Ohio State Tax Penalty Abatement & Common Penalties

A request for penalty abatement is a written request asking the state to waive some, or all, of the penalties that have been assessed.

Ohio law permits the Department of Taxation (DOT) to abate penalties. Usually, the DOT permits it if the failure to comply with the provisions of the tax code were due to reasonable cause and not willful neglect. However, there is no published guidance as to what the State of Ohio considers “reasonable cause and not willful neglect.”

Some examples provided by the IRS are the death of a family member, incapacitation of the taxpayer, unavoidable absences, fires, floods, natural disasters, or other like situations resulting in circumstances beyond the taxpayer’s control. However, a taxpayer must pay the underlying tax due before the Department of Taxation will consider a penalty abatement request.

AG Address for Penalty Abatement Requests

A taxpayer, after paying the underlying tax, should submit a request for abatement in writing to the Attorney General’s office. Moreover, include any supporting documentation that may be relevant. The current address for submission of penalty abatement requests is:

Ohio Attorney General Collections Enforcement Division
150 E. Gay Street, 21st Floor
Columbus, Ohio 43215

The Attorney General’s office will forward the request to the Department of Taxation. Consequently, the Department of Taxation will make a determination, usually within 60 days. The Department may abate all, some or none of the penalty. Nevertheless, the taxpayer cannot appeal penalty abatement request determinations. However, they may refile the request if circumstances change.

Penalties and Interest

With respect to taxes owed, there are 2 penalties that a taxpayer should know. First, taxpayers should know the failure to file penalty. The state will assess the failure to file penalty when a taxpayer fails to file a tax return by the due date, including extensions. The failure to file penalty is the greater of $50 per month, but not exceeding $500, or 5% per month, but not exceeding 50% of the total tax that is due. This penalty will be assessed for each month, or fraction of a month, that the tax return is late.

The second is the failure to pay penalty. The failure to pay penalty is determined by the tax commissioner. Pursuant to Ohio law, it may not exceed twice the amount of the federal short-term interest rate. Currently, that rate is 4% per annum.

Additionally, interest is applied for each month that a delinquent tax goes unpaid, not to exceed the federal short-term interest rate, which as previously stated, is currently 4% per annum (Nov 2018).

As one can see, the penalty for a taxpayer failing to file their income tax return on time (the first penalty) is very steep. Therefore, even if a taxpayer is unable to pay the tax due they should strive to file their income tax return on time in order to avoid the failure to file penalty.

It is highly recommended you work with a licensed tax professional that has experience resolving Ohio state tax problems. Click the link or start your search below.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional.

Ohio Offer In Compromise: Eligibility, Requirements, & Process

The State of Ohio has established a formal Offer in Compromise program to allow some taxpayers to settle their taxes owed for less than the amount they owe. The settlement will include not only delinquent tax due but also penalties, interest, and any collection fees that may have accrued. The program is administered by the Attorney General’s office, with the consent of the Department of Taxation. The program has specific requirements that a taxpayer must meet to qualify.

Qualifying Circumstances for an Ohio Offer In Compromise

The program allows taxpayers the opportunity to settle their taxes owed under three circumstances:

(1) economic hardship

(2) doubt as to liability, or

(3) in limited instances, a substantial probability that the claim, if collected, would be subject to refund under the respective agencies’ statutes, rules or regulations. The State of Ohio processes innocent spouse relief under the economic hardship Offer in Compromise program as well.

The Attorney General’s office only provides general guidance as to what specific criteria a taxpayer must meet to qualify for each of the three types of acceptable Offers in Compromise. They define an “economic hardship” as, “having insufficient assets and income to pay the full amount and that requiring full payment would cause a severe economic hardship.” They do not elaborate on how they view or calculate a severe economic hardship. Further, they define having “doubt as to liability” as, “the taxpayer having a belief that they do not owe the amount and/or did not receive service of the assessments.”

The guidance that the Attorney General’s office does provide is general eligibility requirements, submission requirements, and a list of financial documents that they require to be submitted. We discuss these items in more detail below.

Eligibility

For a taxpayer to be eligible for an Offer in Compromise, the following must be true:

• Taxes owed must have been certified for collection to the Attorney General’s office for greater than one year
• The principal must be greater than $500 (except for innocent spouse)
• The taxpayer must not currently be in bankruptcy or have an administrative appeal pending with the Department of Taxation

Requirements

The following are the requirements for submitting an Offer in Compromise:

• The taxpayer must complete and submit an Offer-in-Compromise application. Taxpayers can request it by contacting the OIC Unit at 614-779-0105
• The taxpayer must be current with all tax return filing and estimated payment requirements
• The taxpayer must sign the Offer-in-Compromise application, agreeing to all terms and conditions stated therein. Specifically:
  • Disclosure of every obligation owed to the State of Ohio
  • Payment of the proposed settlement amount, in full, within 60 days of execution of the Offer-in-Compromise agreement
• The taxpayer must agree to remain in continued compliance with all filing and estimated payment requirements for five years after the acceptance of the Offer-in-Compromise agreement. Failure to comply with this requirement will result in the reinstatement of the original delinquent taxes, including accrued interest.
• The state requires full financial disclosure. A failure to fully and completely disclose and attach any information required by the Offer-in-Compromise Application may result in outright rejection or, if previously accepted, reinstatement of the full amount owed plus accrued interest.
• Also, the Attorney General’s office encourages applicants to submit all relevant information or documents that pertain to their specific situation, even if the Offer-in-Compromise Application does not explicitly request it.

Required Documents

The following is a list of documents that the State of Ohio requires to be included with the submission of an Offer-in-Compromise:

Copies of IRS OIC Documents and Tax Returns

• Copies of all Offer in Compromise forms and supporting documents submitted to the Internal Revenue Service, if applicable; including, all related notices received from the Internal Revenue Service
• Copies of the last two years’ Federal income tax returns, including all W-2’s, 1099’s, schedules and attachments
• Copies of the last two years’ State income tax returns including all W-2’s, 1099’s, schedules and attachments

Financial Documents

• A credit report dated within the past year
• Copies of the last three months’ pay stubs or proof of income
• Copies of the last three months’ complete bank statements. This includes all open accounts at all banks, credit unions, and all other financial institutions
• Copies of the last three months’ complete credit card statements for any and all open credit cards
• Copies of all insurance policies and/or most recent renewal declaration pages, including homeowners, renters, automobile, etc.
• If applicable, a copy of an official statement of social security or other government benefits received
• If applicable, list any bankruptcy cases filed and attach copies of the discharge document

Other Financial & Miscellaneous Documents

• Applicant’s monthly budget including a list of all monthly income and a list of all monthly living expenses
  • Provide copies of the current month’s bills for all budget items listed including lease agreements, mortgage statements, utility bills, car payments, etc.
• List of assets with copies of the last three months’ investment statements including IRA’s, 401k’s, stocks, bonds, etc.
• List of any other liability that is currently in collections, i.e. medical bills, credit cards, payday loans, utilities, etc.
  • Documentation, if applicable, showing payment on the above liabilities
• Provide documentation and list any collection proceedings that have been filed against the applicant, including, but not limited to wage or bank garnishments
• List all civil or criminal cases, including court and case number, in which the applicant is a party
• List any professional licenses from any and all state or federal agencies
  • Please specify if any of these licenses are impaired because of the applicant’s liability, or for any other reason

Filing Process and Considerations

The State of Ohio requires that the Offer in Compromise Application be submitted in paper copy only. Taxpayers should submit their application and supporting documents to the Office of the Attorney General, OIC Unit, 150 E. Gay Street, 21st Floor, Columbus, Ohio 43215.

