records so that you are able to reference any questions or disputes. The more prepared you are upfront the easier it will be to keep to the conversation moving in a positive direction to help you reduce your debt,” suggests Jared Weitz, United Capital Source CEO and Founder. Once you get on the phone, be ready to verify your identity, ask questions, speak to your situation as appropriate, and take notes. Verifying your identity Alissa K. Hollinger, CPA, CTRS and Hollinger Tax Resolution Owner“Taxpayers need to be prepared to verify their identity and provide updated contact information. This will include providing their social security number, date of birth, current mailing address, and contact phone number.”Dane Janas, Enrolled Agent and Boundless Tax Owner and CEO“When you reach an IRS phone operator, speak clearly and concisely. If you’ve received a notice, inform them what notice you’ve received (there is a number in the top right corner), and tell them you’d like to discuss the notice. They will usually put you back on hold for about five minutes while they look over your account, and will return ready to discuss with all the information at hand.” Asking questions Janas“When speaking with the IRS about your tax debt, inquire as to what alternatives are available at this time if you cannot pay the full balance at this time. The IRS phone operator will walk you through the options available to you, and may be able to process one of the options over the phone if you both agree upon it, such as an installment agreement. But again, this is an area where you it would be incredibly advantageous to have a tax resolution professional on your side, as the IRS will not necessarily inform you about options that are generally disadvantageous to them, such as Offers in Compromise or filing as Currently-not-Collectible.” Speaking to your situation Hollinger“The IRS will use every phone call as an opportunity to gather information on the taxpayer. The more information they can gather for collection, the better. This is where any information the taxpayer provides, can and will be used against them.The IRS employee may ask about the size of their household, the name, address, and contact information of their employer. The taxpayer should also be prepared to provide their household budget which will include their income and expenses. When they contact the IRS, the taxpayer needs to be cooperative and truthful. If they don’t know the answer to a question, 'I don’t know' is an acceptable response.” Taking notes Robert Allman, Professional Public Accountants, LLC President“If the taxpayer elects to contact IRS by phone, the taxpayer must have a pen and paper available and be ready to write down the agent’s name and ID number. The taxpayer may have to ask the agent to repeat the name and ID number because often the agent is talking too fast, or the taxpayer cannot understand what the agent is saying. Back to "Prepare to talk with the IRS" Contact the IRS If you do decide to deal with the IRS on your own, you can easily find contact information on the IRS’s website. To get in-touch with your regional office, a Google search is helpful. If you have received a notice from the IRS, the best way is to use the phone number on your notice. “When contacting the IRS, make sure you are contacting the correct department. If you have a notice, use the telephone number published on the notice. If not, the IRS has hundreds of telephone lines and reaching the incorrect one will just get you transferred and put on hold over again and over again,” advises Janas.The other important aspect of contacting the IRS is to be prompt.“Whether it's in-person or over the phone, it's crucial to contact the IRS punctually. Quick outreach not only relieves stress but also demonstrates a show of good faith to the IRS. Often, the IRS can work with an individual to take care of debt without any penalties or added interest," recommends Eileen Maki, FitSmallBusiness.com Tax and Accounting Analyst. Taking steps to resolve your tax debt will help you maintain financial stability. Understanding how the IRS works, your situation, and your options will help you find a good solution to your issue. Working with a tax relief company staffed by tax resolution experts or working with a tax resolution professional can help you achieve optimal outcomes and avoid pitfalls from failing to understand the tax code and IRS properly. Ready to reach out to a tax relief professional? View our top-rated companies.
