TaxMasters applauds the IRS granting much needed relief to taxpayers in crisis. We have posted the IRS’ new release in it’s entirety below.

IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative

WASHINGTON — The Internal Revenue Service today announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people.

Under the new Fresh Start provisions, part of a broader effort started at the IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible for Installment Agreements to help more people qualify for the program.

“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman. ”This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.”

Penalty Relief

The IRS announced plans for new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

• Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.
• Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

This penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief. The new form is available on IRS.gov.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly encourages taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, also with a 25 percent cap.

Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes.

The IRS announced today that, effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. This is a significant reduction in taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments.

Taxpayers can set up an installment agreement with the IRS by going to the On-line Payment Agreement (OPA) page on IRS.gov and following the instructions.
These changes supplement a number of efforts to help struggling taxpayers, including the “Fresh Start” program announced last year. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.

“Our goal is to help people meet their obligations and get back on their feet financially,” Shulman said.

Input from the Internal Revenue Service Advisory Council and the IRS National Taxpayer Advocate’s office contributed to the formulation of Fresh Start.

Offers in Compromise

Under the first round of Fresh Start, the IRS expanded a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations.

For example, the IRS has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on IRS Collection and Other Information

A series of eight short videos are available to familiarize taxpayers and practitioners with the IRS collection process. The series “Owe Taxes? Understanding IRS Collection Efforts”, is available on the IRS website, www.irs.gov.

The IRS website has a variety of other online resources available to help taxpayers meet their payment obligations:

• IR-2011-20: IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process
• Offer in Compromise
• Tax Tip: Ten Tips for Taxpayers Who Owe Money to the IRS
• The What If’s of an Economic Downturn
• Video on How to Complete Form 656: Offer in Compromise

FREE! Click here for our Streamlined Offer in Compromise Program analysis.

As the GAO, the National Taxpayer Advocate, and others have turned up the heat on pressuring the IRS to explain some of its collections policies, the Commissioner has had a harder time standing behind some of the more damaging actions the agency visits on taxpayers. In February 2011, the IRS Commissioner announced the IRS would be focused on helping taxpayers with outstanding tax debt get a “fresh start.” This new fresh start initiative is designed to hedge some of the more aggressive IRS collection practices that damage a taxpayer’s financial position long-term. 

Immediately following the initial IRS release in February, Tax Masters was asked by practitioners and interested media parties alike specifically about the Streamlined Offer in Compromise Program. As reported in the 2010 National Taxpayer Advocate’s Report to Congress, the IRS began a pilot program in May 2010 to test new procedures to “increase efficiencies and improve the quality of OIC case decisions.” Because the Commissioner announced the streamlined OIC program in February, our assumption is the pilot program was a smash success. The trouble was, no one knew what the streamlined program looked like except IRS insiders directly involved with the pilot. Four months later, the IRS has pulled the curtain back and further defined just what the Commissioner was talking about when he announced the streamlined OIC.

What Delinquent Taxpayers Need to Know About the Streamlined Offer in Compromise Program

The expanded Streamlined Offer in Compromise program includes:

• Fewer requests for additional financial information
• Requests for additional information by phone instead of by snail mail, when required
• Greater flexibility on the part of the IRS when determining your ability to pay

According to the Streamlined Offer in Compromise Program page on the IRS website, taxpayers who owe a tax debt may qualify if they:

• Earn wages through an employer, either by W2 or 1099
• Are currently unemployed or out of work
• Are self-employed with no employees and gross under $500,000 per year

The IRS site further states that you may be eligible for the streamlined program if:

• Your household income is less than $100,000, and
• Your total tax debt is less than $50,000 when you file your offer in compromise

How to Take Advantage of the Streamlined OIC

If you believe you qualify for a streamlined offer in compromise you should call us today. Tax Masters will protect you while we help you file all delinquent tax returns and regain compliance with the IRS. While we are doing the work to get you back in compliance, we will work with you to complete a 433 Financial Analysis, which will show you whether you should qualify for the Streamlined Offer in Compromise Program. After you regain compliance and file all your old returns, we will be glad to help you submit an offer in compromise if our financial analysis indicates you should qualify. The best part? You don’t pay for any TaxMasters offer in compromise preparation services unless the IRS accepts your offer. You would still be responsible for the $150 application fee.