Taxpayers should be aware that the submission of an Offer in Compromise Application does not prevent the Attorney General’s office from filing tax liens, tax refund offsets, or stay any pending enforced collection actions, including garnishments or foreclosures. However, the Attorney General’s office will not undertake any new enforced collection actions. Further, the filing of an Offer in Compromise application does not protect the taxpayer from otherwise making payments pursuant to a previously negotiated installment agreement.

Taxpayers should be aware that the Attorney General’s office reserves the right to use any information that is provided in the Offer in Compromise application for tax collection purposes.

Review and Determination

Preliminary Review At First

Once the Attorney General’s office has received the Offer in Compromise Application and supporting materials from the taxpayer they will conduct a preliminary review to ensure that all eligibility requirements, submission requirements and required supporting documentation have been met or included. If the application is incomplete, or if the taxpayer does not meet the eligibility or submission requirements, the application will be rejected without review. If particular documents do not exist, the taxpayer may submit the application with a notarized statement explaining why the records do not exist. The Attorney General’s office will base its recommendation on the information provided, however, the Department of Taxation may investigate further.

Official Review

Next, the Attorney General’s office will perform a review of the application and issue a recommendation of acceptance, rejection or counter-offer. This, along with the application, is sent to the Department of Taxation for review. The Department of Taxation will also perform a review of the application and ultimately issue an acceptance, rejection or counter-offer.

What the AG and Department of Taxation Consider

The Attorney General’s Office and the Department of Taxation have stated they will consider all of the following the review of an Offer in Compromise application:

• Earning potential, current employment, and future employment/income
• All sources of income, past, present, and future
• Applicant’s age with respect to earning potential
• Borrowing potential
• Assets
• Dependents
• Litigation, including tax litigation
• AG collection notes
• IRS and other state and local tax returns
• IRS or other states Offers in Compromise
• Whether the applicant has made a good faith attempt to pay the liability prior to submitting the Offer in Compromise application
• Whether the offer is sincere (rejections and counteroffers are not negotiable)
• Does the applicant have a history of tax compliance? The AG and Department of Taxation will generally reject outright any applicants who cannot demonstrate that they have filed and paid their taxes timely for at least two years.
• In cases of an active business applicant, the fairness to competitors

They further advise that, “[i]t is the burden of the applicant to prove each basis for the request for relief. If the applicant believes a specific issue should be considered, such as an ongoing medical condition or pending legal proceeding, documentary evidence in support of that issue, such as medical records and/or pleadings, must be submitted along with the application. Do not rely on the State to request information.”

The AG Will Issue A Decision in 3-6 Months

The Attorney General’s office will issue a notice to the taxpayer stating whether the Offer in Compromise Application has been accepted, rejected, or a counter-offer proposed. Taxpayers will usually receive this notice within 3-6 months after the filing of their Offer-in-Compromise. The taxpayer does not have the right to appeal a denial of an Offer-in-Compromise. However, they do have the ability to refile the application if their circumstances change.

As always, it is a great idea to work with a licensed tax professional when considering an Offer in Compromise.  Click the link to see professionals with experience doing Offer in Compromise with Ohio, or start your search below.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

Ohio State Back Taxes Options or Resolutions

The State of Ohio has a multi-faceted approach for dealing with unpaid income tax or Ohio state back taxes. The Department of Taxation is responsible for the collection and administration of the Ohio tax code. However, the Attorney General’s office is responsible for collections enforcement. Further, the Attorney General’s office employs private collection firms, called “special counsel,” who perform most of their collection activities. The AG’s office gives private collection firms the full power of the Attorney General while handling their collection matters.

Ohio State Individual Tax Options

Taxpayers who owe back income taxes to the State of Ohio have three or four main resolution options. These options are available for taxpayers to reach a reasonable resolution to their delinquent tax liability. These are:

Installment Agreement (Payment Plan)

An Installment Agreement is also known as a payment plan. It is an arrangement where the taxpayer reaches an agreement with the State of Ohio to make monthly tax payments. The taxpayer makes payments until they satisfy their past-due tax liability. You can read more about Ohio State tax payment plans here.

Offer in Compromise (OIC)

An Offer in Compromise is a program where a taxpayer may offer to settle their delinquent tax liability. Generally, the taxpayer pays less than the amount owed. In Ohio, the state may grant an Offer in Compromise for Economic Hardship, including innocent spouse relief, and Doubt as to Liability. In limited instances, the state may approve an OIC if a substantial probability that the claim, if collected, would be subject to refund under the Department of Taxation’s statutes, rules or regulations. Find out more information here.

Penalty Abatement

A request for Penalty Abatement is a written request asking the State to waive some, or all, of the tax penalties assessed. Just like the IRS, the state permits taxpayers sometimes to reduce specific tax penalties.  You can read more about it here.

Innocent Spouse Relief

Under Ohio law, if there is a joint assessment of spouses for personal income tax and one of the spouses has been granted relief from the joint assessment under I.R.C. § 6015, there is a rebuttable presumption that this spouse is entitled to similar relief for any Ohio assessment of the same liability. The spouse must complete an Offer in Compromise application. Furthermore, they must include all correspondence with the IRS related to the innocent spouse relief. Moreover, this includes all tax returns, including all attachments, for the tax years in question.

Ohio will still consider innocent spouse relief for those who have not received similar tax relief from the IRS. However, the taxpayer must seek that relief by filing an Offer in Compromise Application under Doubt as to Liability circumstances.

Alternative Options That May Be Available

Challenge the Assessment

If the taxpayer has a proposed assessment for additional income tax due as a result of an Ohio Department of Taxation audit, they have the opportunity to appeal the proposed assessment. The taxpayer may first appeal to the Department of Taxation Appeals Office. Therefore, an informal hearing will be conducted, usually via telephone, with a tax attorney from the Department of Taxation.

If the taxpayer cannot resolve the tax issue with the Department of Taxation Appeals Office, the taxpayer may appeal to the Board of Tax Appeals. The Board of Tax Appeals is an administrative, judicial body that works in a formal, courtroom-type manner. A taxpayer may represent themselves in front of the Board of Tax Appeals. However, a taxpayer should hire a licensed attorney who has experience practicing in front of the Board of Tax Appeals.

The Attorney General’s office represents the Department of Taxation for cases in front of the Board of Tax Appeals. The taxpayer will have the opportunity to settle with the Attorney General’s office attorney. However, if the taxpayer cannot resolve the tax issue with the AG, the taxpayer will proceed for a hearing in front of the Board. The Board will then issue a ruling based on the evidence presented. The Board will apply Ohio law to the facts of the case. Fortunately, taxpayers can appeal the decisions of the Board of Tax Appeals to the Ohio Appellate Courts.

Bankruptcy

Bankruptcy can be a costly endeavor. Therefore, this option is likely only practical for taxpayers who have significant personal liability in addition to their delinquent taxes owed. Generally, taxpayers may discharge state taxes through bankruptcy proceedings. Taxpayers should seek the advice of an experienced bankruptcy attorney before pursuing this option.

