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FAQ

Can I discharge my student loans because I am on Social Security Disability due to bipolar disorder?
There is some incorrect information in some of the other answers to this question.Federal student loans may be discharged if the borrower has a total and permanent disability. Some Social Security disability statuses are the equivalent of a total and permanent disability and some are not. The Social Security Administration (SSA) is now doing a data exchange with the U.S. Department of Education’s contractor to help identify borrowers who are eligible for a total and permanent disability discharge. The contractor then contacts the borrowers. But, generally, if your SSA notice of award for SSI or SSDI benefits indicates that your next review will be in 5–7 years after your most recent review, you should qualify for the total and permanent disability discharge. Visit www.disabilitydischarge.com for more information. This web site is run by Nelnet on behalf of the U.S. Department of Education. You can also call 1–888–303–7818.Unfortunately, when the debt is cancelled because of the total and permanent disability discharge, you will receive a 1099-C that treats the amount of the cancelled debt as income to you. The government gives with one hand and takes back with the other. You may then have to pay taxes on this “income.” The IRS can forgive this tax debt if you’re insolvent (total debt exceeds total assets). See IRS Form 982 and IRS Publication 4681. If you are not insolvent, you can try negotiating a settlement with the IRS using IRS Form 656.Some private student loans offer a total and permanent disability discharge similar to the one offered by federal student loans and some do not. You can find a list on www.privatestudentloans.guru, in the listing of private student loan lenders. If your lender does not offer a disability discharge, try calling the lender and ask about their compassionate review process. Sometimes the people in the call center are unfamiliar with the process, so call the lender directly (ask to speak to their ombudsman) and explain your situation. Be sure to prdocumentation of your disability and income. Sometimes you’ll be successful in getting the lender to cancel the debt. Sometimes you won’t. If you get nowhere with the lender and your disability is permanent and precludes your earning an income greater than the poverty line, look into bankruptcy discharge. This is one of the few circumstances in which a bankruptcy discharge is successful.
I just got hit with $7000 in tax bills with no money. What should I do?
First you should confirm that you owe the money. I received a bill for around $4000 a few years ago. After sending a few letters back and forth explaining their miscalculations, I got a check in the mail for $300. They're not always right. What to do if the liability is accurate:If you have low or no income, its possible that the IRS will compromise on the liability (assuming your talking about a federal and not a state tax bill). Google "Low Income Taxpayer Clinic" (LITC) and see if there is one near you. They represent low income taxpayers in a range of federal and state tax issues. If you're not near an LITC or they won't take your case for any reason, you can probably figure out how to draft and submit an Offer-in-Compromise yourself. Its IRS Form 656.If you have a good income stream, then the installment agreement is probably your best bet.
How do you settle back taxes with the IRS?
In general the procedure goes something like this:File all those past year returns you’ve ‘forgotten• to file. Nothing can be done for you until you have filed all your current and overdue returns.Contact the IRS and try to set up an installment payment agreement. If you owe less than $50,000 this usually works. Note that if you are late in paying even one payment then the IRS will usually cancel the agreement and go after you for the full balance.Make an Offer in Compromise. Note that there isn’t a lot of ‘dickering• between you and the IRS in the case of an OIC. On a bumper sticker, you file a a form 433, which is an extensive personal financial statement. The IRS looks at the form and decides if an OIC is acceptable or not, based on their rules.The IRS may accept an OIC based on one of the following reasons:First, the IRS can accept a compromise if there is doubt as to liability. A compromise meets this criteria only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law.Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible. Doubt as to collectibility exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability.Third, the IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.OICs are fairly rare, most are disapproved. Like the payment plan, any deviation from the terms of an accepted OIC can and usually does cause the IRS to invalidate the OIC and demand full settlement.If the taxpayer is just flat unable to pay because there really isn’t any blood in the turnip, then the IRS may be convinced that the debt is noncollectable, and place the taxpayer into ‘Currently not collectable• status.There are lots of rules and caveats regarding ‘CNC• status, it is not a ‘get out of tax jail free• card. But it is appropriate in many cases. For example, and older person confined to a nursing home for a disease or disability may have little likelihood of earning much money ever again even if they were once a strong earner.A taxpayer can do every one of these steps on their own, I strongly recommend getting professional help.If you are low income taxpayer then VITA may be able help you with filing and tax issues for free.Otherwise I recommend consulting an Enrolled Agent or Certified Public Accountant who is a tax specialist for advice and assistant with income tax problems or questions.To the average taxpayer, dealing with the IRS is often a frustrating nightmare. To an EA or tax experienced CPA the typical taxpayer problem is ‘Tuesday’.Note that in my opinion going straight to a tax lawyer is unnecessary for most taxpayers. There is a little a lawyer can do for you that an EA or CPA can’t, short of going to tax court. In fact many tax lawyers hire EA’s or CPA’s do to almost all of the actual tax work anyway.If, on the other hand, your tax professional or you yourself suspect you have committed an actual crime then you do need to engage an attorney as soon as possible! Attorneys have much stronger client privilege than other tax professionals. You don’t want to wind up sharing a cell with Al Capone!In closing, I can’t emphasis enough that ‘forgetting• to file your annual tax returns is the very worst thing you can do to protect yourself financially!You don’t want to to wind up paying hundreds or thousands of dollars to a tax professional to save your house from an IRS lien, only to be saddled with a huge debt to the IRS from your OIC or payment plan.That’s what will happen if you don’t file your annual tax return.