You must act to take advantage of the new Streamlined Offer in Compromise Program. The IRS will not contact you to let you know you qualify. The IRS has opened the door for those of you with tax debts under $50,000. Will you walk through it? Or will you wait and let the IRS take a little of what you own at a time until it is gone?

Don’t let this opportunity pass you by if you owe the IRS and cannot afford to pay the tax. The IRS is trying to give you a fresh start. Take your first step toward a fresh start today and call us now at (800) 581-0456.

Don’t Know What the Offer in Compromise Is? Ask Noah!

Tax Masters–Streamlined Offer in Compromise Update

You have probably seen Patrick Cox, CEO of Tax Masters, on your screen many times. Whether in Tax Masters commercials, on the Tonight Show with Jay Leno, or speaking about current tax topics in the media, we wanted to give you another side of Patrick Cox.

We recently asked Patrick Cox to talk a bit about Tax Masters services, what the company promises and delivers, and to shed some light on the new industry-leading business model and 18-month refund policy.

Patrick Cox, CEO of Tax Masters, on the company he built…

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As usual, ABC News missed the mark in their interview of Nina Olson, the National Taxpayer Advocate with the IRS. ABC had the opportunity to speak to the National Taxpayer Advocate about tax problems and chose to air more information about the symptom of tax disease (tax debt) than about the problem itself (IRS compliance). The simple fact remains that most tax problems begin and end with tax compliance issues, like failing to file tax returns, failing to make quarterly estimated tax payments on time, or failing to make payroll tax payments when they are due. The vast majority of people who come to Tax Masters with tax problems have tax compliance issues. They may want to settle their tax debt, and invariably everyone with a tax debt wants to find some way out of their situation, but that settlement is not possible until the taxpayer files all their delinquent tax returns and makes any currently due quarterly or payroll tax payments.

While ABC News focused on the debt issue, they did not include any content from the Nina Olson interview addressing how to regain compliance and the importance of doing so.

At Tax Masters, we have been asking for years, the right questions. This is direct content from Patrick Cox, Tax Masters’ CEO and founder. ”Are you being audited? Have you not filed tax returns for years? Has the IRS come to your home or place of business? The IRS will relentlessly pursue you for unpaid taxes. TaxMasters can get between you and the IRS. We’ll make sure they treat you fairly and treat you with respect.”

ABC News chose to focus on “pennies on the dollar” tax settlements and, in doing so, failed the American taxpayer dramatically. The focus needs to be on compliance. If, after a taxpayer is back in compliance with the IRS and still owes a tax debt, he or she can often afford an IRS payment plan. If the taxpayer cannot afford to pay the IRS, cannot afford a payment plan, and has no assets, there are other collections alternatives like partial payment installment agreements, currently uncollectible status, and the holy grail of tax relief, the offer in compromise.

ABC News failed to focus on the core issue of tax woes. Instead of discussing the issue, tax compiance, they chose to concentrate on the symptom, which is tax debt. Shame on you, ABC. You should have listened.

Transcript of ABC News Interview of Nina Olson

ABC News: Can I trust the IRS to work with me on my tax problem?

Nina Olson, National Taxpayer Advocate: Taxpayers fear the IRS and there’s a reason for that. The IRS is the most powerful creditor in the United States. We have awesome collection powers. And so there’s a basis for that fear. But that fear can be exploited so that taxpayers aren’t even willing or aren’t comfortable doing something that could protect themselves; just picking up the phone and talking to the IRS and walking through the problem, or even reaching out to my organization, the Taxpayer Advocate Service if they’re really having an economic hardship. We can help you and we can get collection activity stopped while we try to solve the problem.

ABC News: Is it possible to settle my IRS debt “pennies on the dollar?”