The Ohio Tax Amnesty Program

From January 1, 2018, through February 15, 2018, the Department of Taxation had a “Tax Amnesty Program.” The program was available for individuals and businesses with unreported or underreported income. As a result, if these taxpayers enrolled in the program, the Department of Taxation would waive all penalties and only assess half interest if the taxpayers filed, or corrected, their returns and paid the entire tax due. The state does not currently offer this program. However, if the State decides to reopen the Program, delinquent filers should take advantage.

Appeal Rights

As discussed herein, Ohio law does not provide taxpayers with the right to appeal determinations of the Attorney General or Department of Taxation concerning the collection of taxes owed. However, there are a couple of practical tips that the taxpayer, or their representative, should follow in an attempt to reach a reasonable resolution.

First, do not be afraid to escalate contentious issues to a manager at the Attorney General’s office or the Department of Taxation. Often, a fresh set of eyes and the authority and experience of a supervisor can help resolve some issues.

Second, if you believe that your case manager is not following Ohio law, or discriminating against you, file a request for an investigation. Do this in writing, with the Department of Taxation Problem Resolution Office. The Problem Resolution Office serves as a liaison between the Department of Taxation and taxpayers when the usual lines of communication break down or when a problem remains after attempts to solve it through designated channels have failed. 

The Attorney General’s office will release tax liens only after the taxes owed, including any penalties, interest or collection fees, have been paid in full or satisfied through an Offer in Compromise Agreement. The Attorney General’s office will forward to the taxpayer a certificate of release for the tax lien in question. The taxpayer must file this certificate of release with the court where the tax lien is filed to release it officially. Taxpayers often overlook or misunderstand this.

Statute of Limitations

The first factor to review before considering a possible resolution is to determine the taxpayer’s legal rights under Ohio law concerning the statute of limitation rules for the collection of taxes owed.

In Ohio, the Attorney General’s office may file a tax lien against the taxpayer in their residential county. It is generally filed for any taxes owed that has been certified to them by the Department of Taxation. The AG’s office has seven years from the date of the original tax assessment to begin legal proceedings to collect the taxes. This is different from the IRS. These proceedings include garnishment of bank accounts, garnishment of wages, and garnishment of certain retirement or investment accounts. It can also include foreclosures or conducting a debtor’s examination through the Court. If the AG’s office fails to begin proceedings to collect the taxes owed within the seven years, they are time-barred from ever being able to use these enforced collection methods.

Unfortunately, this does not affect the status of any tax lien filings. Under Ohio law, tax lien filings have a separate statute of limitations. This limitation only requires the State to refile the lien every 15 years. Furthermore, they may keep the tax lien active for up to 40 years. Therefore, even if the State may be time-barred from conducting an enforced collection of a delinquent taxpayer, they may still keep the tax lien on the taxpayer’s property for up to 40 years. Naturally, this creates an undesirable position for many taxpayers. The taxpayer may still need to resolve the situation with the State despite the fact they are protected by statute from garnishments, foreclosures, and other enforced collection measures.

Conclusion

In conclusion, taxpayers have many tools at their disposal when dealing with tax liabilities with the State of Ohio. With that said, Ohio has a very government-friendly statute of limitations to conducting enforced collection. Additionally, the penalty, interest, and collection fees system results in reasonable taxes ballooning into crippling liabilities. Therefore, taxpayers should consult with a qualified tax professional as soon as these problems arise. A tax professional can help determine which course of action is most appropriate for their situation. Click the aforementioned link or start your search below to find the tax professional that best fits your needs.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

IRS Identity Theft: What to Do If Someone Files Taxes using Your SSN

Tax-related identity theft occurs when someone else files a tax return using your Social Security Number (SSN). The IRS may flag the return if it looks suspicious. Other times, the IRS may reject your return when you attempt to e-file because they have already accepted a return that contained your SSN.

You may receive a letter from the IRS if a suspicious return is filed using your SSN. If the IRS has rejected your return due to Identity theft, you can also file a paper tax return by mail and attach Form 14039.

How Tax-Related Identity Theft Happens

An identity thief can get your personal information in a number of ways. They may pretend to be a company you do business with and ask for your information. They may also illegally access your electronic information or find paper documents containing your SSN.

To protect your information, take the following steps:

1. Use secure passwords.
2. Install security software on your computer.
3. Only give your personal information to companies you trust.
4. Don’t leave personal information in places where other people can access it.
5. Beware of phishing emails. Don’t click on links or attachments in emails from people you don’t know. Go to the websites of the companies directly.
6. Watch out for IRS impersonators. The IRS will not send unsolicited emails or call you threatening to send you to jail or sue you.

Even when you’re careful with your personal information, identity theft can still happen to you. Someone else can fraudulently use your SSN to file a tax return and attempt to get a tax refund.

In some cases, the IRS may spot something unusual about the fraudulent return and send you a notice asking you to confirm your identity. Other times, the fraudulent return may be accepted, and your return will be rejected when you attempt to e-file it.

How to Handle Tax-Related Identify Theft

Tax-related identity theft can be a frustrating experience. The IRS has a specialized team to handle these cases and get your issues resolved. If you are a victim of tax-related identify theft, take the following steps:

1. Don’t panic. If someone filed a return using your information without your signature or authorization, it is not a valid return. You should not be held responsible for the fraudulent filing.
2. Expect delays. You may have to wait a lot longer than usual to receive your tax refund. The IRS needs time to verify your identity and resolve your case.
3. Be proactive.  If the IRS rejects your return or you believe they wrongfully rejected the return, take action to notify the IRS about your potential identity theft as soon as possible.

What to Do If You Receive a Letter 4883C

If the IRS spots a suspicious return filed with your SSN, they may send you a Letter 4883C. You will be asked to confirm your identity by calling the number on the notice within 30 days.

You will need your prior-year tax return to verify your identity. Once you confirm your identity, you can tell the IRS whether or not you were responsible for filing the return. If you didn’t file it, the IRS will remove the return from your records.

If you still need to file your actual return, the IRS may ask you to file a paper tax return by mail.

Form 14039, Identity Theft Affidavit

If someone else files a return using your SSN and the return is accepted, you won’t be able to e-file your return. This can also be the case when someone else uses your dependent’s SSN on their tax return.

The IRS only accepts one return for each SSN per year, so the IRS rejects any returns after the initial one. When this happens, you can still file a return using the following steps:

1. Complete your tax return and print out a paper copy.
2. Complete Form 14039, Identity Theft Affidavit, attach it to your tax return, and submit both forms by mail.
3. Wait for an acknowledgment letter from the IRS.

You can use Form 14039 when you receive an IRS notice because of tax-related identity theft or when you experience identity theft and are unsure whether someone used your information to file taxes. When you file this form, the IRS will flag your account for questionable activity and have a specialist look into the matter.

Identity Protection Pin (IP PIN)

An IP PIN is a six-digit code used to confirm your identity when you file a tax return. This extra layer of security can help prevent tax-related identity theft.

If you receive a CP01A notice, you must use the IP PIN when you file your tax return. The IRS will reject your return when you file electronically if your IP PIN is incorrect.

You have the option to receive an IP PIN if you receive an IRS notice inviting you to opt-in to your IP PIN. The IRS is also currently running a pilot program that allows all residents of Florida, Georgia, and the District of Columbia to request an IP PIN.

IRS Collections Caused by Identity Theft

In some cases, the IRS may use enforced collection actions against the victim of identity theft. This can happen if someone else files a tax return using your SSN and the IRS later adjusts the return and makes a deficiency assessment.

The IRS may attempt to levy your wages or assets. They may also file a lien against your property.