How can I get my tax debt forgiven?
I lost my business and the forced sell of my property generated a large capital gains tax that I was unable to pay. I filed a correct return but did not have the $25,000 due. The IRS doubled that with penalties and interest. They then started garnishing ever penny I earned over $300 a week. My wife called the IRS office in Atlanta but every agent she spoke to said no deals, pay up. She kept calling until she got a sympathetic agent who ask how much a month we could pay. My wife said $100 but the agent countered with $200, my said OK. We made every payment on time for 10 years. Per the IRS statute, at least in 1996 when we started, all money not collected within 10 years is considered noncollectable.My tax debt wasn’t forgiven, the IRS got the original $25,000 owed, I just got low payments and did not have to pay the penaltys and interest.
Is the Offer in Compromise process to negotiate a settlement for back taxes with the IRS simple enough to be handled by the average person without an attorney?
Yes, but the process can be intimidating. You need to realize that, basically, the IRS will want more than you can pay. This means that if you can pay your IRS debt in the 10-year statute, then you do not qualify for an OIC. Also, if you have adequate assets and/or income, you may not qualify. The OIC is intended for those who cannot pay in full.Start by looking at the OIC booklet 656. Here is a link: https://www.irs.gov/pub/irs-pdf/...Fill out the financial information in Form 433(OIC) which is about pages 7 through 16. Section 8 of this form is the offer amount computation. You must offer more than this. Also, your living expenses cannot exceed the national standards. They can be found here: Collection Financial StandardsOnce you decide on an offer amount, then fill out Form 656 Offer in Compromise. It is in the booklet at about page 23. There is an application fee of $186.00 to apply plus you have to pay 20% of the offer amount upfront. These can be waived if you qualify for low income consideration (see the form and booklet). If you don’t want to do a cash offer but want you installments, that complicates things in that the computation of the minimal acceptable offer may increase.You must (can’t be stressed enough) be current in paying current taxes. Current taxes must be covered by adequate withholding and/or current year estimates.There is a checklist if items to include. You must include all applicable items or explain why they are not in the application.The filing of an offer extends the collection statute so you should be aware of this as well.Edit #1: I was properly reminded that you should consider hiring an Enrolled Agent, CPA or tax attorney if you feel the need. They have expertise in this subject and may be well worth their fee.
A friend of mine stopped working at a university and got some sort of cash payout (some sort of retirement payout, I believe).  He is very ignorant of tax-related things and recently got a letter saying that he owes like $2022 to $3000. He has zero money and does not know where to go.  I told him that he should consider going directly to the IRS and talking to them, but since his mom died a few months ago, he has spiraled into depression and is avoiding these things. What steps should he take to (a) figure out what he owes, (b) negotiate lowering what he owes, or (c) figure out some payment structure that lets him slowly chip away at this? Any and all suggestions would be appreciated, as he has very few options now and is feeling rather overwhelmed. (I am not an accountant or lawyer and am hesitant to give him advice that might hurt his chances of negotiating something.)
