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PILLA TALKS TAXES

Dan’s newsletter Pilla Talks Taxes is published ten times per year with articles designed to help you stay current on new laws, strategies and defenses. Dan will show you how to protect and defend your clients' rights, new ways to cut taxes and how to avoid problems with the IRS. If it is important for you to know, you will find it in this newsletter! You'll be among the first to know what's going to happen, even before it happens, making you invaluable to your clients.

Pilla Talks Taxes is a must-have for any tax professional. Subscriptions are available direct from WINNING Publications, Inc. for $99/year, however TFI Members receive a free subscription as part of their membership benefits. In addition, our members are able to access a searchable archive of past Pilla Talks Taxes articles. Below is a example of the no-nonsense information you will find in Dan's newsletters.

Featured Article

STREAMLINED INSTALLMENT AGREEMENT EXPANDED

IRS Introduces More Flexibility to Payment Plans

Installment payment agreements with the IRS can be a good thing, or a bad thing, depending upon the situation. Too often, the tax liability is so high that a modest monthly payment is not enough keep up with penalties and interest. In that case, a citizen can make the payment for the rest of his life and end up owing more when he’s dead then he did when he started.

But for those who have a more manageable tax debt and are able to make a more aggressive payment, the installment plan is an effective way to solve the problem. Most notably, when an approved installment plan is in effect, the IRS cannot levy or seize assets. What’s more, if the agency rejects or terminates the plan, they must send a written rejection notice to that effect. They cannot levy during the thirty-day period beginning with the date of the rejection notice. If you file a protest letter within that thirty-day period, the case goes to the Office of Appeal for review and the IRS cannot levy while the case is on appeal.

Some time ago, the IRS introduced the so-called Streamlined Installment Agreement rules. Under these rules, the process for obtaining an installment agreement was greatly simplified. Ordinarily, the IRS required a full financial statement before entering into an installment agreement. The agency would determine the amount of agreement based upon your disposable income (which I discuss at length in the prior article). If your income and expenses were such that you could pay $1,000 per month, the IRS expected you to pay $1,000 per month until the tax was paid. Moreover, the IRS would routinely file tax liens to protect its interest.

The streamlined rules came into effect to help people qualify faster if they owed $25,000 or less, including penalties and interest. In that case, if the full tax (including future accruals) could be paid in full within sixty months, the IRS would agree to the taxpayer’s proposed payment amount, regardless of income and expenses. This agreement would be approved without the need of:

  • A financial statement showing income and expenses, as long as the proposed payment would full pay within sixty months,
  • Managerial approval, and
  • Filing a federal tax lien.


Obviously, the lien relief alone is a very important aspect of the streamlined process.

Earlier this year, the IRS expanded the streamlined installment agreement rules. Now, even more people will find relief under this program. Under the new rules, the dollar ceiling for eligible citizens goes from $25,000 to $50,000. The payout time goes from a maximum of sixty months to seventy-two months. See Internal Revenue Memo. SBSE 05-0112-013, January 20, 2012.

However, in cases where the debt exceeds $25,000, there are additional criteria. They are:

  • The debt must be paid in full, including penalties and interest, within seventy-two months,
  • The agreement must be established as a direct debit installment agreement, per the language on Form 433-D, Installment Agreement, and
  • The ability to pay must be verified by a financial statement, Form 433-A, or by information provided by the citizen to collection personnel over the phone.


When the above requirements are met, the agreement can be established without managerial approval and without the need of filing a federal tax lien.

There are two caveats that must be considered when working to set up an agreement where the debt is between $25,000 and $50,000. I discuss them in order.

1. You cannot use the first payment of your agreement to reduce the debt below $50,000. For example, suppose you owe $50,600. You propose a $750 per month payment. The first payment will reduce the debt below $50,000. In this case, the agreement will not be approved. You must first reduce the debt to $50,000 or less to qualify. You can then apply for the streamlined agreement.

2. The agreement is not available to in-business taxpayers. Thus, a corporation, partnership or LLC cannot obtain a streamlined agreement. These agreements apply only to individuals. This is not to say that businesses cannot obtain an installment agreement. They can. They must submit a full financial statement, be subjected to potential liens, and pay the debt as quickly as possible based upon their disposable income.

The IRS created a new form to facilitate applying for this agreement. It’s IRS Form 9465-FS, Installment Agreement Request. A copy of the form is provided here.

In instituting this program in January, Commissioner Doug Shulman stated:

We have an obligation to work with taxpayers who are struggling to make ends meet. This new approach makes sense for taxpayers and the nation’s tax system, and it’s part of a wider effort we have under way to help struggling taxpayers.

As with the new OIC rules discussed in the June newsletter, this will indeed make life easier for countless thousands of people.

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Featured Article

LEVY OF SOCIAL SECURITY BENEFITS 
IRS To Limit How Much It Will Seize

A common question with delinquent citizens is whether the IRS can levy social security benefits. The answer, unfortunately, is yes they can, and worse, they do so regularly. Before intercepting an SS payment, the IRS generally sends notice CP91, Final Notice Before Levy On Social Security Benefits. This letter informs you of the impending levy and invites you to call the IRS to set up payments if you cannot pay in full. 

Read The Rest of This Featured Article

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