You should receive several notices before the IRS takes enforced collection actions. If the tax assessment involves a return you didn’t file, you may be a victim of identity theft. Contact the IRS and alert them that your identity has been stolen as quickly as possible to avoid having your assets levied.

Other Steps to Take After Your Identity is Stolen

If someone stole your identity, you should take these additional steps to protect yourself:

1. Contact the Federal Trade Commission and file a complaint.
2. Have one of the major credit bureaus place a fraud alert on your credit reports.
3. Contact your state tax authority to see if you have any issues to clear up.
4. Close any accounts created without your permission any have any improper charges removed from your accounts.

If you receive any IRS notices, respond promptly to make sure you resolve any problems early on. Connect with a licensed tax professional that has experience resolving tax-related identity theft cases by going here or by starting your search below.

Guide to Completing IRS Form 14039 Identity Theft Affidavit

You can file IRS Form 14039, Identity Theft Affidavit when someone else uses your Social Security Number (SSN) to file a tax return. To alert the IRS that your identity has been stolen, you file this form. The IRS will refer your account to an identity theft specialist for evaluation.

When to File the IRS Identity Theft Affidavit

The IRS catches many cases of tax-related identity theft before they cause problems. Suspicious returns may be flagged or rejected. The IRS may ask you to verify your identity before these returns are accepted, and you won’t need to file Form 14039 in these cases unless you are told to by the IRS.

Some taxpayers discover that someone stole their SSN when they attempt to e-file their tax return. If the IRS rejects the return because the SSN has been used on a tax return for the same tax year, it could be due to identity theft. Be sure you don’t have any typos or other problems before filing IRS form 14039 that caused the IRS to reject the return.

There are three main situations where you should file Form 14039:

1. Someone else files a return using your SSN that is accepted, so you can’t file your return using E-file. You can also file this form on behalf of another person if they are your dependent or if you have been appointed as guardian, conservator, or power of attorney.
2. An IRS notice or letter instructs you to file Form 14039. Check Box 2 in Section A and include the notice number.
3. You are a victim of identity theft that is unrelated to a tax return, but you want to alert the IRS that someone else may have your personal information.

How to Complete and Submit Form 14039

Explain your issue and how you discovered that your identity had been stolen in Section B. Attach any supporting documentation, such as a notice you received from the IRS, and submit it along with the form.

You can’t electronically file the IRS Identity Theft Affidavit. You will need to submit the form by mail or fax.

Where you send the form depends on your reason for filing. You should only send the form using one method—don’t send Form 14039 by both fax and mail.

Follow these instructions when submitting the form:

1. When filing Form 14039 in response to an IRS notice, you can fax the document if the IRS notice includes a fax number. If not, mail the form to the address listed on the IRS notice.
2. If you are a victim of identity theft, but no have current tax-related issues, you can use the fax number or the address listed on page 2 of Form 14039.
3. When you are filing Form 14039 because someone else used your SSN or your dependent’s SSN to file a return, attach the Identity Theft Affidavit to your tax return and send it to the address where you normally file your tax return. If you already mailed your paper tax return, you can send Form 14039 on its own to the same address. Visit the IRS “Where to File” page to find the address you should use when submitting your tax return.

What Happens After You Submit the Identity Theft Affidavit

You should receive an acknowledgment letter from the IRS after they receive your Identity Theft Affidavit. The IRS will refer your case to the Identity Theft Victim Assistance (IDTVA) organization for processing.

The IDTVA will investigate your case to determine if any other fraudulent returns have been filed using your information. They will work to have any fraudulent returns removed from your account and to process your correct return and release your tax refund.

IDTVA attempts to resolve cases within 120 days, but complex cases can take up to 180 days. The IRS sends a notification when they settle your case.

The IRS may also give you an Identity Protection Pin— a six-digit number you use to confirm your identity when filing your return. The Identity Protection Pin can help prevent cases of tax-related identity theft on future returns.

Help With IRS Identity Theft

At TaxCure, we have a large network of tax professionals from around the country. Not all tax professionals can help with IRS Identity theft, our system allows you to filter by the top professionals that do have experience with submitting IRS form 14039 and resolving issues from tax identity theft. You can start your search here which lists the top professionals with IRS tax identity theft experience. We are dedicated to making it easier for taxpayers to find professionals to help them with their unique tax situations.

Why & How to Apply for a Discharge of an IRS Tax Lien

An IRS tax lien doesn’t take money out of your paycheck or bank account, but it can still cause serious financial problems. It may prevent you from selling your property, and it can hurt your credit. You may apply for a discharge of an IRS tax lien to sell or refinance your home, but the IRS will only grant your request in certain situations.

An IRS tax lien applies to all of your property and takes effect as soon as you fail to pay back taxes after the IRS sends you a notice demanding payment. Usually, the balance threshold for issuing a levy is $10,000. The lien gives the IRS a right to your property even if it is transferred to a third party. The IRS may eventually file a notice of federal tax lien against your real property. You most likely won’t be able to sell or refinance your home subject to the lien. Therefore, your best option may be to request a lien discharge.

What is a Discharge When it Comes to IRS Tax Liens?

The discharge of an IRS tax lien removes the lien from a specific piece of property. If you apply for a lien discharge and the IRS grants your request, you can sell or refinance the property named in your certificate of discharge.

Without the lien discharge, anyone who buys your property takes it subject to the IRS tax lien. If someone buys your home, the buyer would not be responsible for your taxes owed. However, the IRS could still seize the property. The tax lien will drive away any potential buyers because they won’t want to be responsible for your tax problems.

When you apply for a tax lien discharge, you will have to show the IRS that you are willing to protect their interests. If you have several valuable assets subject to the lien, the IRS may grant a lien discharge for one piece of property.

What Happens When the IRS Discharges a Tax Lien?

You will receive a certificate of discharge that removes the IRS tax lien from your property. But this discharge only applies to the property named in the certificate.

If you receive a lien discharge, two things will not be affected:

• You will still owe your back taxes to the IRS, including any penalties and interest.
• The IRS tax lien will still cover all property other than the assets named explicitly in the lien discharge.

Getting a tax lien discharged can still be a big win. You may be able to save money by doing a cash-out refinance of your home. Then, use the extra cash to begin making payments on an IRS installment agreement. Or you could sell your home and use the proceeds to pay off your entire tax amount owed.

If you still have tax issues after receiving a discharge from an IRS tax lien, talk to a tax professional. Your taxes owed and the IRS tax lien won’t go away unless you come up with a plan to get tax relief.

How Can a Taxpayer Request a Discharge of an IRS Tax Lien?

You need to submit form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien at least 45 days before the sale or settlement meeting.  Publication 783 provides the instructions for completing form 14135.

You will need to describe the property, its appraised value, and other information. Most importantly, you need to provide a basis for the discharge of the IRS tax lien.

When the IRS grants a lien discharge, it is doing you a favor. You need to give them a reason why they should grant your request.

Reasons the IRS Will Grant a Tax Lien Discharge

As stated above, the IRS will approve the discharge of a tax lien on a specific piece of property or properties with good reason. Taxpayers may use the following as a basis for a lien discharge:

• Your other property subject to the IRS tax lien is worth twice as much as your tax liability.

  For example, if your total tax liability is $45,000, you will need to have at least $90,000 worth of assets subject to the Federal tax lien after the IRS grants the lien discharge for the requested property.

• You pay the IRS an amount equal to their lien interest in the property being discharged.

