Resolving IRS Penalties and Interest

Emerge180 Helps Handle Financial Debts

“We help alleviate the financial stress and anxiety business owners face,” says Jonathan Field, CEO of Emerge180. “We often see companies that are behind with their creditors, are also behind with their taxes.  That is why we have a full service tax division dedicated to helping businesses.”

Several different penalties may be levied against companies. Others apply to individuals as well.

Failure to File Penalty (Applies to corporations and individuals):

The failure-to-file penalty is calculated based on the time from the deadline of your tax return (including extensions) to the date you actually filed it.

Based on the amount due, a 5% penalty accrues each month the return is late up to 25%. If you pass five months, simply multiply your balance due by 25% to calculate your failure to file penalty.

When the overdue amount is more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $100 or 100% of the unpaid tax.

Failure to Pay Penalty (corporations only):

These Deposit Penalties refer to payroll tax deposits.

The IRS may charge penalties if you fail to make required deposits on time, make deposits for less than the required amount or if you do not use EFTPS when required.  For amounts not properly or timely deposited, the penalty rates are:

2%deposits made 1 to 5 days late

5%deposits made 6 to 15 days late

10%deposits made 16 days or more late, but on or before the 10th day after the date of the first notice sent asking for the money owed.

10%deposits made to an unauthorized financial institution, or payments made directly to the IRS, or paid with your tax return.

10%Amounts subject to electronic deposit requirements but not deposited using EFTPS.

15%Amounts still unpaid more than 10 days after the date of the first notice or the day on which you receive notice and demand for immediate payment, whichever is earlier.

*These penalties can reach 65% of the amount owed.

Failure to Pay Penalty (individuals only):

This is determined based on the amount of tax you owe; with penalties of 0.5% each month they are left unpaid. With this, there is no maximum limit. Penalties accumulate from the original payment deadline, April 15, until paid in full.  Also, business owners may be liable for a portion of any unpaid payroll taxes.

As General H. Norman Schwarzkopf said, “Leadership is a combination of strategy and character. If you must be without one, be without the strategy.” Emerge180 offers both qualities.

Understanding Tax and Debt Terms

Emerge180 Helps Negotiate with Creditors

“When company debts add up, it’s important to understand the terms used by creditors,” says Jonathan Field, CEO of Emerge180. His company provides expert help to businesses in financial crisis. A quick list of some of the common terms enables business owners to discuss the challenges that come with overdue and unpaid liabilities.

Lien: This provides a legal claim on property to secure the payment of a debt or obligation. It allows use of the property to continue.

Levy: Instead of a claim, property is seized.

Notice of Tax Lien: The IRS must notify the taxpayer in writing within 5 business days after the filing of a lien under these conditions:

  • The tax liability has been assessed
  • A Notice and Demand for Payment has been sent
  • The taxpayer has neglected or refused to pay or resolve the debt within 10 days of receipt of the notice.

Tax Levy: The IRS legally seizes assets to satisfy a tax debt including property, real estate and automobiles.  It is most frequently applied to bank accounts, securities, wages, and accounts receivable.  It bars further access to the seized items by the owner.

If there is no response after the IRS issues a “Notice and Demand for Payment”, the IRS may file a Tax Lien and then issue a Notice of Intent to Levy.  The IRS can empty a taxpayer’s bank account. The severity and complexities of a levy generally points to the need for Professional Representation.

Notice of Levy:  Before the levy, the tax liability must be assessed and the taxpayer must neglect or refuse to pay the debt. The Final Notice of Intent to Levy leaves at least 30 days before it levies your vehicle, house, or land as well as property held by a third party such as wages, bank accounts, and retirement accounts.

Bank Levy: The IRS can levy your bank account and take whatever money is there, no matter whose money it is.

Wage Levy (Garnishment): This orders an employer to withhold part of a person’s earnings to pay off a tax debt, including salaries, wages, bonuses, commissions, and retirement/pension earnings. They often seize up to 85% of a taxpayer’s take-home pay.

IRS Form 2848:  Power of Attorney and Declaration of Representative form is used to authorize a third party to discuss the tax issues with the IRS.

Statute of Limitations:  Ten years is the time in which the IRS or State Agency can collect on the tax.    For example, if the return from 2000 is not filed until 2004 and the tax is assessed in 2005, the 10-year period begins in 2005 and expires in 2015.Statute of Limitations for States varies considerably.

Reasonable Collection Potential (RCP):  A formula the IRS uses to determine the amount of owed taxes they expect to receive.

Trust Fund Tax Portion:  The money that the employer withholds from the employee’s paycheck for federal income tax withholding and the employee’s share of FICA and Medicare tax payment.

Emerge180 Helps Negotiate with Creditors – Contact Us Today