Taxes are a part of life, no matter how old you are. If you’re receiving income, you’ll be paying taxes. Many seniors are retired and living on their savings and Social Security. While you’ll still pay taxes, it will work differently from how you paid W-2 taxes. If you’re looking for assistance with tax preparation or tax relief, check out these resources and tips from experts. Use the list below to navigate between sections by clicking on the titles most interesting to you. Tax preparation Tax preparation resources Tax relief Tax relief resources What to look for in a tax professional Bonus: top-rated tax relief companies on helping seniors Tax Relief Learn more about tax relief by looking at the top-rated companies and their offerings. See Companies Tax preparation Tax preparation as a senior will likely have some differences from how you’ve prepared taxes before. You’ll likely have received income from various sources and may also qualify for different deductions. As you age, you may have a harder time adjusting to changes in technology and changes to our complex tax code. Income You’ll start receiving Social Security and take required minimum distributions from your retirement savings. You may even have other kinds of income. “Many seniors have pensions, pre-death life insurance benefits, IRA or 401K savings, or other financial assets. This can make preparing and filing taxes more complicated,” says Jayson Mullin, Top Tax Defenders owner. You likely haven’t dealt with these kinds of income previously, so reporting this income and filing taxes can be an unfamiliar process. An accountant or IRS-certified tax preparer can help you understand and complete this process correctly. “Seniors have special tax issues including social security income, pension checks, retirement benefits, and spousal death that can complicate tax preparation and can increase the chance of an incorrect return. Knowing where to look for help can make tax time easier and less stressful,” adds Mullin. If you’re just starting to think about retirement, it can be a good idea to meet with a financial adviser or tax professional to discuss the best way to handle your retirement accounts and Social Security benefits before retiring and create a plan for making withdrawals. “Tax planning is another important area. Seniors, especially those who have retired but are not yet taking their RMDs (under 70.5 yrs), can rollover traditional IRA money into a Roth and reduce future taxes,” says Beth Logan, enrolled agent at Kozlog Tax Advisers. Deductions In addition to accounting for different sources of income, you may also be able to deduct other expenses, like medical and home improvement expenses. “Senior citizens often have higher medical expenses than other taxpayers. Luckily some of these expenses may be tax deductible. If you itemize your deductions, you might be able to deduct out-of-pocket medical expenses that exceed a percentage of your adjusted gross income,” says Josh Zimmelman, Westwood Tax & Consulting owner. You’ll also have a higher standard deduction, which helps lower your tax bill by lowering your taxable income. Once you turn 65, you may qualify for the Tax Credit for the Elderly or Disabled. This tax credit gives you credit on your tax liability between $3,750 and $7,500. Challenges You may also encounter new challenges as you age. These include becoming a target for scams, adjusting to changes in the tax code, and evolving technology. “Age isn’t the only factor that makes tax logistics so difficult for many seniors to manage. Changing technology, complex rules, and a lack of sufficient funds to hire a professional accountant or tax preparer can make even common tax issues seem like insurmountable problems,” says Mullin. Tax scams are also common, and seniors are often targeted. Knowing how the IRS communicates will help you keep yourself from becoming a scam victim. “In a phone scam, a caller will pose as an IRS agent and tell you that you owe money and threaten you with arrest (or other consequences) if you don’t pay it right away. The IRS will never directly contact you by phone unless you’re part of a specific group of taxpayers with longstanding debts. That means you’ll never get surprised by the news that you owe money. If you’ve been filing and paying taxes consistently (or know that you’re not required to file because of your income level) and have never received written notice from the IRS that something was missing, then you can be sure these calls are a scam,” says Zimmelman. You should also watch out for email scams. “Phishing is when someone tries to steal your information through a fake email or website. There is only one official website for the Internal Revenue Service (IRS.gov) and the IRS will never contact you via email. So if you get an email from the IRS asking you for personal or financial information, assume it’s a scam. You can forward any suspicious emails to [email protected],” advises Zimmelman. Knowing that you’ll receive a written notice first and being vigilant and talking with trusted friends and family members before taking any action based on scare tactics will help prevent you from falling for scams. Taking age, legal and technological changes, and scams into consideration, here’s a breakdown of what you should look for in a tax professional and what free resources are available to help with tax preparation. Back to Menu Tax preparation resources You can always file your taxes yourself or pay an accountant to take care of it for you. Depending on the complexity of your tax return, it may be best to pay an accountant to do it for you. “If a senior has trusts that require filing, businesses, rentals (more than one vacation home), complicated investments, etc., they would be better served by a professional regardless of income. The VITA volunteers are good but they are volunteers with limited training. If a senior needs more help, they should contact an Enrolled Agent (EA, https://taxexperts.naea.org) or a CPA,” advises Logan. However, if your tax returns are simple and you want assistance, check out these programs that can help you prepare your taxes: Volunteer Income Tax Assistance (VITA) Tax Counseling for the Elderly (TCE) AARP Foundation Tax-Aide Volunteer Income Tax Assistance (VITA) VITA is a tax preparation service from the IRS that trains volunteers to help people prepare their tax returns. “Generally, this service is offered to those who make $56,000 or less, persons with disabilities, and limited-English speaking taxpayers. Volunteers are provided training and must be certified by the IRS before helping provide tax-preparation services,” says Josh Trubow, MSFP, CFP®, advisor at Sensible Financial. Before setting up an appointment, check to see what services your local VITA site offers. VITA volunteers do not prepare all tax forms, so verify that they’ll help with the tax forms you need by looking at this document from the IRS. “Each location may have [its] own rules to qualify for this free service, so I recommend calling the closest location to confirm eligibility. Appointments are also highly recommended (and may be required, depending on location),” says Trubow. Be sure to go to the VITA site prepared with your ID and all relevant tax documents. VITA sites generally operate during tax season, starting in February and ending in April, though some may be active through October. Tax Counseling for the Elderly (TCE) TCE is another tax program run by the IRS. Unlike VITA, TCE is specifically for seniors. Organizations can apply to receive grant money from the IRS to reimburse its volunteers’ out-of-pocket expenses for meeting with seniors locally. TCE centers offer many of the same services that VITA sites do. Seniors interested in working with a TCE center should go prepared with identification and the necessary tax documents. Like IRS VITA sites, IRS TCE services are usually available February through April, while some areas may extend availability through October. AARP Foundation Tax-Aide The AARP Foundation Tax-Aide runs many TCE locations. Tax-Aide helps seniors prepare taxes regardless of AARP membership and age. Seniors who work with Tax-Aide receive assistance from IRS-certified volunteers. Back to Menu Tax relief Tax relief can be helpful if you owe more taxes than you can afford to pay right now and if you’ve started to deal with income garnishments and other consequences. Unfortunately, the IRS does not treat senior citizens differently from others. Tax debt accrues late payment penalties and interest over time, so you may owe more tax debt than you think. If you’re dealing with tax debt, you may also experience some financial consequences, including liens and levies. A lien means the IRS has first claim on funds resulting from the sale of property. A levy allows the IRS to seize your property and sell it to cover the tax debt. Levies can also be used for assets, like your income. If you’ve worked hard your whole life and have paid off your mortgage and saved for retirement, you especially do not want the government to seize your property. “Unlike younger adults, who tend to be income rich and asset poor, many seniors are asset rich and income poor – with homes paid off and retirement accounts fully available for use. This poses unique challenges, as the IRS will seek liquidation of retirement accounts and other more liquid investments to cover the tax liability,” says Michelle Kendall, attorney at Optima Tax Relief. Luckily, a skilled tax relief professional can help you deal with the IRS and protect your hard-earned savings and assets. “Assets are generally considered collectible property by the IRS, but with the right resolution plan and a skillful negotiator these assets can be excluded from collections consideration in an IRS resolution,” says Jessie Seaman, Community Tax, LLC Vice President of Servicing. Back to Menu Tax relief resources You can work directly with the IRS to work out payment agreements or settlements. However, it can be helpful to work with an experienced tax professional who will help you resolve your debt. Tax relief companies specialize in these services. Not only do their teams negotiate payment plans and settlements with the IRS, they also help remove penalties like liens and levies. Many tax relief companies employ tax attorneys, enrolled agents, and certified public accountants (CPAs). Enrolled agents are authorized to represent clients before the IRS and can help you negotiate payment with state government and the IRS. These solutions are Installment Agreements and Offers in Compromises. An Installment Agreement is a payment plan that you and the IRS agree on. Once you complete the installment payments, you will no longer owe the IRS. An Offer in Compromise is a settlement agreement between you and the IRS. If your Offer in Compromise is accepted by the IRS, you will make a one-time settlement payment and the rest of your debt will be forgiven. Tax relief companies can also help you remove penalties, like liens and levies. Unfortunately, the IRS does not remove interest or late fees from taxes owed. Best Company’s list of top-rated tax relief companies includes Tax Defense Network, Optima