  If you pay the IRS the same amount they could receive from their lien interest, they may give you a lien discharge. The IRS interest may be less than the full value of your property because other creditors, such as a mortgage lender, may have interests that are superior to the IRS tax lien.

• You establish that the IRS tax lien interest in your property is worthless.

  The IRS may discharge a lien if it doesn’t attach to any value. It can occur if you owe more to your mortgage lender than what your home is worth. The mortgage lender’s interest is superior to the IRS tax lien, so the government’s interest in your property has no value.

• You agree to sell your property and hold the funds subject to the IRS tax lien in escrow.

  You can use the sales proceeds to pay off a creditor with a superior interest to the IRS. In many cases, this could be a mortgage lender. But the rest of the funds have to stay in escrow subject to the IRS tax lien.

• A third party provides a deposit or bond equal to the IRS lien interest in the property.

  If a third party owns property subject to your IRS tax lien, they can get a lien discharge by paying a deposit to the IRS. The third-party has to file an action in district court challenging the lien interest within 120 days, or they forfeit the deposit.

Why Would a Taxpayer Want to Discharge a Tax Lien?

A tax lien gives the IRS an interest in your property that can be used against your other creditors or someone who buys your property. A potential purchaser won’t want to buy your property as long as the lien is in place. A home lender may not want to give you a mortgage or refinance your existing one because the IRS would have an interest in your property that takes priority over the lender’s interest.

The IRS tax lien limits your options and makes it hard to make financial transactions. There are several ways to release or withdraw one. You’ll need to use one of these lien removal strategies if you want to be free to sell your assets or get credit.

A tax lien discharge is one method of getting rid of a tax lien on a specific piece of property you own. You can also apply for a lien subordination. A tax lien subordination allows another creditor to receive an interest in your property that is superior to the IRS tax lien. The tax lien remains in place but is second in line behind the other creditor’s interest.

You can also release a lien by paying off your taxes in full or by meeting the terms of an accepted Offer In Compromise. Depending on your situation, you may be able to set up an IRS installment agreement to pay off your taxes. With an installment agreement, if you meet certain conditions, you can request a withdrawal (which is not a release) after three consecutive payments.

Finding a Professional That Can Discharge a Tax Lien

Not all professionals have experience with discharging tax liens. Our network has the ability to filter pros with this exact type of experience. You can visit this link here to view the pros with lien discharge experience, or you can start your search below and apply the applicable filters for your problems and/or desired solutions.

IRS Fresh Start Initiative Overview

Updated October 25, 2019, by Charlie Corsello

IRS Fresh Start Initiative: What Is It? Is It Real?

The initiative is an extension of the IRS Restructuring and Reform Act of 1998. Launched in 2011, the Fresh Start Initiative (FSI) was designed to give delinquent taxpayers a “fresh start” on their taxes owed. Over the years, the initiative progressed with incremental changes to IRS collection procedures. The changes contain different elements that make it easier for taxpayers to get into Federal tax compliance and resolve IRS taxes owed. More importantly, the changes helped more taxpayers avoid tax liens and withdraw them. In recent years, the IRS has made this program even more enticing. The changes are real and IRS forgiveness is a possibility for more taxpayers.

What Relief Did the IRS Fresh Start Initiative Provide?

Below you will find a summary of these significant changes as well as detailed discussions below.

1. New Rules for Tax Liens
2. Loosened the rules to Get Tax Liens Withdrawn
3. Changed the qualifications for certain Installment Agreements to ease the process (Monthly Payment Plans)
4. Easier to Set up Installment Agreements for Business Taxes
5. Eased the Rules to Obtain Offers in Compromise (Settling Taxes owed for Less Than You Owe)
6. Changes to Currently Not Collectible Status
7. Expanded Penalty Relief (Now expired)

IRS Fresh Start Tax Lien Changes

Before the Fresh Start Initiative, the IRS issued tax liens for all kinds of liability levels. Under the new rules, the IRS does not issue tax liens if the tax owed is less than $10,000. Note that there are rare exceptions to this rule.

A tax lien is a legal claim to your assets, and it appears on your credit report. A tax lien is similar to how if you owe money on a car loan, your lender has a lien on your car. If you sell the car, the lender is entitled to the proceeds of the sale. Similarly, if the IRS issues a tax lien, the IRS is entitled to any money you get if you sell your assets. When an IRS tax lien is on your credit report, lenders usually will not give you loans.

The Fresh Start Made It Easier for Lien Withdrawals

Under the Fresh Start Initiative, the IRS also made it easier to get tax liens withdrawn. When the IRS removes a tax lien, that is called a tax lien withdrawal.

You can get a tax lien removed by paying off all your taxes. Alternatively, if you set up an installment agreement (monthly payment plan), you can get the tax lien withdrawn after you make three consecutive payments. However, you must owe less than $25,000 in taxes and agree to a direct debit payment method.

Unfortunately, the IRS doesn’t always remember to automatically withdrawal liens. You can request to have your tax lien removed using Form 12277 (Application for Withdrawal).

Fresh Start Installment Agreement Individual Changes

An installment agreement, or a long-term payment plan, is where you make monthly payments on your taxes. With updates to the Fresh Start Initiative, the IRS let taxpayers who owed up to $50,000 set up streamlined installment agreements (more now, read below). A streamlined installment agreement offers a “streamlined” application process—you don’t have to provide a lot of financial details. As long as you meet a few minimum criteria, the IRS approves your installment plan.

In 2016, the IRS expanded the provisions of the Fresh Start Program and made it even easier for taxpayers to get streamlined installment agreements. The IRS rolled out the new rules on a trial basis and kept most of the changes in place.

Under the new rules, you can qualify for a streamlined agreement if you owe up to $100,000. If you owe between $50,001 and $100,000, you can obtain up to 84 months to pay off your taxes (see all of the consequences by IRS tax amounts owed). That is an extra year. If you owe more than $25,000 but less than $50,000, you don’t have to set up a direct debit—you can mail a check or pay manually every month. You can see the overview of IRS changes here.

How To Setup an IRS Installment Agreement?

To apply for an installment agreement, use the IRS’s online payment agreement tool if you owe $50,000 or less including penalties and interest. If you owe more than $50,000, you can apply using Form 9465 (Installment Agreement). The IRS will ask for form 433-F if you decide to not pay via direct debit or payroll deduction.

You can send payments to the IRS in a variety of ways, including by Direct Pay, debit card, credit card, check, or money order. However, to prevent missed payments and in some cases to avoid tax liens and other forms, it is always wise to pay via direct debit or payroll deduction. Setup fees for an installment agreement depend on your income level, and how you apply. If applying online and not considered low income, fees range from 31 dollars (online) to 149 dollars. You will also incur additional charges for paying with a debit or credit card.

IRS Fresh Start Installment Agreement Changes for Businesses

Generally, the IRS is a lot stricter about business tax than an individual tax. If your business owes up to $25,000, you can qualify for a streamlined installment agreement. Before the IRS Fresh Start, the threshold for business taxes owed was only $10,000.

If your business has employees, you may qualify for In-Business Trust Fund Express Installment Agreement for back payroll taxes. To qualify, you must be in business, have employees, and be able to pay off all your liabilities within 24 months. This payment plan is great for businesses that got behind in the first year or two of operations but now have enough revenue to cover payments on their taxes owed.

