What To Do if the IRS Cancelled Your Payment Plan

What To Do if the IRS Cancelled Your Payment Plan

By Dave Horwedel, EA and CEO of GuardDog Tax and Torchlight Tax

If you failed to keep up with your IRS payment agreement, you likely received a CP521 notice in the mail. This notice tells you officially that you defaulted on your installment agreement.

It also tells you how much money you still owe, the date the IRS declares that you must remit payment in full, and any penalties or cancellation terms for the agreement.

Of course, if you defaulted on your agreement, chances are you do not have the funds to pay the IRS in full.

Any tax liens, bank levies, wage garnishment or asset seizures that were held in check by the installment agreement are no longer held back.

Your income, home, savings, and good credit are all at risk.

Action should be taken. But how imminent is the threat? The answer this question depends on the exact circumstance of your situation.

This would be an ideal time to have an EA, CPA, or Tax Attorney with specialized knowledge and experience in IRS Representation, such as those at GuardDog and Torchlight Tax, review your case.  Starting with a free consultation, we could work out the urgency of action required.

Now, if you are broke and cannot afford to pay for IRS Representation, you should call the IRS.  If you really cannot pay them, you might be able to get Currently Not Collectible (CNC) Status.  This would remove any immediate threat if achieved.

A new payment plan approved by the IRS would also eliminate the immediate threat.

You might even be able to get an Offer in Compromise (OIC) approved. This is a much longer task and requires a lot of painstaking paperwork.  If you can get the CNC or a payment plan approved, then you may have time to learn how to do an OIC.

Most taxpayers get overwhelmed trying to do an OIC.

The OIC submission requires an application fee and 20% down payment on your offer amount. This submission once received and coded into the IRS system STOPs all IRS enforced collections actions. The OIC usually takes 6-12 months.

Many people think the best time to negotiate with the IRS is when you can at least pay them something. Actually, the best time to negotiate with the IRS is when you cannot pay them.

Contact GuardDog/Torchlight Tax at 1-877-758-7797 on info@torchlihgttax.com or info@guarddogtax.com for a  free consultation for help in handling your tax situation.

The IRS can generally be relied upon to tell you that you owe tax.  They cannot be relied upon to tell you what options exist to avoid or minimize your tax liability or payments.

For this reason, you either need to bone up on tax law, rules, and regulations, or seek out a tax professional you can trust.

Just as you would not go to criminal court and face the police and District Attorney without a trusted lawyer, a wise taxpayer, dealing with tax matters he is not expert in, hires an Enrolled Agent (the highest federal tax credential) or Tax Lawyer to represent him before the IRS.

Call 1-877-758-7797 for a free consultation.

You are also welcome to view other articles and videos on our Torchlight Tax website and YouTube Channel, and on our GuardDog Tax Website and You Tube Channel.

How to Handle Un-Confrontable Tax Debt

How to Handle Un-Confrontable Tax Debt

This is a common situation. For whatever reason, your IRS debt has spiraled out of control.  There seems no possible way to pay it.  You keep dreaming of  a fantastic income year to handle it, and it does not happen.  Each year the debt increases, the IRS Notices and Letters flood the mail box, and IRS tax liens, bank levies and wage garnishments trash any hope of financial recovery.

Many Americans do not realize that there are legal provisions to protect the taxpayer who is actually unable to pay his tax debt. Indeed, from an IRS negotiation standpoint, a huge IRS debt that you cannot possibly pay is the Ideal situation to get IRS tax debts cancelled!

It is a mistake to apply standard business logic to IRS tax situations.  Setting aside money so you can cut  a deal with the IRS and get them to accept a lower payment is fruitless. They will simply levy your bank account, take the set-asides, and demand the full balance, plus accruing interest. There is special action needed to deal  with the IRS. You either study up and get it, or hire someone who has it to  represent you.