I don't know enough about this situation to make a specific recommendation, all I can do is provided some general guidance.As far as figuring out what your friend owes - if the letter was from the IRS, they've already figured it based on the information on the Form 1099-R that they received from the retirement plan administrator (assuming it was a lump sum distribution). I'd suggest having a competent tax professional review things with your friend, but based on what you've provided my belief is that the IRS's numbers are probably correct.There are two ways your friend can approach paying what is owed - working out an installment arrangement with the IRS or trying an Offer In Compromise (OIC). I generally don't recommend the OIC, especially for a relatively small amount owed (and 2000/3000 is *relatively* small in IRS terms), because (a) there's a cost up front to the taxpayer (minimum $150 application fee plus 20% of the lump sum offer or the amount of the first proposed periodic payment) and (b) there's a pretty high bar to cross to even qualify - basically the taxpayer has to show that he could almost literally *never* be expected to pay the IRS what is owed within the 10-year statutory collection period, or that the payment of the amount owed would work an economic hardship on the taxpayer due to an *exceptional* circumstance. The IRS retains the final say on whether they will accept an OIC. Form 656-B (http://www.irs.gov/pub/irs-pdf/f...) describes the OIC process.Your friend could also seek an installment agreement. This is something that *will* have to be worked out with the IRS directly, as distasteful as that might be to your friend. There's also a fee for that ($105), which can be included in the installment agreement.I strongly urge that your friend talk to a competent tax professional ASAP. You should be able to find someone in your area who can review your friend's situation and make recommendations as to how to proceed. Your friend might qualify for help from a Low Income Taxpayer Clinic; check outhttp://www.irs.gov/pub/irs-pdf/p...
How do I become a part of the IRS forgiveness program?
The program is called an offer in compromise. Fresh start. Qualifying is according to your current financial situation, compliance with filing all tax returns they 2022 as required, tax withholdings or estimated tax payments must be current or get current for 2019.In addition, exum national background, age, occupation and future income potential os considered.Go to An official website of the United States government and search for Form 656-B Offee in Compromise Booklet for informationOr, call me at 323 344 2294 for free initial consultation.Note: Do not believe the radio,TV or other advertisements that make promises without knowing your case specifics.Do not sign on with someone or company that takes monthly payment from your bank account for their fees. Many scammers out there.If you call a tax resolution company or tax resolution professional. They need to ask you about cause of tax debt, compliance with filing requirements, bankruptcy filings, asset information and more.my website; Payroll Tax Debt Relief| Advocate Tax Group | Los Angeles
When people make an "offer in compromise" deal with the IRS, to pay off a large delinquent tax debt with a lump sum, for less than the full amount, what percentage of the full amount is usually settled on?
When people make an "offer in compromise" deal with the IRS, to pay off a large delinquent tax debt with a lump sum, for less than the full amount, what percentage of the full amount is usually settled on?Depends on the financial statement you submit, current income, current living expense and liquid assets they can grab.  They even take life insurance cash values as well as jewelry.  There is no such thing as “average”.  If so, the average American would have one breast and one testicle.If you look at tax court, most professionals refer to it as the “Candy Store”  Let’s make a deal is the coin of the realm. If you have even a shred of evidence or some District Court case, you are going to tear them up.  30% is what I shoot for and it is the usual settlement or I go to court.  If 90% did not settle, the courts would be backed up for 7 years.  They have to “make a deal”.  That goes also to Offer and Compromise.  The last settlement I did was $110,000 (including penalties and interest) and settled for $10,000.  I could have retired if I had laid down odds that “withholding tax” could be negotiated.  I wasn’t even sure but rolled the dice.  The government’s position was the withholding was the workers money and not the employer.  The Employer was nothing more than a fiduciary collecting the money for the government.  Bankruptcy was not an option but it was a service business and if the government didn’t deal, the business would have been shut down and no chance of receiving a dime.  Over One Hundred people would have been laid off (a cleaning business) and the bulk would have been on welfare, unemployment, food stamps etc.  The Judge order us into the Jury room and said “either come up with a deal or I will give you a deal that neither one of you will like.After what seemed like “all day”, the finally caved in for Ten grand and I lent the money to the client to with the expressed and implied condition if the IRS did not issue a full settlement, the loan was off.  Everything went smooth, and the company is still operating today and a profit.  That is less than ten cents on the dollar.I also heard of a Doctor selling everything he had in contemplation of retirement. he sold his home, business property and his practice.  Well over a million Dollars.  His tax bill was also well over a Hundred Thousand.  He simply didn’t pay them.  A Revenue Officer was assigned and of course, his file was moved into Collection.  They could find no assets.  Everything was moved out of the country.  They threatened him with fraud,  He said good luck with that one. he called them from the Airport and told them he was leaving the country.  He offered them Ten Grand to settle or go pound sand and good luck.  After about six months, his Offer and Compromise showing zero assets (confirmed by Collection) and they settled.When it comes down to collecting money, the IRS is very good at.  One of the guys I have breakfast with each day is a retired Revenue Agent from the Collections Department. We used to be bitter enemies and hated each other.  Turns out he is pretty damned sharp and that Is probably why I hated him so much.  Now, I realize he is really right up there as the best of the best.  He also has a Master’s Degree and one of the best accountants I have seen.  The point is, you can settle, but you had better be broke to do so.  If it can’t be paid off in less than five years, you can pretty much forget it.
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