Understanding the Purpose of Form 656

Form 656 serves as the official application for individuals or businesses seeking an OIC from the IRS. It provides detailed information about the taxpayer's financial situation, supporting their request for a reduced settlement amount. The purpose of Form 656 is to demonstrate to the IRS that the taxpayer is unable to pay the full tax debt within a reasonable timeframe, making a compromised settlement the best resolution.

Gathering the Necessary Documentation

Before tackling Form 656, it is crucial to gather all the necessary documentation. This includes:

• Detailed financial statements: Provide a comprehensive overview of your income, expenses, assets, and liabilities.

• Proof of income: Submit recent pay stubs, profit and loss statements, or any other relevant documentation that supports your reported income.

• Bank statements: Include statements from all your bank accounts to substantiate your financial standing.

• Investment...

Understanding Form 656 and Mastering its Completion for an OIC Submission

When dealing with tax debts, individuals or businesses struggling with financial obligations may find relief through the Offer in Compromise (OIC) program offered by the Internal Revenue Service (IRS). The OIC program allows taxpayers to settle their tax liabilities for less than the total amount owed. To initiate this process, one must submit a comprehensive and accurate Form 656, also known as the Offer in Compromise application. In this article, we will delve into the details of Form 656, exploring its purpose, requirements, and the essential steps to complete it effectively for a successful OIC submission.

Understanding the Purpose of Form 656

Form 656 serves as the official application for individuals or businesses seeking an OIC from the IRS. It provides detailed information about the taxpayer's financial situation, supporting their request for a reduced settlement amount. The purpose of Form 656 is to...

The Internal Revenue Service (IRS) has reported a decline in tax refunds for Americans this year, as stated in an article on Fox Business. The average refund amount has decreased by 16.7% compared to the previous year, with taxpayers receiving an average of $2,833. This decline can be attributed to ongoing changes in the tax code and the impact of the Tax Cuts and Jobs Act, which was enacted in 2017.

The article emphasizes that the decrease in tax refunds is a result of several factors. One key factor is the changing tax landscape, with adjustments made to deductions, credits, and tax rates. The Tax Cuts and Jobs Act brought about significant modifications to the tax code, and these changes have affected the refund amounts received by individuals. Consequently, taxpayers are experiencing lower refund amounts this year.

Furthermore, the article highlights that smaller tax refunds do not necessarily mean that individuals are paying more in taxes. It is essential to consider the...

Penalty Abatement: Your Guide to Resolving IRS Penalties

Introduction

Dealing with tax issues can be a stressful and daunting task. If you have ever faced penalties from the Internal Revenue Service (IRS), you know how burdensome they can be. However, there is a glimmer of hope in the form of penalty abatement. In this comprehensive guide, we will delve into the world of penalty abatement with the IRS and provide you with the knowledge and strategies to navigate through this complex process successfully.

• Understanding IRS Penalties

Before we dive into penalty abatement, it's crucial to grasp the different types of penalties the IRS imposes. The IRS may assess penalties for various reasons, including late filing, late payment, accuracy-related issues, and underpayment of estimated taxes. These penalties can accumulate over time, leading to substantial financial burdens.

• What is Penalty Abatement?

Penalty abatement is a relief mechanism offered by the...

Dealing with tax debt can be overwhelming and stressful, especially when you're struggling to meet your financial obligations. Fortunately, the Internal Revenue Service (IRS) offers taxpayers a potential solution through the Offer in Compromise (OIC) program. An OIC allows eligible individuals to settle their tax debt for less than the total amount owed. However, not all OIC applications are accepted. The IRS carefully evaluates several factors before approving an OIC. In this article, we will explore the key considerations the IRS takes into account when accepting OICs, helping you understand what it takes to increase your chances of a successful OIC application.

• Ability to Pay

The IRS will assess your ability to pay based on your current financial situation. This includes factors such as your income, expenses, assets, and liabilities. The IRS will review your income sources, employment status, and monthly earnings. They will also examine your essential living...

Coping with tax debt can be an overwhelming and stressful experience. Fortunately, the Internal Revenue Service (IRS) offers a range of programs to assist taxpayers in resolving their tax obligations, among which is the Offer in Compromise (OIC) program.

The OIC program provides taxpayers with the opportunity to settle their tax debt for an amount less than the total owed. This program specifically caters to individuals who are unable to pay their tax debt in full, even with the option of an installment agreement, and who have exhausted all other viable payment alternatives.

Qualification Criteria for an Offer in Compromise

Not all taxpayers are eligible to participate in the OIC program. The IRS takes into account various factors when assessing eligibility, including:

Financial capacity: Your income, expenses, assets, and liabilities will be scrutinized by the IRS to ascertain whether you can repay your tax debt in its entirety. Reasonable Collection Potential (RCP): The IRS...

The tax filing season is upon us, and taxpayers have two options to choose from when filing their tax returns: paper filing or e-filing. While both methods have their advantages and disadvantages, the decision ultimately boils down to personal preference. In this blog post, we will explore the pros and cons of filing paper tax returns versus e-filing.

Paper Filing

Pros

• No internet required: One of the biggest advantages of paper filing is that it does not require an internet connection. This means that taxpayers who do not have access to the internet or prefer not to use it can still file their taxes.
• Physical copy: Paper filing provides taxpayers with a physical copy of their tax return, which they can keep for their records. This can be helpful in case of an audit or if the taxpayer needs to refer to their tax return in the future.
• 
  No fees: Unlike e-filing, paper filing does not come with any fees. Taxpayers can simply print out the forms and mail them to the IRS.

Cons

• Slower...

Dealing with tax debt can be overwhelming and stressful. However, the Internal Revenue Service (IRS) offers several programs to help taxpayers settle their tax debt, one of which is the Offer in Compromise (OIC) program.

The OIC program allows taxpayers to settle their tax debt for less than the full amount owed. This program is designed for taxpayers who are unable to pay their tax debt in full, even with an installment agreement, and have exhausted all other payment options.

Qualifying for an Offer in Compromise

Not all taxpayers are eligible for the OIC program. The IRS considers several factors when determining eligibility, including:

• Ability to pay: The IRS will consider your income, expenses, assets, and liabilities to determine if you can pay your tax debt in full.
• Reasonable Collection Potential (RCP): The IRS will assess your future income and assets to determine your RCP. This is the minimum amount the IRS believes it can collect from you over a certain period.
• ...

If you're a freelancer or gig worker who receives payments via apps like Venmo, Zelle, Cash App, or PayPal, it's time to start preparing for a change in tax reporting requirements for the 2023 tax year. The change won't affect the amount of taxes you owe, but it will change how you report income with 1099-K forms.

Currently, freelancers and small business owners only need to report payments totaling $20,000 or any number of payments above a threshold of 200 using these forms. However, starting next year, that threshold will be just $600, and every income transaction will need to be reported. This change will impact platforms, businesses, and individuals alike, so it's crucial to start preparing now.

Here's what you need to know to get ready for the new 1099-K reporting threshold:

Keep Accurate Track of Your Income
If you're already keeping accurate track of your income from freelancing paid via Venmo, Zelle, Cash App, PayPal, or other sites, you're in good shape. The main difference...