If your tax debt seems un-confrontable, contact GuardDog Tax at 1-877-758-7797 for a free consultation.

Best Small Business Tax Structure

Best Small Business Tax Structure

By Dave Horwedel, EA

There is a C-Corporation which is the major corporations like those you see on the stock market. C-Corporations have stockholders, and they can make a lot of money. They have corporate meetings and boards of directors’ meetings and so on. They pay 21 % corporate income tax on the profits that the corporation makes.

Then they pay their shareholders in dividends and the shareholders pay individual taxes on the dividends they receive. This is referred to as double taxation, as they are taxed on the individual and corporate level.

There are reasons corporations do this.  One reason is that they do not have much choice. They are often too big to be treated as S-Corporations. There are advantages to being a C-Corporation. They can be listed on the stock market. They are attractive to investors.

The small businessman is usually better served by the S Corporation. The other type of corporation is called an S-Corporation. An S-Corporation is a small business corporation. It has limits on how much money it can make. It can’t have more than 100 shareholders. It cannot have foreign investors. A major thing about an S-Corporation is that the income it makes automatically flows through to its shareholders, so it never makes taxable income as a corporate entity. It all gets credited to the individuals who own it, so there’s no double taxation.

The S-Corporation is not taxed at the federal level. Some states (e.g. California, Tennessee) tax S-Corporations at the state level. This decreases but does not eliminate the S-Corporation’s tax advantage in these states.

An S-Corporation is called a flow through entity because its profit or loss flows from the federal corporate return to the individual stockholder’s return. Limited Liability Companies, Partnerships, and Sole Proprietorships also flow through entities. The business profit or loss flows from the business to the individual 1040 tax return.

So, what is the advantage of the S-Corporation?  These other entities (LLCs, Partnerships, and Sole Proprietorships are also flow through entities BUT are automatically subject to the Self Employment (SE) Tax.  This is the Employer’s and Employee’s contribution to Social Security and Medicare COMBINED, i.e. 15%.

On $100,000 of profit this is $15,000 In SE Tax in addition to Income Tax.  OUCH!

Now, an S-Corporation can save much of this money. The taxpayer will need to file an S-Corporation tax return form 1120S. Moreover, the corporation will need to pay reasonable compensation to shareholder employees and pay them on a payroll.

For a small business making $30-300K profits per year, this is often worthwhile.  If you are curious about how this might affect your taxes, you are welcome to contact us for a free consultation.

There are also asset protection advantages to S-Corporations and LLCs. Asset Protection is commonly underprioritized by business owners and this can be a major mistake. You are welcome to contact us at Guard Dog Tax and Torchlight Tax (these are sister companies) and we can review the benefits of an S-Corporation for your exact situation.

Now, there is one other entity that’s not actually a corporation, but everybody thinks it is. It’s called a limited liability company, or LLC.

Now, the funny thing about an LLC is that it can apply to the Internal Revenue Service to be treated for tax purposes as an S-Corporation.

Now a C-Corporation, if it meets the qualifications, can also apply to internal revenue service to be treated for tax purposes as an S-Corporation.

This is because S-Corporation is a tax status, not an entity.

LLCs and Corporations are formed as entities at the state level.  They can apply for S-Corporation tax status at the federal level.

If an LLC does not apply for S-Corporation tax status at the federal level, it is viewed by the IRS as a disregarded entity.   If this occurs, a single member LLC would file as Sole Proprietor.  An LLC with more than one member would file as a Partnership.

Now if a corporation does not file for S-Corporation tax status, the IRS will treat it as an S-Corporation.

For most small businesses, there is little practical difference between an LLC or Corporation.

Fees can be different. Corporations sometime have extra requirements. Feel free to contact us if you have any questions here.

I realize some of these points may seem unnecessarily complex or picayune.

You are welcome to contact us to discuss your own unique situation or email us  at info@Guarddogtax.com or info@torchlighttax.com. We offer a free consulation.

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