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Tax Resolution – What it is and isn’t.

Tax debt can be confusing and finding good advice and an adviser with your best interests at heart can be a trying process.  You can find positive and negative reviews for just about every provider in the industry so it can be tough to pull the trigger and hire help when you can’t afford to be wrong.

Critics, unfamiliar with the nuance of our practice, often claim that the process can be handled on your own at a fraction of the cost, with no need for expert advice while others target the fact that many companies operate without credentials.  At 20/20, we are a firm of Enrolled Agents, licensed to practice before the IRS.  We have been in business for nearly 20 years representing clients and offering our expertise to help resolve tax debt through the most effective means possible.  Additionally, we know first hand how arduous dealing with the IRS can be.  According to the IRS, a 2015 study showed that only 37% of calls to IRS customer service were actually answered with the average wait time being 27 minutes.tax calculation

Everyone Can Settle Tax Debt – A Marketing Gimmick

Advertisements push the notion that your debt can be reduced and you will only pay a fraction of the amount owed.  While this is true for some, others will find this may not be an option.

The IRS and most states base their willingness to reduce a liability to less than the principal tax owed on the financial condition of the debtor.  If they believe, based on a financial analysis, that there is a greater good that can be achieved by settling the debt and focusing on future compliance, they will agree to settle the liability.  As tax resolution experts, we work diligently to make the argument that a client’s financial condition warrants the acceptance of an offer to settle, or as it is known, an Offer in Compromise.

Some will find the Offer in Compromise process is not one that best meets their needs since they don’t meet the qualifications.  In those instances, we work to reach a resolution that works within a client’s budgetary constraints so they can remain protected from enforced collection.

Easy Enough To Do On Your Own – A Dangerous Rhetoric

In some cases, the tax resolution industry is criticized because individual debtors can obtain installment agreements without a financial review when their liability falls below a certain threshold.  These agreements are known as Streamlined Agreements and involve either a 72 or 84 month limit on the time required to repay the liability.  In a situation where the Streamlined Agreement amounts to a lower monthly payment than a financial review suggests, we do recommend these, but only if it is the most effective resolution.

There is a lesser known solution whereby a debtor can reach an installment agreement that doesn’t amount to paying the liability in full, but makes payments through the collection statute expiration date (‘CSED’).  While there are exceptions to the CSED rule of 10 years that can toll the time frame, in most cases, a debt becomes non-collectible 10 years after it originally becomes due.  These types of agreements are reviewed no less than every two years to see if the debtor can increase their monthly payments, but typically result in a greater savings than a full pay installment agreement.

In addition to compromises and payment plans, we work to abate penalties and lessen the impact of tax liens imposed on our clients.  Most of the time, a taxpayer will be eligible for a first time penalty abatement (‘FTA’).  The FTA is a no strings attached abatement that can be given without cause provided there was a history of compliance with no penalties for 3 prior tax periods.  In addition to the FTA, we are able to submit a reasonable cause penalty abatement.  An abatement for reasonable cause must be constructed to represent that the failure to file or failure to pay was not a result of willful neglect, but rather the result of reasonable cause.  Typically, the IRS applies the cause stated to their reasonable cause assistant to determine if the threshold has been met to abate the penalties.  Even if an initial request is denied, a qualified tax resolution expert can contest the ruling through an appeals process.  In cases where liens pose a problem, solutions are available.

Representation Matters

Did you know the right to representation exists in the IRS collection process?  If sued by a creditor for the same amount that the taxing authorities allege, would you represent yourself?  Maybe, but most likely not.  The IRS recognizes the adversarial nature in which they are pursuing their best interest, not yours.  As a result, the right to counsel in the collection process is afforded by the Taxpayer Bill of Rights.

It is important to understand that the resolution process is not one where a licensed expert can make your liability disappear with an incredibly low settlement offer, but rather one where an expert can analyze your profile and your debt and develop the solution that saves you the most time and money in the long run.  We believe we offer the most intelligent and thorough solutions in the industry today and strive to offer solutions that we believe are attainable in order to provide our clients the service and solutions they deserve.