As of 2018, the IRS is also testing expanded criteria for business taxes owed repayment. If your business is an out-of-business sole proprietorship, you can qualify for a streamlined installment agreement over 72 months if you owe up to $50,000. If your out-of-business sole proprietorship owes between $50,001 and $100,000, you can qualify for a streamlined installment agreement over 84 months. The IRS will decide whether or not to make these rules permanent in September 2018.

IRS Fresh Start Offer in Compromise (OIC) Changes

An offer in compromise is when the IRS lets you settle your taxes for less than you owe. In other words, you make an “offer” of how much you can pay, and the IRS “compromises” by letting you pay less than you owe.

As a general rule of thumb, the IRS only accepts offers in compromise if your offer represents the most amount of money the IRS could get if it used other collection activities. For example, if you owe $15,000  and are living on a fixed income with just enough to cover necessary expenses and you offer $5,000, the IRS may accept that amount if that is all you have. However, if you have $20,000 in your savings account and make more money than is “required” to pay your monthly living expenses, the IRS usually won’t accept that low of an offer. Instead, the agency may just require you to pay through a payment plan.

Applying and Qualifying for an Offer in Compromise

However, thanks to the Fresh Start Initiative, it is now easier than ever to get an offer in compromise. You can apply for an offer in compromise on up to $100,000 in taxes, and you can choose between a lump sum or a short-term periodic offer in compromise. Additionally, the FSI radically changed for the better how the IRS calculates your future income in determining whether to accept your OIC. Before the FSI, the IRS considered four years of income with a Lump Sum OIC. However, now the IRS only considers one year of income. Finally, with the Short-Term Periodic OIC, the IRS only considers two years of income when formerly it was five years.

As of March 2017, the IRS will immediately reject your offer in compromise if you have any outstanding tax returns, but it will keep the down payment and apply that to your taxes owed. Additionally, to qualify, you must not be in bankruptcy or be behind on any of your current tax payments.

To get a sense of whether or not you may qualify, you should work with a tax professional as the IRS’s OIC online qualifier tool is not always accurate.

IRS Fresh Start Initiative Changes to Currently Not Collectible Status

Currently not collectible is when you prove to the IRS that you can’t pay your taxes, and the IRS stops all collection activity on your account. A currently not collectible or CNC designation is usually only temporary. The IRS regularly reviews your tax returns every two years to see if anything has changed.

The Fresh Start Initiative makes it easier to apply for currently not collectible status. In particular, if you owe less than $10,000, you may not have to provide as many financial details or documents to the IRS. Some common scenarios are listed below for people that generally qualify for currently not collectible status:

• You earn less than $84,000, and all your income goes to IRS-approved living expenses.
• All your income is from Social Security, welfare, or unemployment benefits.
• Your tax owed is almost ready to expire.
• You are unemployed and have no income.

To apply for currently not collectible status, see our section on the qualifying for Currently Not Collectible with the IRS.

Penalty Relief Under the Fresh Start Initiative

The Fresh Start Initiative started by offering special penalty relief to people who were earning less money or who had been unemployed for a certain amount of time.

In 2012, the IRS provided a six-month grace period on failure to file tax penalties for individual wage earners and self-employed taxpayers for the 2011 tax year.  Moreover, it offered unemployed taxpayers until the tax extension filing deadline to pay taxes and avoid the failure to pay penalty. These provisions have expired.

However, you may still qualify for the first-time penalty abatement, which existed before the FSI. For example, when you don’t file a return or if you pay late, the IRS adds penalties to your account. If this is your first time facing penalties, you can have them both erased through the first-time penalty abatement waiver. To qualify, you must not have tax penalties for the previous three years among other requirements. Even if you don’t qualify for first-time penalty abatement, you may also consider removing penalties if you have “reasonable cause” for not meeting your tax obligations.

You may want to get help from a tax professional when applying for penalty abatement.

How to Apply for the IRS Fresh Start Program

The Fresh Start Program is not a program. Instead, it’s a collection of IRS policy changes that make it easier to get your tax issue resolved. As explained above, there are a variety of ways to apply for a fresh start. The application process depends on whether you qualify for an installment agreement, a business installment agreement, an offer in compromise, or currently not collectible status.

With all of these programs, you usually have to meet the following criteria:

• Up to date on all filing requirements.
• Current with estimated quarterly tax payments if self-employed.
• Made all federal tax deposits (payroll tax, sales tax, etc.) if you are a small business owner.
• Not in bankruptcy.

Benefits of Working With a Tax Professional

A tax professional can help you identify which tax resolution options will work best for your tax and financial situation. Then, they can help you apply. Remember, a tax professional is advising you with your best interest at heart, and they work accordingly. In contrast, if you’re working directly with an IRS agent, their main concern is to ensure the IRS gets paid. You can find a list of tax professionals here that specialize in resolving IRS problems. 

IRS Form 12153 Collection Due Process Hearing Guide

If you receive a notice that the IRS intends to place a tax lien or levy your assets, you can request a Collection Due Process (CDP) hearing. Taxpayers can file IRS form 12153 to request a hearing and appeal the lien or levy. These hearings allow you to appeal the IRS’s collection actions. They can potentially stop the lien or levy from happening.

The Office of Appeals is independent of the other IRS offices. It helps taxpayers to resolve tax controversy without litigation in a way that is fair for both the taxpayer and the IRS. But the first step to appealing a lien or levy is to file this form. The rest of this guide explains the Collection Due Process hearing, and it outlines how to appeal using Form 12153. 

What is a Collection Due Process Hearing?

A Collection Due Process hearing allows taxpayers to appeal IRS liens and levies. It is an informal hearing which can happen in person or over the phone. Oaths are not involved, and no transcript gets taken.

The hearing looks at the validity of the notice and relevant issues related to the unpaid tax. At the CDP hearing, you can attempt to obtain innocent spouse relief— that’s where you argue that your spouse or ex-spouse was exclusively responsible for the taxes owed. You may also work out a payment plan or suggest collection alternatives.

Essentially, the purpose of a Collection Due Process hearing is to figure out a compromise between the IRS’s need to collect taxes and your concerns about the collection activity. After the hearing, the IRS issues a Notice of Determination. It outlines the following elements:

• Whether or not the IRS delivered the lien or levy demand correctly—The IRS must hand-deliver these notices. Or, the IRS must send the notice via registered mail to your last known address and get a receipt that you received it.
• Whether or not a tax lien will take place
• Whether or not a levy will happen
• The details of any payment arrangements decided upon during the hearing.
• Whether or not the IRS accepted your request for innocent spouse relief or any similar defenses.
• Whether or not tax relief was offered.

After receiving the Notice of Determination, you have 30 days to appeal to the Tax Court or the US District Court.

When Do You File a Request for a Collection Due Process Hearing (Form 12153)?

Taxpayers can request a Collection Due Process hearing if they receive a Notice of Federal Tax Lien or a Notice of Intent to Levy. Usually, the IRS sends one of the following notices:

• Letter 1058 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing)
• Letter 11 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing)
• CP90 (Final Notice of Intent to Levy)
• CP92 and CP242 (Notice of Levy Upon Your State Tax Refund)
• Letter 3172 (Notice of Federal Tax Lien Filing and Your Right to a Hearing)

The IRS does not allow taxpayers to request these hearings for “frivolous” reasons. That includes refusing to pay tax on religious or moral grounds.

What Are Some Legitimate Reasons to Request a CDP Hearing?