Tax Relief, and Community Tax, LLC. Back to Menu What to look for in a tax professional If you’re hiring an accountant, enrolled agent, or tax attorney to help you with tax relief or tax preparation, you’ll want to look for qualifications, experience, transparency, and trust. Qualifications Josh Zimmelman, Westwood Tax & Consulting owner“It is not required for an accountant to be a CPA (certified public accountant) but it doesn’t hurt! Preferably your accountant with hold an MBA or at the very least have taken several continuing education courses in tax preparation. A tax attorney should have an LL.M in Tax.” Experience Jayson Mullin, Top Tax Defenders owner“Seniors should look for preparers that specialize in working with seniors. You’ll want someone who has the right experience for your particular needs and can work at a price you can afford. You should expect your preparer to be skilled in tax preparation and to accurately file your income tax return. You should trust him or her with your most personal information.” Zimmelman“Preferably your tax accountant will have at least five years of experience handling a broad set of issues. You should look for an accountant who has experience handling your particular type of tax return. Someone familiar with your business or industry is the best fit.” Beth Logan, enrolled agent at Kozlog Tax Advisers“Consider more than tax preparation. Look for a tax professional that will do tax planning with [you]. There is always a concern as seniors age that they might get dementia. A preparer should work with [you] early to make sure there is a plan in case [you] cannot handle [your] own finances.”Michelle Kendall, Optima Tax Relief attorney“The most important thing to consider is the firm's reputation and experience in tax resolution services. Not all tax professionals are well versed in IRS collection procedures, and not all companies in this space are trustworthy. An incompetent professional or disreputable company can turn your IRS problem into an expensive nightmare. Look for credentials, such as having licensed tax attorneys on staff. You want to find a truly qualified firm that can resolve your tax issues and defend you against collections, legally and comprehensively.” Transparency Zimmelman“Some accountants will charge by the hour, others charge a flat rate based on how simple your tax return should be. Fees will vary, but you should know what you are getting into and ask your accountant if there is anything you can do to keep costs down. The more organized you are, the easier it will be for your accountant to sort out all of your transactions and receipts and save you money in the end. Accountants have to charge for their work obviously, but many will be willing to take a few minutes to review your past tax returns for free. Having some information on your finances is necessary for an accountant to know if they are comfortable preparing your current tax return. A good accountant will be honest about whether they’re not the right fit for your situation.” Trust Logan“Look for someone who explains [your] taxes to you. Some only prepare the return and then say 'sign it.' Preparers should go through the return and answer any questions.” Zimmelman“Is this someone I can trust and with whom I can feel comfortable? This question is one you really have to ask yourself. Do you know anyone who has worked with this accountant who can vouch for their professionalism and honesty? Do they have references they can provide? Do they talk down to you or treat you with respect? Trust your instincts. If you don’t feel right about someone, then don’t hire them, no matter what their credentials are.” Jessie Seaman, Community Tax, LLC Vice President of Servicing“When considering a tax relief company, seniors should start their search with companies that are highly rated on sites like Google or the Better Business Bureau. Quality tax relief companies should willingly review your case and provide service recommendations for resolving your case risk-free for a relatively low fee. Stay away from companies that charge thousands of dollars or promise a specific result up front. And like most services, always use your best judgement and remember to tell yourself that if it sounds too good to be true, it probably is.” Back to Menu Bonus: top-rated tax relief companies on helping seniors Optima Tax Relief Kendall“At Optima Tax Relief, we take our responsibilities very seriously, and take particular care when serving seniors. We’re acutely aware that seniors have worked a lifetime to achieve what they have, and that their assets cannot be easily replenished. When approaching a senior's case, we evaluate the entirety of their situation. Once we have a thorough understanding of their personal finances and their needs and goals, we can focus on protecting their assets in accordance with their priorities. We negotiate with the IRS on their behalf, working tirelessly until we’ve obtained the best possible resolution for them.” View Optima Tax Relief Reviews Community Tax, LLC Seaman“Seniors tend to have different sources of income than the general taxpayer population such as Social Security and pension income. Community Tax can obtain access to IRS information databases (with a signed information authorization form from the client) to pull information on these income sources and make preparation of back tax returns and financial statements as easy as possible.” View Community Tax, LLC Reviews Back to Menu
