Hi Chet,
You asked: owe some taxes for 1997. I have a repayment plan set up with the IRS. As long as I continue making my payments, are my checking and savings accounts safe?
Right now it is, but if you default in your payments and you get a letter stating that they intend to LEVY, Once that process is started the answer will be NO it will not be safe.[b/]
You Asked:What about an HSA? If I default for any reason on my payments, can the IRS take that money?
YES [b/]
You Asked: If I set up an "Offer in Compromise", is the settlement amount required at that time, or is it payable over time?
First of all these Tax people who say that they can settle your account for pennies on a $$$$ are being investigated by the IRS. According to a Senior Auditor That I know. due to the high rate they are charging, and truthfully maybe only 1 in 1000 are approved.
Here is the updated information on "Offer In Compromise"" you have to pay up front to the IRS with the application fee of #200.00, I think this is what it is now) plus 20% of the tax you owe. the application fee is non refundable, and the 20% will be credited to your account toward your balance even if not approved. the CPA"S and EA's that I know Say it not worth the aggravation to go through the process. due to the percentage rate that is approved currently, Prior to the new laws that pertain to the "OFFER IN COMPROMISE" they were a way out, but now it is not as easy to get one approved.
You have to remember that if you incurred the debt(you say 1997) and you were Single at the time. Now lets say your Married and the way it is figured is based on what you can repay back and if your wife is working her salary is figured in to the Offer also./
I want to pay them back. But I get so worried about having money in a bank in my name for fear of it being taken from me by the gun-toting IRS agents.
There bit gun toting agents, they are just following rules of the government, they can be ingnorant, misleading, aggravating, and downright nasty, that was the old way until the reorganization in the since 2001, there a little nicer now but that also can be questioned.
As long as your paying them back monthly, they will have no recourse to badger or threaten you. Your money is safe in your own account. unless you default on your payments for more than 1 month, If at any time that you run into trouble and you cannot make a payment do not be afraid to call them and explain the problem, they will work with you.
I understand that you want to pay them back, but by you using the repayment plan, you are being charged a high rate of interest, I do not know what you owed when you incurred the debt, but at that time the interest was around 9 percent per quarter, 36% per year, then in end of 2003, 2004 and the begining of 2005 it was in the 4% or 5% per quarter, Now its back up to 8% per quarter or 32% the last 2 quarter of 06 and so far the first quarter of 07. So you would be looking at a minimun of 32% for this year.
here is an example of what you would owe if you make no payments from april 15 1998
IF YOU OWED $10,000 FOR 1997 DUE aPRIL 15, 1998 AND DID NOT MAKE ANY PAYMENTS
BALANCE OWED $10,000
PENALTIES ADDED 4,750
INTEREST ADDED 9,845
YOU WOULD OWE #24,595 TO 12/31/2006
THE WAY IT IS FIGURED IS THIS
8% PER QUARTER COMPOUNDED DAILY ON THE UNPAID BALANCE
1/2 OF 1% PENALTY COMPOUNDED DAILY ON THE UNPAID BALANCE
THIS IS ONLY FOR INTEREST AND STANDARD PENALTY, NOT ANY ADDITIONAL PENALITIES, LIKE LATE FILING FEES, UNDERESTIMATED TAX, ETC WHICH ARE ADDED IN TO YOU BALANCE.
So if you have any way of getting a loan for the balance, or borrowing the money from some one at 8 to 15% per year it would definitely save you a lot of money.
8% is the current Rate effective from Jan 1, 2007 through March 31, 2007 for the 1st quarter only
If you have any additonal questions please do not hesitate to ask, I am here for your questions to answer, if i do not know the answers I will investigate it and give you an answer if I can, If Not I will direct you in the correct direction.
Franklin Katz, ATP
Frank's Tax & Business Service
226 S. Cherokee St
Kings Mountain, NC 28086
704-739-4039