You can't apply for a CDP based on frivolous reasons. So what are the legitimate reasons to request this type of hearing after you receive a notice of intent to levy or issue a lien? If any of these situations apply, you may want to apply for a hearing.  

• You want to seek payment alternatives such as a payment plan or an offer in compromise. To get these plans accepted, you must file all delinquent returns.
• You have a terminal illness and overwhelming medical bills.
• You can’t pay because you’re living on Social Security or unemployment.
• You can’t afford to pay with your income—the IRS has strict guidelines on this type of hardship arrangement.
• You want to apply for a lien subordination. That’s when the IRS agrees to put its lien as subordinate to another lien. For instance, if you want to take out a home equity loan to cover a tax bill, the lender may only give you the loan if the lien takes precedence over the IRS lien.
• You want the lien discharged so you can sell the underlying asset and pay the IRS.
• You need the lien removed from your credit report because you already paid in full or you are currently in a payment arrangement.

The IRS may be willing to accept other reasons, but those are some of the most common. When you talk with a tax professional, they can let you know the best reasons to apply for a CDP in your situation. 

What If You Don’t Agree With the Amount Due on Your Notice?

You may also request a Collection Due Process hearing (form 12153) to challenge your tax liability. However, you can only do that in rare situations. Namely, you can only challenge the amount due if:

• you didn’t receive a statutory notice of deficiency,
• you didn’t receive a notice to file a Tax Court petition,
• or if you didn’t have a chance to dispute your liability previously.

You cannot bring up issues that have already been heard.

If you don’t meet those criteria, there are only three ways to appeal the amount due at this point:

• Pay the taxes in full. Then, file a refund claim and appeal when the IRS denies your refund.
• Request an audit reconsideration with new information.
• File an Offer in Compromise for doubt as to liability.

All of the above options are complicated, and you may want to get professional help in all of those situations.

How Do You File a CDP Request?

To request a Collection Due Process Hearing, you need to complete Form 12153 (Request for a Collection Due Process or Equivalent Hearing). This form is pretty straightforward. It requests your name, ID number, address, phone number, and the best time to reach you. You also have to include information from your tax lien or levy notice.

You can tick a box if you want to apply for innocent spouse relief. Otherwise, you need to write in your reason for requesting a hearing. It is an essential part of the form, and you won’t obtain a hearing if you don’t supply a sound reason. You can use any of the reasons listed above or any that were brought forth by your tax professional.

Send the form to the collection office that started the compliance action. Usually, this is a small business or self-employed collection division of the IRS. The notice that you receive should have specific instructions on which IRS address to send this form to. 

What If You Don’t Meet the 30-Day Deadline?

You have 30 calendar days to request a levy hearing after you receive a Notice of Intent to Levy. You have five business days plus 30 calendar days if the IRS issues a notice of federal tax lien. The IRS is strict about both of these deadlines. The IRS will only respond to your request if you postmark the IRS form by the last day of the 30-day period (or the last day of the 30-day plus five business days) after receiving your Intent to Levy or Tax Lien notice.

If you don’t submit the form within the correct time frame, you still have options. At this point, you can request an Equivalent Hearing. You have one year and five business days from the filing date of your Federal Tax Lien to make this request or one year from the date of your levy notice. In these cases, the levy may go forward, and the IRS can take your assets, but if the hearing is successful, the IRS will stop the levy. 

How to Apply for an Equivalent Hearing

You can apply for an equivalent hearing using Form 12153 as well. Simply, look at the second question on the form. It asks if you want to apply for an equivalent hearing. You just need to tick the box. Note that you must tick the box on the application. If the IRS receives your request for a CDP hearing late, the agency won't automatically convert your request for a CDP hearing to an equivalent hearing. You must specifically ask the agency for this type of hearing. If you're not sure whether or not you're applying by the deadline, you can request the CDP hearing. Then, you can also mark that you want an equivalent hearing if your CDP application isn't received in time.  

If you apply for an equivalent hearing, the IRS will not release the lien or stop the levy. The IRS also won't pause the clock on the statute of limitations. These are the two main drawbacks of asking for an equivalent hearing instead of a CDP. Generally, you only want to take this option if you missed the deadline, but in either case, you should consult with a tax pro to figure out the best option in your situation. 

What Happens After You Request a CDP Hearing?

Once the IRS receives this form, all collection activity stops, and the 10-year statute of limitations pauses. If there is a levy against you, it will be suspended while the process is pending. For instance, if the IRS is garnishing your wages, that will stop when you file Form 12153 to request a hearing. In rare situations, however, the levy may stay in place — this typically only happens if the tax collection is in jeopardy.

The statute of limitations on collections is also paused while the hearing is pending. Normally, the IRS has 10 years to collect on a tax debt, and once this window passes, the IRS can no longer collect on the bill. When the statute gets paused, the time gets added back on once the statute is no longer paused. To give you an example, imagine that you request a CPD hearing, and the IRS has five years and one month left to collect on the tax debt. The time that passes while the state is paused doesn't count. When the hearing process is complete, the statute will be unpaused, and the IRS will still have five years and one month to collect, even if several months have passed. 

How the IRS Processes CDP Hearing Requests

Once you submit the request, the collection officer may choose to continue working with you. They can work with you for up to 90 days at their discretion. If you haven't reached a resolution after 90 days, they must forward the CDP hearing request to appeals. However, the collection function employee doesn't have to wait this long. They can opt to send your hearing request to the appeals office immediately.

If you want to speed up the process, tell the collection employee that you want them to send in the CDP hearing request. They are supposed to send it to appeals when you request them to do so. After appeals receives your request, a hearing settlement office will issue a contact letter. The letter will let you know that you have the opportunity to talk with appeals about why you disagree with the lien or levy. It also informs you that you get to discuss alternatives. For instance, you might want to suggest monthly payments instead of having the IRS issue a levy against you. 

How You Get the Results of a CDP Hearing

After the CDP hearing, appeals will issue a Notice of Determination letter. This outlines what was decided in your situation. In particular, it tells you if the lien or levy is going to happen and/or if your alternative payment options have been accepted. After an equivalent hearing, appeals issues a Decision Letter. You may receive additional letters depending on the situation. 

What If You Don't Agree With the Results of the CDP Hearing?

If you don't agree with the outcome of the CDP hearing, you have the right to petition the US Tax Court. Then, the Tax Court will review the decision made by appeals. After the Tax Court makes its decision, it's final. Unfortunately, with an equivalent hearing, you don't have the option to appeal to the tax court. 

Requirements for Collection Due Process Hearings

Appeals must meet strict criteria when processing CDP requests and holding hearings. To protect taxpayer's rights, appeals must comply with the following requirements:

• Following established procedures based on whether taxpayers request a CDP hearing or an equivalent hearing. 
• Ensuring taxpayers only get one hearing for the tax period related to the lien or levy. 
• Providing an impartial hearing officer unless the taxpayer waives this requirement. 
• Including documentation in the case file to show that the legal or administrative procedures were met. 
• Updating the case file to reflect that the taxpayer was allowed to talk about the unpaid tax, the proposed lien or levy, innocent spouse relief if applicable, collection alternatives, and the tax liability at the hearing. 
• Documenting in the case file that the hearing office balanced efficient tax collection with the taxpayers concern about the collection actions. 

When the Treasury Inspector General for Tax Administration looked over these processes in 2022, it discovered that appeals was following the majority of the rules. However, it discovered some issues with pausing the collection statute of limitations. ITs report estimates that the collection statute is incorrect on between 2500 and 3200 taxpayers who request CPD hearings every year. To protect your rights, you should work with a tax professional who can help to ensure that the IRS is processing everything correctly.  