Nina Olson, National Taxpayer Advocate: Actually it can happen that because of your ability to pay. You know, if you have such reduced ability to pay, you may end up paying what could be pennies on the dollar of what you owe to the IRS. But it’s not an easy thing and you have to show the government, you have to show the IRS, that they are not going to be able to get any more money out of you than pennies on the dollar. And if that’s the truth, then you can settle with the IRS for that amount. But to say that you’d be able to do that routinely is just not true.

ABC News: How does the IRS determine whether I qualify to settle my debt for less than I owe?

Nina Olson, National Taxpayer Advocate: What the IRS does is it looks not only at your income and your expenses, but it looks at all your assets. You know, what is your net equity in assets? And so we’re getting a whole complete financial picture as well as mitigating circumstances like illnesses or job loss. But, you’re really looking at the financial picture and then deciding what is that person’s ability to pay?

ABC News: If I want to hire someone to help me with getting a collection hold, who should it be?

Nina Olson, National Taxpayer Advocate: Someone at the company who is qualified to practice before the IRS. It has to be an attorney, a CPA, or what’s called an Enrolled Agent, someone who’s taken a test to practice before the IRS. That person has to call on your behalf and they have to let the IRS know that they are there, that they have been hired to represent you. And then they can talk to the IRS about getting a collection hold. Now you too, a taxpayer, can call the IRS and ask for a collection hold and, you know until they can work out some collection alternatives like an installment agreement or an offer in compromise. A lot of this the taxpayer can do him or herself. But a lot of taxpayers are frightened of doing that themselves.

ABC News Interview of Nina Olson, National Taxpayer Advocate

ABC News Tax Masters – Taxpayers Fear the IRS – Nina Olson, National Taxpayer Advocate

Monday night, April 11, seven days before American taxpayers are required to file a federal tax return or mail in an extension, Tax Masters Patrick Cox appeared on the Tonight Show with Jay Leno in a segment called “Go to the Expert.”

The sketch shows Tonight Show host Jay Leno proposing outlandish deductions taxpayers have tried to take over the years and asking the audience to vote by applause on whether the deduction is allowed, or not allowed.  Leno then defers to Patrick Cox, the tax expert, to declare the expense deductible or not and then to explain his reasoning.

The sketch is segmented into two videos below. As always, your comments are welcome. And don’t forget to file your tax return or send in an extension this year by April 18.

The Tax Expert – Part 1

The Tax Expert – Part 2

Deductible or Not Deductible?

Scenario 1

Jay Leno:  Man in Slippery Rock, Arkansas has emphysema. His doctor tells him he needs to get more exercise on a regular basis. Guy puts in a big swimming pool in his back yard. Come tax time, he writes off the pool; deducts the cost of the pool, calling it a necessary medica expense. Audience, how many think that is deductible? How many say not deductable? Let’s go to the man. Tax Master, what do you say?

Tax Master – Patrick Cox:  That was deductible.

Jay Leno: All right, now why?

Tax Master – Patrick Cox: If it’s doctor’s orders, it’s legit.

Jay Leno: Really?

Tax Master – Patrick Cox: Absolutely. The chemicals, the cleaning, maintenance, everything.

Explanation

Capital expenses incurred for home improvements as a result of prescribed medical care are allowed expenses. From the IRS website:

• http://www.irs.gov/publications/p502/ar02.html#en_US_publink1000178902
  Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.
• http://www.irs.gov/publications/p502/ar02.html#en_US_publink1000178851
  Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.

Scenario 2

Jay Leno: The madam of a brothel in Oklahoma, where prostitution is not legal, writes off $50,000 in sex toys, condoms, whips, chains, and everything used by her employees and her clients. She put these on her tax return. audience, how many think that is deductable? Wow, they know the law. How many say not deductable. It’s an illegal activity. Tax Master?

 Tax Master – Patrick Cox: Jay, that one is deductable.

Jay Leno: Now wait, now why? She’s performing an illegal service. How can you deduct something like that?