20/20 Success Story: Douglas

Tough times and tough decisions forced couple into bankruptcy, losing their business and leaving them with hundreds of thousands in unpaid tax debt.

Situation:

As any business owner will attest, managing a company can be a delicate balancing act. During prosperous times, it’s easier to keep a steady ship. But when challenges arise, difficult decisions made under duress can come back to haunt you.

That’s a business lesson not unfamiliar to Douglas Smith and his wife, Dana. The one-time co-owners of an ambulance service provider had managed their successful business for many years until tough times forced the couple to make arduous economic choices. Squeezed between paying employee salaries and keeping current on all tax obligations, the couple chose the former – thinking they would “catch up” when financial pressures eased. However, as interest and penalties accumulated, the unpaid taxes became a hurdle too big to overcome. Forced into bankruptcy and struggling to pay bills and keep the company, the Smiths were distressed and disillusioned.

“There were some extraordinarily dark times,” recalled Doug Smith. “It certainly wasn’t the most joyous of times or the most anticipated of consequences.”

Analyzing Business Data - pen and numbers on paper

The Problem:

In the case of the Smiths and their business operations, there were actually multiple problems – all requiring attention at once. But perhaps the most pressing issue was the constant pressure from the IRS to settle the matter. Faced with a struggling business and a tax bill reaching “hundreds of thousands” of dollars, the Smiths were under an increasing amount of stress both at work and at home.

“You still have to pay your bills,” Doug said. “You still have to try to make your business work. We were still running the company trying to get a contract so we could get out of this mess. It was not good times.”

“There was a lot of stress. A lot of emotion,” Dana added. “We saw a lot of tears.”

With such a large amount of money owed and no way to pay it, the Smiths were becoming concerned about the potential consequences, including the fear that jail time might be a possibility.

“I don’t really know if it was a possibility but we’d heard stories,” Doug said. “Certainly with over a hundred thousand dollars at stake, I’m not sure how forgiving a prosecuting attorney would be if it had ever gotten to that point.”

Fortunately, it never did.

The Solution:

With the recognition that their tax troubles were only getting worse – and a desire to move forward with their lives in a positive way – the Smiths decided that professional help was in order. Disappointed by the lack of support they were finding in their community, the couple was understandably wary of seeking outside help. Yet, the Smiths needed help from someone familiar with, and adept at, solving the tax problem they were facing. Fortunately, 20/20 Tax Resolution possessed the exact experience the couple required.

“I did research online just to look for relief,” Doug said. “When I checked 20/20 Tax Resolution, I also checked their Better Business Bureau rating and decided they were the ones I wanted to call.”

Satisfied with 20/20’s BBB, the Smiths contacted the firm and were quickly blown away by the attention to detail and responsiveness of their 20/20 representative.

“They were very understanding and very clear on what we needed,” Doug said. “We were moving forward and making good progress when my bankruptcy came back to throw a bump in the road.”

During the process of finalizing an Offer in Compromise (OIC) with the IRS, it was determined that the Smith’s bankruptcy filing had not been “fully discharged” – which means the couple possessed remaining assets not considered in the OIC. (An OIC allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed.) As a result, the original OIC was returned, but Doug said that 20/20’s commitment to resolving their issue never wavered.

“They were diligent, caring and showed the highest integrity,” he said. “My case took a few curves and hit some bumps along the way, but all were masterfully handled by them. I have nothing but the greatest of praise and highest recommendation for anyone needing 20/20’s tax resolution services.”

After a very long process, a new OIC was secured for the Smiths which effectively reduced their debt to a fraction of the couple’s original tax debt. (You can view the actual OIC here.) For the first time, the Smiths could see a light at the end of their very long, dark tunnel.

“For anyone going through this, I would say find a very good advocate for yourself,” Doug said. “I believe I found an excellent advocate at 20/20. My team was worth a million bucks. They were there whenever I had an issue. Sam Million and his assistant, John Casanova (the Smith’s 20/20 team) were exquisitely talented in helping with my case and understanding the stress I felt throughout the case. Thanks to their efforts our life has improved considerably.”