Help With a CDP Request

Here at TaxCure we have a network of tax professionals from around the country. Each professional has their own specialties and agencies they service. We have a unique algorithm that ranks professionals based on their work experience. To find the top-rated professionals in helping with CDP requests, follow this link here to see the search results, or start your search below where you can filter by agency, problems, solutions and more.

NYS Tax Payment Plan Options

New York State’s Department of Tax and Finance (DTF) offers tax payment plans. The NYS tax payment plan option can vary by the term and whether the taxpayer must disclose financial information. However, this option helps taxpayers who cannot afford to pay their taxes in full.

Installment Payment Agreement (IPA) is the official name DTF uses to refer to a monthly tax payment plan. "Deferred payment agreement" was the previous name for the IPA.

DTF does not publicly discuss what the typical or maximum term is for a payment plan. Generally, the longer the term requested by the taxpayer, the more meticulous the IPA review process.

Some of these options may have changed.  It is always best to consult with a licensed tax pro when in doubt. However, as of August 2017, here is a breakdown of the type of payment plans available to individuals.

3 Year Streamlined NYS Tax Payment Plan

Generally, NY State offers a 36-month payment plan for personal income taxes owed without requiring financial disclosure. In other words, the application process does not require financial disclosure. If you are granted the IPA, you pay off your tax liabilities over 3 years or before the Collection Statute Expiration Date (CSED), whichever comes first.

The CSED is the date that NY State cannot legally collect the tax from you. Therefore, an IPA will have to end before the CSED date(s) arrives. Remember, NY State has a 20-year statute of limitations on collections.

3 to 6 Year NYS Tax Payment Plan

If a taxpayer requires more than 3 years to pay off a tax balance, NYS may request financial information. Therefore, in cases requiring financial verification, a DT-5 form or financial information will need to be provided.

In certain cases, NYS may file a tax warrant with the County Clerk and the Secretary of State. As a result, the tax warrant creates a tax lien. Therefore, it is generally a good idea to ask if DTF can refrain from issuing a tax warrant as long as you stay compliant with your IPA.

Business Installment Payment Agreements

Businesses can obtain IPAs. However, the requirements can vary on a case-by-case basis. This is largely determined by the amount and type of taxes due. In many cases, the DTF requires a 20% down payment. However, there have been many cases where an IPA was still granted without the down payment. An IPA could be a for business with a “trust fund” liability. For example, sales taxes and withholding taxes are great examples of “trust fund” taxes.  Consequently, Form DTF-5 may be required by all responsible officers of the business. They will need to fill it out personally.

Sole-proprietors, single-member LLCs, or members of multi-member LLCs, generally accumulate income at the personal level (pass-through income). Therefore, the individual options above would most likely apply.

How to Apply for an IPA

There are a few ways to apply for a payment plan with NYS’s DTF.

• You can hire a licensed tax professional (attorney, CPA, EA) with NYS tax resolution experience. You can request a . There is no obligation.
• If you have your bill, you can call the NYS Department at 518-457-5434. You will need to enter your taxpayer identification number and the four-digit pin on your bill.
• You can apply online once you set up an account. Once logged in, select “Payments”, then “bills and notices” and then “Request an Installment Payment Agreement.” Generally, this method is if you owe $20,000 or less.

As part of the IPA application process, taxpayers can request a term and/or specific monthly payment amount. During the time DTF is reviewing an IPA request, DTF may ask taxpayers to make good faith payments. Usually, these payments match closely the monthly payment amount the taxpayer asked for with the IPA.

DTF will look at the taxpayer’s compliance history and financial state when deciding to grant the IPA request. If DTF grants an IPA, the taxpayer (you) must stay compliant with all tax filings and pay all new tax balances in full. Any failure to stay in compliance will automatically default the IPA. If a taxpayer cannot make the minimum monthly payments with an Installment Payment Agreement, they may want to consider other options, including an Offer in Compromise.

When Will NYS DTF Terminate an IPA?

DTF may terminate an IPA at any time if it believes the taxes owed pursuant to the IPA are in jeopardy of being collected. Generally, if DTF wants to cancel or modify an IPA, it must provide the taxpayer 30 days notice. It can terminate or modify the IPA if:

• The taxpayer provided inaccurate or incomplete information before entering into the IPA
• The taxpayer’s financial state has changed drastically
• You fail to make a payment or pay any other tax balance when due
• You fail to provide the updated financial info requested by the DTF

If you are looking to connect with a tax professional with experience resolving NY tax problems, visit the aforementioned link or start your search below. Not all professionals have experience with the New York Department of Taxation so be aware of that when selecting a company or professional to help. Using our site, you can have confidence that the professionals listed with New York Experience are top-rated professionals that can ensure you get the best outcome for your situation.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

How to Avoid the Trust Fund Recovery Penalty Interview (4180)

If the IRS believes you are responsible for the trust fund taxes, the agency will request an interview with you. The purpose of the interview is to figure out if you are responsible for the unpaid taxes or not.

It is called a 4180 interview because the agent asks questions from Form 4180 (Report of Interview With Individual Relative to Trust Fund Recovery Penalty). The interview can be very stressful, but there are a few ways to avoid it.

How to Avoid the 4180 Interview If You Are Liable

If the IRS requests a 4180 interview, the best way to get out of it is to pay the bill and cancel the interview. You can also admit to liability by signing Form 2751 (Proposed Assessment of Trust Fund Recovery Penalty) and then attempt to set up payments or apply for a settlement.

In particular, if the bill is under $25,000, the business can pay it back over a 24-month period. You have to set up a direct debit to qualify for this streamlined arrangement. Once the business sets up payments, you don’t have to worry about your personal assets being at risk.

How to Avoid the 4180 Interview If You Are Not Liable

If you are not responsible for the payment, you may argue your liability. This can be very difficult, and you should get a tax attorney or an experienced lawyer to help you. Don’t just hire any attorney. You need one experienced with this issue in particular. The lawyer needs to prove that you were not responsible for the unpaid tax even if you were involved with the company’s finances.

If you accidentally signed Form 2751 but you aren’t really liable, a lawyer can help as well. That professional can argue that you were intimidated into signing the form. In other cases, a lawyer can argue that the other employees ganged up on you.

How to Avoid the 4180 Interview If You Don’t Have Any Money

The IRS isn’t into chasing rainbows. If the agency believes that you won’t be able to pay the bill, it will look somewhere else for the funds. To prove to the IRS that you don’t have any money, you need to submit Form 433A.

This is the same form you use when you apply for a settlement on personal tax liabilities. To fill it out, you need all kinds of information about your personal finances. You also need a lot of backup documents (bank statements, mortgages, utility bills, credit cards, etc).

Keep in mind uncollectibility is hard to prove. You may feel broke, but the IRS may disagree. The agency has no problem taking your personal assets or garnishing your wages as needed.

What If You Can’t Avoid the 4180 Interview?

In some cases, you may not be able to get out of the interview. If you have to go to the interview, it’s important to know what to expect. It is also a good idea to consult with a tax professional to help with the situation. Here at TaxCure we have a large network of tax professionals from around the country and only certain professionals can help with this type of issue. To see the top trust fund recovery penalty professionals, visit this link here which displays the top trust fund recovery penalty pros based upon your unique algorithm.