Tax Master – Patrick Cox: As long as you report the income, the IRS can’t turn you over to the police even if your business is illegal.

Jay Leno: So what you’re saying is, they have no morals.

Tax Master – Patrick Cox: You said that, not me.

Jay Leno: Oh. Well. Put the ho in Oklahoma.

Explanation

All income is taxable income. Business-related expenses are allowed by the IRS and are enforced on a national basis. If adult-related items are deductable in Nevada as part of a legal business, they are also deductable in Oklahoma. It is not the job of the IRS to enforce local or state laws, but federal tax laws.

• http://www.irs.gov/compliance/enforcement/article/0,,id=112999,00.html
  When no other crimes could be pinned to Al Capone, the Internal Revenue Service obtained a conviction for tax evasion. As the astonished Capone left the courthouse he said, “This is preposterous. You can’t tax illegal income!” But the fact is income from whatever source derived (legal or illegal) is taxable income. 

About Tax Masters

Houston based Tax Masters has served tens of thousands of clients and had incredible success with helping taxpayers regain compliance with the IRS, settling federal tax debt, defending clients in audit, setting up monthly IRS payment plans, and filing past-due tax returns. The company is publicly traded under the stock symbol TAXS.

About Patrick Cox

Patrick Cox is President, CEO, and Board Director of Tax Masters, Inc. (TAXS), a company dedicated to helping consumers solve their tax problems. Patrick Cox is a tax expert who founded Tax Masters in 2001, which has become one of the most effective IRS tax representation firms in the IRS tax relief industry. Before founding Tax Masters, Patrick Cox served as Vice President of Finance for Kemper Insurance Companies and owned a small CPA firm in Houston, Texas.

January typically marks the beginning of the IRS tax filing season. But after Congress took so long to agree on a tax bill in late 2010, the IRS is running  a few weeks behind on being able to accept millions of tax returns. Taxpayers who itemize deductions and file their taxes electronically may have to wait until at least mid-February to file because the IRS was not able to complete programming before January, 2011.

Patrick Cox, TaxMasters’ CEO, was asked to sound off on the tax filing delays during Varney & Company on the Fox Business Network. Click the screen below to see the interview, conducted by guest hosts Charles Payne and Tracy Burns.

The basic issue is that the IRS did not, or could not, anticipate the tax bill Congress would pass and the effect final legislation would have on filing when it was finally signed into law.  While some have called the delay in filing and refunds nothing more than a hiccup in the 2011 filing season, Patrick Cox pointed out that even a short delay in filing and receiving refunds “could push some people into the instant refund loan or into the refund anticipation loan, which is in advance of even filing your return. And those do carry very high interest rates. Three or four hundred percent a year is not unheard of.”

Anyone who itemizes instead of taking standard IRS deductions will be affected by this delay. Perhaps those hardest hit will be the taxpayers who depend on their tax refunds to pay off bills or holiday debts. As discussed in the interview, even school teachers are affected by these delays if they itemize their allowed $250 classroom materials deduction.

When asked about the significance of the IRS taking only a few weeks longer this year to issue refunds, Cox replied, ”If you came up to mid-April and you said [to the IRS] I tell you what, I’m going to take an extra two or three weeks to pay you, you’d pay pretty hefty penalties and interest for that privilege. So, it seems like the rules are different for us and for the government.”

About Tax Masters

Houston based Tax Masters has served tens of thousands of clients and had incredible success with settling federal tax debt, defending clients in audit, setting up monthly IRS payment plans, and filing past-due tax returns. The company is publicly traded under the stock symbol TAXS.

Stuart Varney invited Patrick Cox, Founder and CEO of TaxMasters (stock trading symbol TAXS), on “Varney & Company” this morning to discuss a recent report from the Treasury Inspector General for Tax Administration (TIGTA) which stated that nearly 50,000 prisoners claimed tax refunds totaling over $130 million even though they reported on tax returns that they received no wages.

