With thousands getting ill every day, who frets about their taxes?
Mitch does not –– and he owes the IRS $350,000. Mitch runs his own service just outside of Atlanta. His tax issues go back 15 years.
“In 2006, I offered business for nearly $1 million and invested practically all of it in reality,” he states. “I learned it was a scam, and they took all my cash –– however it still left me with capital gains.”
In other words, Mitch lost everything however still owed the Internal Revenue Service for those losses.
“My world was sort of over,” Mitch states. “I didn’t have a lot to live for, rather frankly. But I’m a man of faith, and I selected to believe things improve.”
Mitch is likewise a man of action. Instead of disregarding the issue –– which the Internal Revenue Service states are all too typical –– Mitch consulted several tax pros before picking one to assist him out.
“I realized I remained in a great deal of problems and I required some professional help,” he states. “They saved me nearly $200,000 with the IRS and $33,000 with the state.”
They ended up being Neighborhood Tax, a national tax-relief company that turns 10 this year.
“They saved my monetary life,” Mitch says. However, he has a caution for all those like him who aren’t looking for assistance: “The Internal Revenue Service doesn’t disappear throughout a pandemic.”
Death and taxes
Mitch isn’t an uncommon case. The Internal Revenue Service states in 2018, 14 million Americans owed $130 billion in back taxes. Which were 2 years before the pandemic.
The pandemic has produced 2 problems, says Sarah Nieschalk, an assistant vice president at Neighborhood Tax, the tax-relief firm where Mitch ended up. One issue is monetary, and the other is psychological.
“As a tax professional, I see countless cases of folks whose tax problems have snowballed until the problem seems too large to handle,” she states. “At the end of the day, these folks merely want a fair solution to the issue, but they often don’t even understand where to begin.”
And for lots of others, they do not want to begin. Ignoring the problem is as common as death and taxes.
Until recently, those overdue taxpayers had a little less to fret about. Because of the pandemic, the IRS suspended taking property under liens and levies from April 1 through July 15. That date was likewise significant for taxpayers who were working with the IRS, either paying their back taxes a little monthly (under what’s understood as an”installment arrangement“) or paying less than what they owed (called an”offer in compromise“).
If you had an installation arrangement before the COVID-19 shutdown, your payments were suspended from April through last Wednesday. Same went for Offers in Compromise (OIC), with the included advantage taxpayers had up until July 15 to supply information the Internal Revenue Service requested for a pending OIC. The Internal Revenue Service likewise didn’t close any pending OIC request before that date without taxpayer authorization.
It was called the Individuals’ First Initiative, and many struggling taxpayers and political experts were hoping –– and frankly, expecting –– the IRS to extend the program.  After all, the pandemic and its economic shockwaves haven’t alleviated up, they’ve just worsened.
Unfortunately, less than a week after Treasury Secretary Steven Mnuchin openly mused that extending those pandemic hold-ups was “something we might consider,” he revealed the IRS was ending the program. 
If you couldn’t pay your present taxes by July 15 –– which the Internal Revenue Service had moved from the standard April 15 –– you could easily get an extension to Oct. 15. But that just extends your due date to file, not your due date to pay. Simply put, the clock on all penalties and interest has already rebooted after 2 & frac12; months in suspended animation.
Now the issues start, Nieschalk states.
The pandemic tax panic
“We forecast we’ll see an uptick in tax problems throughout and even after the COVID-19 pandemic,” Nieschalk says. “We saw this in the years following the Fantastic Economic downturn too.”
Just what did she see? Enormous hold-ups followed by massive action.
“Throughout times of prevalent monetary strife, the Internal Revenue Service can fall significantly behind,” Nieschalk states. She’s checked out reports that the Treasury Department, which oversees the Internal Revenue Service, has “semi-trailers loaded with unprocessed client correspondence.”
That’s because their own staff members were sheltering in the house and getting ill.
“It’s going to take the IRS a number of months– if not more than a year– to dig out of the backlog created by minimal staffing conditions,” she states. Which might lead some cash-strapped Americans to pay other bills before they pay Uncle Sam.
Even in the very best of times, “the IRS doesn’t have the resources to micromanage every taxpayer,” Nieschalk states. “The U.S. tax system greatly relies on voluntary compliance.”
You may have heard the expression, “the wheels of justice turn slowly however grind exceptionally great.” When it comes to taxes, the wheels of the Internal Revenue Service spin even slower –– but when they roll over you, you’ll get squashed under documents.
“When the Internal Revenue Service does catch up, taxpayers wind up taking a look at a mountain of work to deal with the issue– and extraordinary charges and interest charges on top of all of it,” Nieschalk states. “The majority of our customers have overlooked the issue longer than they should. It is easy to select to not file a return with a huge balance on it because you’re frightened about how to resolve that balance when you can not pay for to pay.”
There’s that psychology at play once again. However, another pandemic-related issue is looming.
Many unemployed Americans who have collected joblessness during the shutdown did so for the first time in their lives. They don’t understand what Nieschalk does: “Joblessness earnings are still taxable, and lots of taxpayers do not know they require to keep.”
She predicts, “Despite Congress opening some opportunities for relief, we’ll still see folks make difficult choices concerning paying their taxes or paying their instant expenses of living simply due to the fact that they can’t afford both.”
When the pandemic inevitably ends, the tax problems for millions of Americans will just be beginning.
How to get ahead of your tax issues
Remember Mitch, who went from millionaire to flat broke in a matter of months? He’s on an Internal Revenue Service installment arrangement. His guidance to anyone caught in an alarming situation like his: “You tackle this head-on.”
Nieschalk totally concurs.
“Everybody’s facts and circumstances are distinct, and Mitch is no exception,” she states. “The number one thing I desire folks to discover from his scenario is that they are not alone. They don’t require to deal with the IRS alone.”
And they shouldn’t. The IRS approximated, back in 2014, that 80 million individual income tax returns were dealt with by paid preparers.  That’s over half. So it follows that if a lot of Americans do not do their own taxes, they can’t deftly manage working out with the Internal Revenue Service when they fall back on their taxes.
“Tax problems are frightening due to the fact that tax law is extremely complicated, and the IRS can be exceptionally intrusive,” Nieschalk states. “Customers are forced to put a lot of trust into whoever they work with to help them.”
The issue is, there is a great deal of untrustworthy firms preying upon puzzled and desperate people. Informing the difference between a genuine tax-relief firm and a fraud can be challenging.
Mitch didn’t panic and engaged a number of other tax-relief companies prior to deciding on Neighborhood Tax. There was one huge reason for that.
“They don’t take payment up until they do something,” Mitch says. Other firms charged him fees for not in fact fixing his problem. “Everyone else I talked with, they remain in the letter-writing stage or in the due-process phase –– they’re always in some type of stage. Do you know what stage they’re truly in? The take-your-money stage.”
Mitch likewise trusted Neighborhood Tax due to the fact that the company explained what was taking place instead of concealing behind the intricacy. As Nieschalk explains, “We do not just provide a band-aid to provide a quick fix to the immediate issue. Along with the method, we inform our clients so that they do not inadvertently fall into the very same situation once again.”
“I was haunted with this dark cloud above me,” Mitch says. “Now I do not even have to think about taxes.” Rather a task for someone who owes the Internal Revenue Service six figures. On the July 15 Internal Revenue Service deadline, when many Americans were panicking about their taxes, understand what Mitch was doing? “My spouse and I are house-shopping.”