FAQ

FAQ (21)

What is an enrolled agent?

An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.

I filed my tax returns but didn’t have the money to pay what was owed. What do I do now?

When the Internal Revenue Service sends you a notice stating that you owe back taxes, the amount is usually much higher than what you thought because they have tacked on penalties and interest. Of course you could just write a check and pay them the full amount, including penalties and interest. Worse you could just ignore them; meanwhile the penalties and interest keep piling up. Or you could hire my firm, as an Enrolled Agent who is experienced in the matters of back taxes. By analyzing your situation, we can determine your best course of action. For many taxpayers with no ability to pay, this typically leads to an Offer in Compromise.

Is there an age limit on claiming my child as a dependent?

To be claimed as your dependent, your child must meet the qualifying child test or the qualifying relative test.  While the child’s age is a factor in the qualifying child test, it is not in the qualifying relative test. An individual meeting the qualifying relative test may be of any age.

As long as all of the following tests are met, you may claim a dependency exemption for your child:

  1. Qualifying child or qualifying relative test,
  2. Dependent taxpayer test,
  3. Citizen or resident test, and
  4. Joint return test.

If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?

If you can claim your daughter as a dependent on your income tax return, she cannot claim herself on her income tax return.

  • If an individual is filing his or her own tax return, and the individual can be claimed as a dependent on someone else’s return, the individual cannot claim his or her own personal exemption.
  • In this case, your daughter should check the box on her return indicating that someone else can claim her as a dependent.

Can I receive a tax refund if I am currently making payments under an installment agreement or payment plan for a prior year’s federal taxes?

No.  As a condition of your installment agreement, any refund due to you in a future year will be applied against the amount that you owe.

  • The IRS will automatically apply the refund to the taxes owed.
  • You must continue making your installment agreement payments as scheduled and in full because your refund is not applied toward your regular monthly payment; therefore any payments due under the installment agreement must still be made in full.
  • Regardless of whether you are participating in an installment agreement or other payment arrangement with the IRS, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. For more information on these non-IRS refund offsets, you can contact Financial Management Service (FMS) at a toll-free number 800-304-3107.

Even though I am making installment payments, can I do an Offer in Compromise?

Yes! And in most cases the installment agreement can be suspended while the IRS is evaluating your Offer in Compromise.

How do I know if I have to file quarterly individual estimated tax payments?

You must make estimated tax payments for the current tax year if both of the following apply:

  • You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
  • You expect your withholding and credits to be less than the smaller of:
    •  90% of the tax to be shown on your current year’s tax return, or
    • 100% of the tax shown on your prior year’s tax return.  (Your prior year tax return must cover all 12 months.)

There are special rules for:

  • Higher income taxpayers
  • Farmers and fishermen
  • Nonresident aliens
  • Estates and trusts

When the Internal Revenue Service approves an Offer in Compromise, what happens next?

You may have up to ninety days or 2 years to make payment to the Internal Revenue Service of the offered amount. Once the IRS has received payment, they will release all tax liens, and there is no further back tax liability.

How long does it take for an Offer in Compromise to be approved by the IRS?

Depending on the IRS caseload, it generally takes eight to ten months. But no matter how long it takes the Internal Revenue Service to review the Offer in Compromise, during that time all further collection activities are suspended.

Can I go to jail or prison for not filing my taxes?

The IRS may seek to impose a criminal offense for failure to file tax returns as required. Even if you do file, the tax returns must be accurate and truthful because if false returns are detected by the IRS, a fraud referral to the Criminal Investigation Division will be generated. Failure to file returns is illegal and a FELONY, and subject to criminal and civil penalties. This means that you can go to prison, pay substantial penalties and be financially destroyed. Willful failure to file returns can result in a punishment of one year in jail and a $25,000 fine ($100,000 in the case of a corporation).

I am located outside New York. Can you still help me?

Yes! The IRS has offices all over the country and every office is subject to the same guidelines. The OIC’s are processed in NY, & TN. With today’s instant communication, mail, phones, facsimiles, and e-mail, it has become simple to accommodate taxpayers who reside anywhere in the country.

What is an Offer in Compromise?

An Offer in Compromise is an out of court agreement between the IRS and the taxpayer that resolves the taxpayer’s liability. The Internal Revenue Service has the authority to settle or compromise federal tax liabilities by accepting less than full payment under certain circumstances. These circumstances are: Doubt as to liability – Doubt exists that the assessed tax is correct. Doubt as to collectibility (most common) – Doubt exists that you could ever pay the full amount of tax owed. Effective tax administration – (i.e., economic hardship)

Will I have to see or speak to the Internal Revenue Service if you take my case?

No! I will handle your case in its entirety. All communications with the IRS will be made directly through myself as an Enrolled Agent.

Can I file bankruptcy and discharge my taxes without entering into an Offer in Compromise?

Generally personal income taxes that are over three years old, and were assessed at least 240 days prior to bankruptcy filing, and voluntarily filed at least two years ago, can be included in a bankruptcy. However, most taxes aren’t dischargeable. The trust fund portion of employment taxes is not dischargeable in bankruptcy; therefore, an Offer in Compromise is the only way to effectively eliminate the burden of the trust fund portion of employment taxes.

I have not filed returns for a number of years. Is it too late to reach a settlement and make a fresh start?

No, All tax returns must be filed to do either an Offer in Compromise or an Installment Agreement. We will guide you to bring you current and formulate a strategy to pay off the balance due. For many taxpayers, this typically leads to an Offer in Compromise.

Is an Offer in Compromise best for me?

That depends on your situation, which is different for each taxpayer. That is why we offer a FREE consultation to assess your needs and to recommend what would be best for you in your particular situation. The OIC does NOT blemish your credit. In fact once the Offer is accepted and paid, all liens are released. We suggest that you complete our pre-qualification form and send it back to us, or call us directly so that we can analyze your situation.

When do I have to pay the amount being offered in an Offer in Compromise?

Upon receiving an approval letter from the Internal Revenue Service you may then have ninety days or as long as 2 years to pay the offered amount. After receiving payment, the IRS writes off the balance of the liability and releases all tax liens previously filed.

Can the IRS ever revoke an approved and paid Offer in Compromise?

Your Offer will not be revoked as long as you comply with the requirements relating to filing returns and paying required taxes for the five years after the date your Offer is approved by the Internal Revenue Service.

What are your fees?

Our fees for an Offer in Compromise are reasonably based on a flat rate and the terms of our engagement will be presented to you during your FREE consultation.

What type of documents will the IRS ask for?

Paycheck stubs, bank statements, mortgage or rent payments ,utility bills, etc. We will provide you with a checklist of documentation to collect in assisting us in settling your IRS debt.

For head of household filing status, do you have to claim a child as a dependent to qualify?

In certain circumstances, you do not have to claim the child as a dependent to qualify for head of household filing status; for example, a custodial parent may be able to claim head of household filing status even if he or she released a claim to exemption for the child.