 |
| |
|
|
|
| |
|
 Contact Us
Jefferson Tax Relief
2748 North Lincoln Avenue Suite #2
Chicago, IL 60614
316-422-7865 |
| |
|
|
|
|
 |
| IRS Collection Forms |
| For taxpayers who owe the IRS tax debt, it may be helpful to be aware of the
different IRS collection forms so you know what to expect from the agency once the
owed amount is assessed. These forms are sent to the person in question who must
then determine whether or not it would be beneficial to complete, sign, and send
them into the IRS or not. Here is the list: |
|
| Form 433-A |
|
| Form 433-A is an IRS collection form that gives the IRS a comprehensive layout of
what the taxpayer’s financial situation is. It the most common (and thorough) form
that they use, and anybody who wishes to set up an Installment Agreement or Offer
in Compromise with the IRS will be required to complete said form and submit it to
the agency for review. It is necessary that taxpayers report exactly what the Form
433-A is asking, and certainly report honestly what their situation is. If a taxpayer
attempts to adjust (for example, income) any piece of information that would lower
the amount of tax they owe, they are putting themselves subject to potential perjury
charges and a possible criminal investigation. |
|
| There are two parts to the Form 433-A. Assets and liabilities make up the first part
of the form, while income and expenses cover the second section of the form. Values
of assets that taxpayers report on the Form 433-A are subject to interpretation by
the IRS, and this can often lead to headaches for taxpayers who disagree with the
value of an asset claimed by the agency that may conflict with that which was
reported on the form. |
|
| Perhaps the most important section of the Form 433-A is the section where the
taxpayer reports their monthly income and expenses. With this information, the IRS
will be able to determine roughly how much disposable income the taxpayer may
have to pay off the tax debt in question. In addition, with this information available
to them, the IRS can also better determine how long it will take the taxpayer to pay
off their tax debt as well. Also up for debate is what is deemed as a necessary
expense, and what expenses the IRS will not consider such. Keep in mind that the
IRS will not consider expenses for pleasure, and if included, those expenses will
surely be omitted from the form. |
|
| Once the IRS receives the completed Form 433-B, they will typically take one of the
following actions. They may require that the taxpayer pay off the debt in full at once.
This is typically the case for those taxpayers who have a lot of disposable income or
have liquid assets that could be used to pay off the debt. They may consider setting
up an Installment Agreement with the taxpayer, which would allow the individual to
pay off their debts over an extended period of time. They may also consider setting
up an Offer in Compromise with the individual, which would allow the taxpayer to
pay off their tax debts for a reduced amount of the total balance. Or, the may attempt
a garnishment of wages, property seizure, or file a Federal tax lien to help secure the
debt. |
|
| Form 433-B |
|
| See Form 433-A. The difference between the two forms is that Form 433-A is for
individuals while Form 433-B is for businesses. |
|
| Form 870 |
|
| This form would be sent to a taxpayer who has an agreed tax liability with the IRS.
Essentially this allows the IRS to assess the liability without going through the
standard routine of sending out a Notice of Deficiency to the person first. In
addition, this is a form that the Examination Division of the IRS will typically handle.
After the taxpayer fills out the form and sends it in to the IRS, the agency has a 30-
day time limit to assess the liability in question. If the taxpayer pays off the liability
in full within a 10-day time period after the assessment is made, they will not have
to pay any additional interest to the IRS. It is necessary to keep in mind that if Form
870 is completed and sent in to the IRS, the taxpayer waives their right to contest
the IRS in the US Tax Court. Ultimately the taxpayer weighs the advantage of cutting
interest by sending the form in to the IRS versus waiving that right to take their case
in to tax court before making the final decision. |
|
| Form 900 |
|
| Form 900 in almost 100% of all instances is one particular form that can never work
in the favor of the taxpayer for those who choose to sign said form and sends it in to
the IRS. In simple terms, this form, if signed and sent in, extends the Statute of
Limitations for the IRS to collect on the tax debt that is owed. The Statute of
Limitations refers to the amount of time the IRS may legally try to collect on a tax
debt from the person in question. Under Internal Revenue Code (IRC) section 6502,
the agency may collect on a tax debt for up to 10 years from the time that the
balance is assessed on the taxpayer. |
|
| As a result, there really is no benefit from the standpoint of the taxpayer to sign
Form 900 and send it in to the IRS. If you refuse to do so, be aware that the IRS will
also analyze your financial situation to see if you are employed and/or have any
assets. If the answer is yes to either of those questions, the agency may move to
garnish wages or put a lien on a piece of property to secure the collection of the
debt. |
|
| Form 2261 |
|
| By signing and sending Form 2261 in to the IRS, the taxpayer has thus agreed to let
the agency take a portion of their future wages to pay off the tax debt amount owed.
Typically, the IRS strategically uses this form for taxpayers who have fluctuating
income. The IRS will usually use a “sliding scale” to determine how much of the
future income will be dedicated to paying off the tax debt. Consider the following
example: |
| |
The IRS will take 0% of income under $20 K.
The IRS will take 5% of income between $20-30 K.
The IRS will take 15% of income between $30-60 K .
The IRS will take 25% of income over $60 K. |
|
|
| There is no formal or legal requirement for taxpayers to sign a Form 2261. However,
it will almost always be necessary to do so if submitting an Offer in Compromise to
the IRS for a tax settlement. |
|
| Form 2751 |
|
| The IRS typically uses this form with business owners or corporate officials.
Essentially, by signing Form 2751, the taxpayer is accepting responsibility and
claims liability for a Trust Fund Recovery Penalty. This means that the taxpayer in
question did not properly withhold or pay back the IRS employment taxes from that
year for their employee(s). Since signing the form implies liability, by doing so
taxpayers waive their right for any penalty abatement or even the right to claim for
one. Also, taxpayers who sign this form waive their right to have their case taken in
front of the IRS Appeals Office for review and further consideration. |
Go Back
|
|
|
Learn about Installment Agreements, how to submit an offer for an Installment Agreement, and who is likely to qualify for an Installment agreement with the IRS to pay off their tax debt.