“Anytime you have the government giving out what we call refundable credits, you’re really not getting a refund. You’re getting a distribution of government assets by filing a return claiming that you have a limited amount of income and a couple dependents,” said Patrick Cox. “The IRS has been chasing the fraud in this program for a long time.”

According to the IRS Management Challenges Memorandum from TIGTA to Secretary Geithner on October 15, 2009, the IRS admits erroneously paying $10 billion to $12 billion every year to people inaccurately claiming refunds based on the Earned Income Tax Credit (EITC). It may be easy to get bent out of shape by 50,000 prisoners costing the US Treasury $130 million in a year. The fact is that  this is a small drop in the bucket compared to the billions issued annually by the IRS to people who are defrauding the system through the EITC program. The EITC, in its current form, encourages very low income filers to make sure they qualify. If they make a few dollars too much in a year, they miss out on thousands of refund dollars.

Concerning prisoners in particular, “The form you use to file [to claim the EITC] doesn’t ask you if you’re a prisoner,” said Cox. “Maybe that should be one of the questions.”

The conversation quickly turned to the possibility of the Bush tax cuts being extended before year’s end. Cox stated that keeping taxes low will help businesses and the economy, but expressed that people will still have tax problems because there are always taxpayers who fail to file, cannot pay, or who hope to pay less than they owe.

The final question was very direct. Do we need to simplify the tax code?

Cox’s response? “Simplification doesn’t hurt anybody… Ultimately, our business and economy are complicated. Simplifying [the tax code] completely is probably not very realistic.”

About Tax Masters

Houston based Tax Masters has served tens of thousands of clients and had incredible success with settling federal tax debt, defending clients in audit, setting up monthly IRS payment plans, and filing past-due tax returns. The company is publicly traded under the stock symbol TAXS.

What are your thoughts about the ad? Share them here. In case you haven’t seen the ad, here it is…

The basic messaging is simple: 

There’s nothing like having a tax problem to ruin your holidays. If you have years of unfiled tax returns, are facing an IRS audit, or owe a substantial debt to the IRS, we can help. You don’t have to stand by while the IRS garnishes your wages and levies your bank accounts over the holidays. It’s always better to act sooner rather than later, determining the best path to repay the IRS what you can afford on your terms.

We’d love to see your comments. What say you? come on, we know you have an opinion!

About Tax Masters

Houston based Tax Masters has served tens of thousands of clients and had incredible success with settling federal tax debt, defending clients in audit, setting up monthly IRS payment plans, and filing past-due tax returns. The company is publicly traded under the stock symbol TAXS.

Patrick Cox made an appearance on the Fox Business Network this morning during ”Varney & Company.” Guest host Charles Payne asked the Founder and CEO of Tax Masters about what will happen to the economy if the Bush tax cuts are allowed to expire on December 31, 2010, effectively raising taxes on Americans across the board.

Patrick Cox shared his perspective on how increased taxes will harm the economy because businesses can afford to hire fewer employees if they are required to pay more to the government. As he put it, business expansion leads to jobs and jobs fuel the economy. When asked about the possibility of Washington simplifying the tax code and taxing system, the Tax Masters CEO said, “You start with the basic premise that people should pay X percent of their income. And then you start trying to make exceptions and everybody has a valid argument for what exceptions there ought to be. The closest we ever came to a true flat tax was the 86 Tax Reform Act under Ronald Reagan. Since then, we’ve continued to add exceptions and complexities to it and I think we’ll continued to do that.” 

Patrick Cox also made the comment that the recent election clearly shows that Americans understand that the economy will improve if businesses are expanding and hiring.

Guest host Charles Payne ended the segment by showing a clip from the recent Tax Masters Saturday Night Live spoof of the Tax Masters commercials. Patrick Cox showed both profiles on camera to dispel the rumors that he in fact has a tiny unformed step-brother named Daniel attached to the left side of his head.

About Tax Masters

Houston based Tax Masters has served tens of thousands of clients and had incredible success with settling federal tax debt, defending clients in audit, setting up monthly IRS payment plans, and filing past-due tax returns. The company is publicly traded under the stock symbol TAXS.