In fact, Dana said the assistance of 20/20 may just have saved the couple’s marriage. Today, the Smith’s are “starting over” and rebuilding their lives free of the worry and burden that overtook their lives for nearly six years. If everything works according to plan, the couple will purchase a new home this year – something unimaginable just a few short months ago.

20/20 Success Story: John

Facing tens of thousands in owed back taxes, Texas man turned to 20/20 Tax Resolution and discovered the meaning of sweet redemption

Situation:

John Mohan lived his life on the edge – but without ever realizing it. An electrician by trade in the small Texas town of Alvin (located about 40 miles south of Houston), John worked as an independent contractor for many years and never bothered to file a tax return for any of his contracting income. It wasn’t a conscious decision to disregard a responsibility, but more of an oversight that over time became an “outta sight, outta mind” kind of habit. Similar to others in the construction industry, John worked a variety of jobs over the years, ranging from electrician to carpenter. But when John took a job with a larger company that withheld taxes from each paycheck, the Internal Revenue Service took notice.

“I received a letter saying that I owed $4,000,” John, 53, said. “So I assumed that’s all they wanted and I went in to the IRS to try and finance that $4,000. That’s when they said ‘Wait, that’s $4,000 for ONE year.’ They wanted immediate filings for the last six or seven years.”

Man holding blue helmet close up

The Problem:

Like so many in the construction industry, John hadn’t kept meticulous records of his past earnings. He couldn’t afford to hire an accountant to help him go back nearly a decade and determine all the revenue he had earned and how to file his back returns. He was, in his own language, “devastated.” And the IRS was breathing down his neck.

“I wanted to just quit my job,” he said. “The IRS was threatening to garnish my wages right off the bat. I’ve heard horror stories about people going through this and I just had no idea what I was going to do. I had no idea where to even begin with something like that.”

John left the IRS office that day feeling sad, depressed and “all alone.” He knew he could be facing an insurmountable amount of back taxes and penalties. Losing sleep and worried about his economic future, John owed nearly $45,000 in back taxes spanning multiple years.

The Solution:

In what could be called an amazing coincidence, John returned home from the IRS to find a letter in his mailbox from 20/20 Tax Resolution. He had never heard of the Colorado-based firm with more than two decades of experience helping people just like him.  The letter arrived at the perfect time for John to take action.

“That really got the ball started,” John said. “Just contacting 20/20 really started to emotionally put me at ease.”

From the very onset of working together, 20/20 was able to remove the fear, worry and unrest John was constantly feeling about his tax situation. An aggressive IRS was sending John threatening letters and communicating ultimatums John wasn’t able to fully understand.

“They said don’t worry about it, just send the letters to us,” John said. “Every time I got a letter, I would pick up the phone immediately and call 20/20.”

That attention and compassionate assistance made a world of difference to John. He was able to better focus on his work and life – and remove the doubts and concerns from his mind. He was a bit concerned at the outset that 20/20 was located in Colorado while he lived in Texas. But those worries were quickly displaced by gratitude.

“I actually forgot about the whole situation a lot of times,” he said. “20/20 was just great. Those people are awesome. They even worked with me on creating a payment plan for the cost to resolve my situation.”

In the end, John received the greatest news of all: 20/20 was able to successfully negotiate an Offer in Compromise for John with a settlement of only $234! Although he’s still in the process of getting liens removed and he will need to stay on top of future tax obligations, John feels 20/20 helped him dodge a bullet that would have hampered his life for many, many years.

“I feel very blessed that I called 20/20,” John said. “I’d recommend anyone who has any tax problem at all to call 20/20. They are outstanding people.”

Presidential Candidate Tax Returns: Should Voters Care?

Reviewing tax returns can reveal a lot of information about a political candidate. But many tax experts caution the average voter may not be knowledgeable enough to know what all that information means – and they argue that any conclusions based upon a tax return can often be traced back to a voter’s pre-existing political position.

“As a company, 20/20 reviews a lot of tax returns. It’s our job to dispassionately review a  tax record and determine what steps need to be taken to resolve any tax issues,” said Brian Biffle, president of 20/20 Tax Resolution. “Voters review tax returns with a more subjective approach. So, before they pass judgment based on a candidate’s financial history, a ‘tax return primer’ might be in order to understand what they are reviewing.”

