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IRS & Substitute Tax Forms
DebtHelp.com Tip: If you are unable to, or simply do not, file an income tax return, the IRS may prepare one for you. In fact, whenever you voluntarily do not file an income tax return, the law allows the IRS to prepare a substitute tax return for you. This will happen, however, only after numerous attempts have been made to contact you and arrive at a mutually satisfying repayment agreement of back taxes. You do not want this to happen, if at all possible.
Even though the IRS may have filed a substitute tax return for you, it still is recommended that you file a correct tax return to properly claim any deductions, expenses, etc. Your tax account will be updated with any figures you provide.
Plus, by you filing a tax return for your unpaid back taxes, you will place a time limit on the statute of limitations in which the IRS can come after you. If you never file a tax return, there is no time limit for the IRS to attempt collections.
A substitute tax return will use only the standardized amounts applicable to exemptions, deductions, income, and credits. This basic return will not include any of the numerous expenses you are entitled to.
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Back Tax Forms
Whenever you are ready to file your back taxes, you have two options:
Obtain directly from the IRS
Develop a substitute form
IRS. The IRS usually carries tax forms for prior tax years. You can obtain them by ordering online, downloading them from the IRS website, or calling the IRS toll-free to order them. You will be calling 1-800-829-1040 to request your back tax forms.
Substitute tax forms. The IRS has a Substitute Forms Unit that accepts IRS tax forms that you develop. However, there are guidelines that must be met. For instance, the substitute tax form you develop must:
Be on white, unlined paper
Conform to the physical layout of the applicable IRS form. (Have the same number of pages, i.e.)
Wording should match the official IRS form as closely as possible
All perjury statements must be worded verbatim as the original IRS form.
Prior approval is needed unless the only change is the preprinted year.
The substitute form you develop must not hinder the IRS tax process.
You need to know that the following tax forms are not allowed by the Substitute Forms Unit. You will need the actual tax form where applicable, in other words.
· Wager earner documents: W-2, W-2c, W-3, and W-3c (see Publication 1141 and 1223 for information on these forms).
· Income reporting documents: 1099 series, W-2G (gambling winnings), 1096, 1098 series, 5498 series and 1042-S (Publication 1179 provides more information on this area)
· State tax forms. Period.
· Federal Tax Deposit (FTD) coupons
· Forms 1040-ES (OCR) and 1041-ES (OCR), which may not be reproduced.
· Forms 5500, 5500-EZ, and associated schedules (see the Department of Labor website (www.dol.gov) for information on these forms).
· Requests for information or documentation you received from the IRS.
Submitting. You can send your substitute tax form to the Substitute Forms Program via email. The email address is taxforms@irs.gov. In the subject line, be sure to put “PDS Submissions”. Your documents must be in pdf format.
Here are some more guidelines for sending email substitute forms to the IRS:
Do not send individual files for each of your substitute forms. You need to send one attached pdf file containing all of the forms you wish to submit.
The process of emailing your substitute tax forms will not quicken the review or approval process. The files are dealt with in the order they are received, along with any mailed-in submissions.
Of course, the smaller your submission, the quicker the processing time.
Be sure to optimize your pdf file prior to submitting.
Largest attachment is 2.5 megabytes.
Zip files are acceptable.
In addition to submitting forms via email, you may continue to send your submissions to:
Internal Revenue Service SE:W:CAR:MP:T:T:SP Attn: Substitute Forms Program 1111 Constitution Avenue, NW Room 6406 Washington, DC 20224
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Uncollectible Category
DebtHelp.com Tip: Whenever a taxpayer cannot pay their delinquent tax bill, and there is no sign of them being able to, the IRS may put them into the category known as “uncollectible”.
Also known as an ‘undue hardship’ case, the IRS has no promise of collecting their tax debt from someone classified as “Uncollectible”. The taxpayer in this category has little, if any, assets. So, the IRS cannot levy anything. And, the taxpayer has no income beyond that necessary to meet living expenses.
If you feel that you fall into this tax resolution category, notify the IRS. The IRS personnel will prepare a Form 53 which will temporarily inactivate the IRS collection activities. This Form does not stop the interest from accruing, though. It also will not stop you from owing taxes. Only the IRS collection process is put on hold, temporarily.
About once a year, the IRS will re-exam your financial status. You will be required to complete a new Financial Statement (Form 433A). Fill out this form to the best of your abilities. The IRS will research your answers.