This is the third installment of the short "Intro to Tax Relief" series, presented by Tax Defense Network. You can learn more about them by reading their full review. There are few things more disquieting than opening your mailbox and seeing the IRS logo on the corner of an envelope. You might not even have a reason to worry as far as you know, but you automatically begin worrying all the same. Everyone does. After all, what could a letter from the IRS be but bad? It's a common misconception that all notices from the Internal Revenue Service are sinister. Regardless of your opinion or prejudice, you definitely want to open that letter and read it carefully. Don't even think about throwing it away. There are people who make the mistake of simply tossing an IRS notice, hoping that disregarding it will make whatever the problem is go away. That is, until the next notice is sent...and then the one after that. The IRS has no shortage of letters they'll send you and, if they have something they really want to talk to you about, expect plenty of mail. It shouldn't come to that, though, because you're going to do the right thing and open that letter. You don't have anything to hide and, if you do, it's clearly not working. If you've done something underhanded or misleading on your return, a letter from the IRS shouldn't be a surprise. If, on the other hand, you're like most people and filed accurately and honestly - to the best of your knowledge - you may be anxious for no reason. The reality is that the IRS sends a variety of letters, not just warnings of an audit or potential tax debt. Whatever notice you receive will be designated by a "notice number", which has a corresponding definition on irs.gov. Here are a few of the standard notices, including some to worry about: 1. CP05 This notice is sent to inform you that your return is being reviewed. This could be because something you reported seems askew or it could be completely random, but you're not required to take action. The IRS is simply giving you a heads up and letting you know they may be talking to third parties to verify everything you reported is accurate. It's not a bad idea to review your return and, if you filed with a tax preparer, you may want to give them a call to help you. 2. CP09 You'll see this one if you may be eligible for the Earned Income Credit, or EIC, but didn't claim it. Obviously, this is good news for you and definitely something you want to take advantage of. You'll get a worksheet, which you should complete and send back if what they're seeing is accurate. Assuming you don't have any outstanding IRS debts, you should see a refund within six to eight weeks of sending in the EIC worksheet. 3. CP11 This notice is sent because the IRS has made changes to your return to correct a miscalculation and, as a result, you owe money. Admittedly, this is not the ideal letter to get, but it's important that you know about the issue as soon as possible. There are a couple reasons for this: first, the IRS might be wrong in their assessment and, if so, you can make an appeal or participate in an audit. If you are in the wrong, you can either pay the debt in full or make arrangements as soon as possible to avoid penalties and interest. No matter which way you cut it, responding to the notice quickly is in your best interest. 4. CP14 You'll receive this notice if you owe money for unpaid taxes, plain and simple. This one may not come as much of a surprise, as you're likely to get it if you owed money from the beginning but didn't pay. If, for instance, you filed your return but failed to send in a check for the amount you owe in taxes, the IRS may send you the CP14 notice. Again, paying sooner rather than later will save you both aggravation and money. 5. CP75D Your tax return's being audited and you're being notified because may need to provide some documentation. While it may not be appropriate to panic, you should definitely respond promptly. Whether your return was selected for audit due to inaccuracies or completely at random, you'll need to verify what you reported through records the IRS requests. Be sure to send them copies of any documents and retain the originals in case you need them for the future. Pandora's Box It might seem like avoiding an IRS notice is a good way to prevent a problem, but a problem may already exist whether you like it or not. On the other hand, the IRS could very well owe you money, and there's little chance you would argue with that. The bottom line is that no matter what the reason is for the letter, there's no good reason not to open it. Depending on what notice you get, you may want to consider requesting help from a licensed tax professional. It's important to begin working on a formal resolution as soon as possible, anda tax pro can do just that. Whatever you decide to do, remember that the first step is tearing open that envelope and seeing what's inside. *Written by Christopher Wiggins, Content Writer for TDN.