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Reduce or Eliminate Your

IRS TAX DEBT

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Key Term To Know

  • Doubt as to Liability (DATL) – Doubt as to liability comes into play when a taxpayer doesn't actually owe the tax the IRS audit claims they do.
  • Currently Non Collectible (CNC) – Case Closed: Currently not collectible status occurs when the IRS agrees that you cannot afford to repay the debt, and doing so would create an economic hardship on you
  • Installment Agreement (IA) – pay what IRS offers within typically 72 months.
  • Partial Pay Installment Agreement (PPIA) – an IRS payment plan in which the taxpayer pays their tax debt in affordable monthly installments until the debt expires.
  • Offer In Compromise (OIC) – a program offered by the IRS to taxpayers who are unable to pay their tax debt. Those who qualify are allowed to make an offer in compromise, which is an offer to pay a lesser amount than that which is owed.
  • Effective Tax Administration (ETA) – the taxpayer has a proven economic hardship and compromise would not undermine compliance with tax laws.
  • Doubt as to Collectability (DATC) – the taxpayer has proven special circumstances that warrant acceptance for less than the amount of the calculated reasonable collection potential.
  • Collection Due Process Hearing (CDP) – this may be your last best chance to resolve a tax controversy with the IRS short of tax litigation. Generally, the IRS must issue a Notice of Intent to Levy and Right to Request a Hearing if it sends a levy.
  • Collection Statute Expiration Date (CSED) – the timeframe is ten years from when the IRS puts a liability on its books (the later of date of filing or date of assessment). The CSED is also commonly referred to as the statute of limitations on collection.
  • Reasonable Collection Potential (RCP) – the amount taxpayers pay the IRS instead of the full amount owed is the RCP. The Reasonable Collection Potential is based on the calculation and is an important to be know for the Offer to be accepted.
  • Small Business / Self-Employed (SBSE) – a division within the IRS that overviews small business and self-employed taxpayers (i.e. Individuals filing Form 1040, Schedules C, E, F or Form 2106 (Employee Business Expenses) and Companies with assets under $10 million).
  • Trust Fund Recovery Penalty (TFRP) – a penalty against any responsible person required to collect, account for, and pay over taxes held in trust who willfully fails to perform any of these activities. For example, if someone was a manager in a company and the company dissolved, the IRS issues a TFRP against that person personally.
  • Revenue Officer (RO) – an individual who collects revenues such as taxes on behalf of the government. A revenue officer is generally employed by the IRS. This can be a person assigned to handle a tax lien matter. This person should not be confused with a an IRS revenue agent.
  • Substitute for return (SFR) – a tax filing that the IRS will create for a taxpayer in order to preliminarily calculate the tax due, if a taxpayer neglects to file his or her own return.
  • Notice of Federal Tax Lien (NFTL) – a federally authorized lien against any and all assets of a taxpayer who has unpaid back taxes. The lien allows the IRS to secure the taxpayer’s property in order to secure payment. A lien is a public records usually filed in the County Court House where a taxpayer resides. It can also negatively affect one’s credit report.
  • Levy – an administrative action by the IRS, without going to court to seize property to satisfy a tax liability. The IRS can levy your bank accounts, and garnish your wages, even and retirement income, including social security benefits. The IRS also may seize your assets and property. In addition, any future tax refunds may be applied to your tax liability.
  • Ability to Pay – ability to pay is a principle that tries to create a fair ratio of your finances and the taxes you owe. The idea of this principle is to have a fair proportion between the two variables.
  • Adjusted Gross Income (AGI) – Adjusted gross income is the income earned before taxes are applied to it with specific subtractions deducted from it. This is different from net income which already has the taxes subtracted. Adjusted gross income is what is typically required when filling out mortgage forms and FAFSA forms. The adjusted gross income can be found easily on your previously filed IRS tax returns.
  • Amount Due – bottom line on your tax return after taking all deductions and exemptions from all income sources.
  • Appeal – for the purposes of taxation, it can be a request for a change of taxpayer status or to argue against an audit or collection action. An appeal is made to change a previous decision of the tax court.
  • Authorized E-file Provider – an authorized IRS e-file provider is a tax professional who has been accepted into the IRS’ e-filing program. This allows them to submit a taxpayer’s tax return electronically to the agency.

 

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