According to 20/20, here’s what voters can learn from a candidate’s tax return:

  • Sources of a candidate’s taxable income
  • Clues to business failures in losses or the overall fiscal health of business endeavors
  • Information on charitable deductions (not simply how much but where it’s distributed)

“For some voters this information can, in essence, become a test of character,” Biffle said. “They’re interested in where a candidate’s income originates and what types of charities the candidate supports.”

Other information revealed often causes voters to compare a candidate’s tax history to their own, said Biffle, and make judgments about how “in touch” a candidate is with voters, as well as the candidate’s ability to serve in the Oval Office. For example:

  • The effective tax rate paid by a candidate
  • Information on investments and loans
  • Real estate taxes (abatements, for example)
  • Real estate holdings
  • Information about the existence of offshore accounts, household employees and other holdings

“Voters sometimes view this information almost as a question of transparency,” Biffle said, particularly since candidates are not required by law to release their tax returns. “But in reality, none of these things provide a complete analysis of a person’s ability to lead. It’s only become an important factor to voters in recent elections.”

Although candidates are required to file Public Financial Disclosure Reports since the passage of 1978’s Ethics in Government Act, these reports don’t provide the detailed examination many voters have come to expect, Biffle said.

“We have clients from every walk of life, income level and background,” Biffle said. “At no time does a tax return provide an exact portrait of a person’s character. It simply offers a glimpse into their finances.”

20/20 Tax Resolution Success Story: Jurgen

20/20 Tax Resolution client came to the United States from Germany to pursue the American Dream – but unwittingly faced a classic American nightmare when he ended up on the wrong side of the IRS.

Situation:

In 2009, Golden, Colo. resident Jurgen was a real estate developer converting buildings into condominiums. But when the economy tanked and the Great Recession hit, he was unable to renew his 5-year loan, and suddenly tightened monetary restrictions prevented him from securing a new loan. Thus began a snowballing cascade of financial concerns that was topped off when Jurgen’s CPA suddenly passed away – unbeknownst to Jurgen who was busy managing his financial affairs. By the time he tried to connect with his now-deceased CPA, the accountant’s files had disappeared, along with all of his documentation.

“I did not find out until I had to do my new taxes (about eight months later),” Jurgen recalled. “By then, all the CPA’s files were gone. I didn’t know what to do.”

The Problem:

Unable to be confirmed through documentation, many of Jurgen’s deductions were denied by the IRS – to the tune of hundreds of thousands of dollars. He was now facing a tax debt of nearly half a million dollars.

With mounting debt and a wife and two children to support (one of whom was about to enter college), Jurgen was nearly in a panic. He recognized he couldn’t manage this situation on his own. So he researched online for the right kind of help. He found it at 20/20 Tax Resolution.

The Solution:

20/20 conducted a thorough examination of Jurgen’s circumstances and were able to connect with the IRS and intercede on his behalf. His 20/20 Senior Tax Consultant – working with Jurgen – took immediate steps to bring sanity back to his personal and business lives, including:

  • Getting all past and current tax returns in proper order in order to expertly diagnose the problem
  • Identifying all the next steps necessary
  • Reducing wage garnishment, which had been implemented by the IRS
  • Securing a hold on both the state’s and the IRS’ additional collection efforts
  • Negotiating a payment schedule that Jurgen could accommodate without destroying his financial future

As a result, 20/20 was able to help put Jurgen’s life back on track. “They treated me like a human being not somebody that screwed up,” he said. “They understood that the IRS is hard to deal with.” Based upon our experience working with taxing authorities, 20/20 was able to quickly assess Jurgen’s circumstances, alleviate his concerns and help calm him down. “It’s not a good situation when all of the sudden the IRS is after you,” he said. “It’s pretty scary when you think you’re going to lose everything and have to start over. There’s no way you can go through this by yourself. Go to somebody that’s a professional.”

To hear more about Jurgen’s story and his experience working with 20/20, watch the video above.