The IRS problem resolution method known as “Uncollectible” is the category consisting of taxpayers showing the least hope of ever improving. Taxpayers classified as ‘uncollectible’ do not have any prospects of a more positive livelihood, better training, better education, etc. Taxpayers with large tax debts, falling into old age, poor health, and poor education have a higher likelihood of being classified as ‘uncollectible’ than does a college educated, healthy 20 year old.
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Applying Guidelines For An Offer in Compromise
Offer in Compromise programs offer taxpayers a way to reduce their tax debt at less than the full original amount of tax debt. Sometimes this program is affectionately known as ‘pennies on the dollar’. The agreed amount in an Offer in Compromise includes the original unpaid tax bill, interest, and penalties. In order to apply for an Offer in Compromise (OIC), you need to follow some guidelines.
Form. You will need to file IRS Form 656 as a requirement.
Online. You can also go online to request an OIC.
Financial statement. You will need to supply the IRS with financial information about your situation. This is done on IRS Form 433-A for individuals. For businesses, you will use IRS Form 433-B.
Verification. You will need to supply verification of your financial situation. Verification includes bank statements, vehicle titles, mortgage notes, financing agreements, etc.
Cover letter. Write a cover letter explaining why the IRS should accept your OIC offer.
You need to convince them it is to their best interest to enter into this Offer of Comprise agreement. Enclose this letter with your IRS Form 656.
Fee. There is a $150 application fee. This is nonrefundable. Include this with your application package.
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Releasing A Wage Garnishment
DebtHelp.com Tip: How do you get a wage garnishment released? Since a wage garnishment is a form of tax levy, the procedures you need to follow to have one released are essentially the same.
You paid the wage garnishment and all applicable costs in full.
You have shown the IRS that the levy is causing undue financial hardship on you.
You have shown the IRS that they have a better chance of collecting the taxes if they release the asset.
The statute of limitations ended before you received the levy notice.
You are involved in an installment agreement (unless it states otherwise)
You have shown the IRS that the liabilities on the levied property are less than the fair market value. And, releasing the levy would not hinder collecting the taxes.
A wage garnishment release will remove the unpaid tax bill from your IRS account. It also will stop the garnishment from decreasing your wages, thereby giving you a larger paycheck.
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Assets That Might Be Levied
Once you have not voluntarily paid, or agreed upon paying, your back taxes, the IRS starts their enforced collection process. The point where the IRS seizes your assets is known as the IRS tax levy stage. Some of your assets that the IRS may take from you include:
Bank accounts
Personal property such as accounts receivable from your business, computers, furniture
Wages
Income from customers
Vehicles (boats, motorcycles, cars, etc.)
Social Security benefits
Retirement plans
Real property (real estate you own)
Stocks, bonds, investment items (such as dividends)
State and federal income tax refunds, current and future
Accounts that belong to you, but are held by someone else. For example, cash loan value of your life insurance, licenses, rental income, mutual fund accounts.
An IRS levy arrives shortly after the Notice of Lien. You may receive a written notice, or not. An IRS levy can happen even though no a tax lien has not been filed.
An IRS levy occurs only when you have not attempted to contact the IRS or repay your unpaid tax bill. They do not happen totally out of the blue.
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Stop IRS Wage Garnishment
DebtHelp.com Tip: How do you stop an IRS wage garnishment? As in an IRS attachment situation, you have just a couple of options.
First, keep in contact with the IRS. It has been mentioned in this tips book many times, but this is important. The IRS simply wants to know what is going on with you and truly wants to work with you. Do not ignore them.
Second, arrange repayment of unpaid taxes. Enter in a tax resolution method that is most appropriate for you. Installment agreements, penalty abatements, offer in compromise – all are there to help you repay your tax debt.
Third, keep current with your payment arrangements. If you fall behind in any of them, the IRS may cancel the agreement and move forward in its collection efforts.
Fourth, do not take it out on your employer. They are simply following instructions. It is your fault you are in this situation, not theirs.
Fifth, live on less. Learn to live on less as your wages are taken away from you to pay your back taxes.
Sixth, you can request a release from your wage garnishment.
The best way to stop an IRS wage garnishment, is to communicate willingly with the IRS. Too many taxpayers believe that by ignoring the IRS, they will go away. That is not true. The IRS can be the most persistent and annoying creditor you will ever have. They have a knack of popping up years later, when you thought it was safe.
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