Case Study: An Affordable Payment Plan & 72% Saved

a self-employed woman working in her office

I’d like to tell you about a client that we recently helped settle an IRS tax debt that you might be able to relate to. We will call her Ms. W to respect her privacy. 

 

The Collection Letters and Loss of Sleep

When Ms. W first contacted us, she was beyond frantic. She had received many collection letters from the IRS and had been losing sleep due to the stress. She shared with me all she knew about her tax situation but admitted that there was a lot she did not know because she had been putting off her IRS issues for a few years.

 

The Failed IRS Payment Plans

She explained that a few years back she had thought she owed over $20,000 to the IRS. She had tried to work with them many times including setting up a few different payment arrangements. These arrangements were never affordable for her, and she also noticed that the tax debt was not decreasing much at all with each payment that she made. 

She missed several payments because she could not afford them and as a result defaulted on her payment arrangement. But she also had another issue. Each month as she was making these high payments to the IRS she was not putting any money aside for the current year’s tax debt. So, with each new tax year, she would have a new tax debt and the IRS would default her out of her current payment plan. (When you set up a payment arrangement with the IRS, you must remain current with your tax filings and tax debt.) She was a 1099 employee, so the taxes were not being withheld for her. 

After many failed attempts to pay the debt back, she not only stopped trying to pay but also stopped filing her taxes altogether. At the time she contacted us she thought that there were probably 4 or 5 years of unfiled taxes. She was not really sure about anything that was going on with her tax obligations at this point.

 

Other Tax Relief Companies Did Not Help Her

She was terribly upset and felt like she really had no way out of this situation. She had spoken to many other tax relief companies and each time felt disrespected and eventually concluded that there was nobody out there that would work with her financial situation. 

Most of these companies wanted large upfront costs which were based solely on the limited information she provided about her situation. I assured her that that was not how we do business at Innovative and apologized for what she had dealt with from other companies in our industry. Unfortunately, any time you have people in vulnerable situations like her you will have some bad apples in our industry that wil try to take advantage of them.

 

Our Process to Help Ms. W

I explained our tax relief process and how a case like hers should be handled. One glaring fact was that she did not know what her tax debt situation was, so I needed to figure it out for her. As I always say, “facts first.” 

We started off her case with a Tax Investigation. This is where for a small deposit our agents contact the IRS on her behalf. They put representation on file and communicate directly with the IRS to figure out the facts of the case and the true work that must be done. After Ms. W spent many months trying to get in touch with the IRS and never getting through and then getting the run around from many other tax relief companies, she was elated when within 10 days we were able to come back with a full game plan that included exact numbers and a strategy to fix her situation.

Like many of the cases that we take on, her situation was not exactly as she had thought. At this point, she only owed about $14,000 which was in active collections. There were also only 2 years that needed to be filed, not 5 as she had thought. Since we had representation on file, we able to obtain protection for her which bought us some time to get in there and start fixing her situation. 

We laid out a full strategy for her and showed her all the work that had to be done on our part to get her into a payment program with the IRS that she could afford. Even though she was in a tight financial situation, we were able to figure out a way to make this all affordable for her.

 

Getting Ms. W Back Into Good Standing With the IRS

The first thing that had to be done was get her taxes filed up to date and get her back in good standing with the IRS. Since she was a 1099 employee, she was viewed by the IRS as self-employed, running her own business. So, we were able to use her expenses within the unfiled years to limit the additional tax debt that was accrued. She ended up owing a little more than $25,000 altogether. 

When she was finally in good standing with the IRS in terms of being current with her tax filings, were able to move on to the next phase and negotiate her tax debt.

 

Her Tax Debt Reduced by 72%

When it comes to owing money to the IRS, a compliant taxpayer has a lot of rights that our agents can enforce. With Ms. W’s financial situation being so tight, we were able to negotiate what is called a “partial payment arrangement” for her. This is where, because of her inability to pay the full amount, we could get her into a payment plan with low payments. In her case, she would be responsible to pay only $59 a month for 10 years. She was so relieved that she finally had affordable payments! And she was blown away by the money we saved her. 

If moving forward she continued to file her taxes on time and did not accrue any further tax debt, she would only have to pay back a little over $7000 to the IRS on a $25,000 tax debt–a savings of 72%! She would save almost $18,000 not to mention all of the penalties, fees, and interest that the IRS normally would have charged in the payback of the tax debt. 

 

Helping Ms. W Stay on Track

To help make sure she would continue in good standing with the IRS so that she could keep the great benefits we got her, we finished up her case with some tax education and future tax planning so that the only reason she would ever need us again was to file her taxes every year moving forward.

If you can relate to Ms. W’s case whether it’s because you have unsuccessfully tried setting up a payment arrangement with the IRS or have avoided dealing with your tax issues altogether, we can help. Contact us for a free tax relief consultation and advice.

 

Ozzie Gomez is a Senior Tax Settlement Agent and the owner of Innovative Tax Relief which holds business licenses in Tax Resolution, Tax Audit Representation and Tax Preparation.  With almost 10 years of experience in the tax resolution industry, he has personally helped more than 4,000 individuals and businesses resolve their tax issues.

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