On December 4th, 2015, President Obama signed the Fixing America’s Surface Transportation Act (“FAST”) into law.The law--which focuses on improving America’s transportation and highways through improved funding--has an odd section, Section 32101, Subtitle A, Title XXXII. This section has seemingly nothing to do with highway funding or transportation,but rather amends sections of the Internal Revenue Code to allow the IRS to revoke or deny taxpayers a passport if they owe delinquent taxes to the government, and it requires theIRS to use private debt collectors.
Why this provision was included is unclear. It is not authority the IRS asked for and, with regard to privatedebtor collectors, has in the past proven harmful to tax compliance. Instead of properly funding the IRS by allowing the hiring of properly trained and qualified revenue officers, the FAST act appears to bepushing a troubling “outsourcing” policy.What this means for you if you owe back taxes to the IRS is that, if you do nothing, you face not only theusual enforced collection action by the government (i.e. liens and levies) but also harassment by private debt collectors and having your passport revoked, even if you have previously been deemed uncollectable.
What You Need To Do Today
If you owe back taxes to the IRS we can help you not only avoid the unpleasantness of private debt collection and a revoked passport, but we can help you bring this headache to an end once and for all. There are a number of options for resolving your old tax debt, including installment agreements, Offers-in-Compromiseand even bankruptcy. What you need to do immediately is get working on this problem, contact the IRS andbring the situation to a close.
An installment agreement is a payment plan with the IRS to repay the back tax debt over time. The amount you have to pay depends upon your personal financial situation and your ability to pay. The IRS will calculate the ability to pay based upon your gross income and allowable expenses.
An Offer-in-Compromise is where the IRS agrees to settle your back tax debt for less than the full amountowed. How much you need to pay to settle the back tax debt will depend upon the IRS financial analysis todetermine your ability to pay, called your “reasonable collection potential” or “RCP.” The IRS’s RCP calculation will include net equity in assets (with some exemptions) and future income (gross income less allowable expenses). An Offer-in-Compromise can be a great way to settle your back tax issues, buta complete analysis should be done to review the RCP calculation and if an Offer-in-Compromise makes sense for you.
Income taxes may be dischargeable if the tax meets certain requirements. In addition to discharging the taxes themselves, the penalties and interest may potentially follow the underlying tax and be discharged as well. Finally, other debts can also be cleaned up simultaneously. A complete analysis needs to be done both by usas tax professionals and a competent bankruptcy attorney. Bankruptcy may be the quickest and cheapest way to resolve the outstanding tax debt and clean up your financial issues.
With the implementation of the FAST Act it has now become more urgent that taxpayers work aggressively toresolve their outstanding tax debt before they become the targets of new IRS enforcement and harassment.To explore your tax resolution options, make an appointment to request a free consultation.
Rohit Kalra is a tax resolution expert and the owner of Kalra CPA & Associates, PC, a Certified Public Accounting firm based in Fairfax, Virginia. Rohit dedicates his practice exclusively to representing taxpayers before the Internal Revenue Service and solving complex tax problems. Rohit is a licensed CPA and holds a Master of Science in Taxation from the University of Virginia. While obtaining his M.S. in Taxation at UVA, Rohit also taught undergraduate accounting at the McIntire School of Commerce at the University Of Virginia. Before entering private practice nearly ten years ago, Rohit's prior experience included serving private companies, private equity firms, and ultra-high-net worth individuals in the tax practice at PricewaterhouseCoopers. Rohit is a frequent author and speaker who genuinely enjoys educating businesses and individuals on financial topics.