Category: Tax Debt Relief

Don’t be misinformed in 2018 regarding ACA (Affordable Care Act)


One of the biggest benefits (besides adjusting income tax brackets and their respective percentages) of the Tax Cut Jobs Act (TCJA) Trumpeted by the Trump administration was the repeal of the “individual mandate penalty”.  However, although other provisions of the tax bill took effect in 2018, the individual mandate penalty, which penalized taxpayers that did not carry health insurance for at least 9 months out of the year, will not be eliminated until the 2019 tax year.

Despite strong opposition to the penalty as being extremely unfair to the poorest of taxpayers (80% of those who paid the penalty earned less than $50,000/yr.), the penalty has increased steadily since it’s 2014 debut.

The Individual Mandate Penalty Started Out Small But Has Grown Over Time

•     In 2014, the punishment was $95 per uninsured adult ($47.50 per child), up to $285 per family, OR 1 percent of household income. The IRS released statistics that among filers who owed a penalty for the tax year ending 2014, the average penalty was $210.

•     In 2015, the penalty would be raised to $325 per uninsured adult ($162.50 per child), up to $975 per family, OR 2 percent of household income. The IRS released statistics that among filers who owed a penalty for the tax year ending 2015, the average penalty rose over 125% year-to-year to $470.

•     In 2016, the penalty was again significantly raised to $695 per uninsured adult ($347.50 per child), up to $2,085 per family, or 2.5 percent of household income.

The 2.5 percent of household income penalty has remained constant since 2016, and in 2018 will remain at $695 per uninsured adult ($347.50 per child), up to $2,085 per family, or 2.5 percent of household income.

In closing, it is important to remember that although the individual mandate penalty was eliminated as part of the tax cut legislation passed in December 2017, this penalty assessed by the IRS will still be in effect for the tax year 2018.

IRS Tax Penalties

Avoid these common types of IRS Penalties

Filing Extensions

One of the most common errors that taxpayers make every year is assuming that filing for an extension buys them more time to file their return and paying any taxes owed.  Filing for extensions are easy whether you are missing crucial forms (e.g. 1099’s or K1’s) or it’s due to simple procrastination and you want to buy more time to file, there is no explanation required.  What is required however, is that taxpayers remit with their extension an approximate amount they will owe, failure to do so will result in taxpayers being subject to “penalties and interest“!


Estimated Tax Miscalculation

Quarterly tax payments are due four times a year, failure to make these payments could result in an “estimated tax penalty”.  This is a fairly common penalty as the IRS assessed this penalty to more than 10 million taxpayers in 2017.  Although it is most common among people who are self-employed or retirees who have investments, taxpayers who don’t withhold enough taxes from their paycheck could also be subject to an estimated tax penalty.  On the bright side, the penalty is one of the more reasonable ones assessed by the IRS as it generally equates to interest owed on a taxpayers underpaid funds (as of April 2018 the IRS interest rate is 5%).

Failure-to-file & failure-to-pay

The failure-to-file penalty is generally more than the failure-to-pay penalty.   The IRS may remove or abate these penalties if you can show that you had reasonable cause for not filing or paying your taxes by the deadline (e.g. casualty, fire or other interventions).  If the taxpayer cannot provide an acceptable reason for filing or paying late, they may be able to apply for a first-time penalty abatement (FTA) waiver. To qualify for this type of relief, the following requirements must be met 1) received no penalties (other than estimated tax penalties) for the three tax years preceding the tax year in which you received a penalty, 2) filed all required returns or filed a valid extension of time to file, and 3) paid, or arranged to pay, any tax due.  Taxpayers can also reduce the failure-to-pay penalty by setting up a payment plan with the IRS commonly known as an “installment agreement”, these payment plans can cut a taxpayers penalties by as much as 50%.  There are many types of installment plans offered by the IRS, therefore it is always a good idea to consult a tax professional like those found at TaxPM who can help you determine which plan is most suitable for you.

Tax Filing Inaccuracy

Although some tax filing inaccuracies are forgivable (e.g. incorrect birth date or address entry), others like substantial underpayment or negligently prepared returns will not be treated so favorably and will in most cases trigger penalties and interest due.  If the IRS determines that your tax return was filed inaccurately due to negligence (e.g. inadequate record keeping, or other gross understatement of taxes due) they can assess penalty for negligence.  If the IRS deems that the inaccuracies or substantial underpayment are a result of an intentional attempt at fraud or evasion then civil and or criminal penalties can be assessed.


Regardless for the reason of the inaccuracies on the tax return the IRS will almost always assess interest penalties (these are in addition to any other penalty assessed) on the balance of taxes owed, and unlike other penalties that have limits, there are no maximum amount of interest (compounds daily) that can assessed!  If you receive a notice from the IRS regarding a penalty or interest being assessed against you and are unsure how to proceed or simply prefer to have more experienced person address the IRS on your behalf, contact the professionals at TaxPM™ today!

Tax Debt Relief

There are many reasons why people are unable to pay their taxes – economic setbacks, loss of job, disability, illness etc. In situations like this, many people believe that paying certain taxes and debts is not that important. But, the fact is that people have to pay their taxes because IRS can use forced collections methods to get this money from you.

People need good tax debt solutions in order to prevent or fight the aforementioned IRS collection methods like IRS tax liens, IRS bank levies, interest and penalty abatement, wage garnishments and more. (1) Keep in mind that any taxpayer can get in a situation where they have to face serious tax problems. There is a chance that you have not be contacted by the IRS for a few years, but out of nowhere, you can get a notice of intent to levy mail. From that moment on, you will have to figure out how to avoid the IRS collections methods.

Staying Away From Serious Tax Problems

Preventing things is much smarter than trying to fix them. You should address this issue from the start. In order to achieve this goal, you have to act fast and identify the problems early on.

First of all, you should get in touch with the IRS in case you can’t pay taxes when you file. It turns out that the IRS is willing to assist individuals who can’t pay debts by providing a few tax debt solutions. By doing this you will avoid critical tax problems. Explain why you are unable to pay the taxes and they will help you.

Next, you should file and pay the taxes on time in case you want to avoid IRS collections. In cases like this, you won’t need any tax debt solutions. Remember that if you are able to pay the taxes, you must file and pay that debt.

IRS Collections Actions

If you have tax debt, the IRS can use a few collections actions/methods to get that money from you. For starters, they are using Wage Levy. This method is used frequently and it can seriously affect your everyday life. Namely, this method can take up to 75% of people’s paychecks. (2) So, you should give away between 50% and 75% of your paycheck until the debt is cleared. The worst part is that they usually don’t take your monthly bills into account. This is a serious situation and that’s why it is highly recommended to use professional assistance like the one provided by TaxPM.

Additionally, they can use bank levy and asset seizure.

Tax Debt Relief Solutions

There are a few tax debt relief solutions that you can use. For instance, the installment agreement allows you to pay the debt over a pre-determined period of time. There’s also an Offer in Compromise which allows you to pay a portion of your debt, but the IRS will consider that you have paid the entire debt.

These tax issues can be quite complex and that’s why it’s a smart idea to get professional tax advice from companies like TaxPM.