IRS Talk – Wilson Rogers & Company

Why Does The IRS Hold EITC Refunds?

Understanding the EITC and Why Refunds Are Delayed by the IRS

The Earned Income Tax Credit (EITC) is a federal tax credit designed to support working individuals and families with lower to moderate income levels. It is intended to reduce tax liability and, because it is refundable, it can also increase a taxpayer’s refund—even when no federal income tax is owed. Eligibility for the credit is based primarily on earned income, such as wages, salaries, tips, and self-employment income. However, qualification is not determined by income alone. Filing status, the number of qualifying children, residency requirements, and valid Social Security numbers for all individuals on the return also play a critical role. Because of these combined factors, the EITC is one of the more complex credits in the tax code and requires careful compliance with IRS rules.

While the credit can provide a meaningful financial benefit, it is also subject to additional IRS scrutiny. This is especially true when it comes to the timing of refunds.

Why the IRS Holds EITC Refunds

Taxpayers who claim the EITC often notice that their refunds are issued later than expected, particularly when compared to returns without refundable credits. This delay is not the result of a processing issue, but rather a set of requirements and safeguards built into the tax system.

Federal law requires a refund delay

Under the Protecting Americans from Tax Hikes Act (PATH Act), the IRS is required to delay the issuance of refunds that include the EITC (as well as the Additional Child Tax Credit) until at least mid-February each year. This rule applies regardless of when the return is filed. Even if a taxpayer submits their return in January, the IRS is not permitted to release the refund before the mandated date. This timing requirement was implemented to allow additional verification before refunds are issued.

Increased focus on fraud prevention

The EITC has historically been one of the most frequently reviewed credits due to its high claim volume and susceptibility to errors and fraudulent filings. Common issues include incorrect dependent claims, mismatched income reporting, and identity theft-related filings.

The delay period gives the IRS additional time to evaluate returns for inconsistencies and potential fraud indicators before issuing refunds.

Verification of income and eligibility

EITC eligibility depends on information that must be independently verified, including wages reported by employers, dependent qualifications, and filing status accuracy. During the hold period, the IRS cross-references tax returns with third-party reporting documents such as W-2s and 1099s to confirm that the information provided is consistent.

This verification process is designed to ensure that only eligible taxpayers receive the credit and that refund amounts are accurate.

Reducing improper payments

Because the EITC is a refundable credit, it represents a significant portion of federal tax refunds each year. Even small inaccuracies can result in improper payments. The additional review period helps the IRS reduce these errors and maintain compliance with federal tax law.

What Taxpayers Should Expect

A delayed EITC refund is not necessarily an indication of an issue with a tax return. In most cases, it simply reflects the standard processing timeline required under federal law.

Once the PATH Act hold period concludes in mid-February, refunds are generally issued in the order they were received, assuming no additional review or verification is required.

However, further delays can occur if the IRS identifies discrepancies in income reporting, dependent information, or if additional identity verification is needed.

Conclusion

The Earned Income Tax Credit remains one of the most impactful credits available to working taxpayers, but it is also subject to enhanced oversight. The IRS refund delay associated with the EITC is not discretionary, it is a statutory requirement intended to reduce fraud, verify eligibility, and ensure accurate payment of refundable credits.

While the waiting period can be inconvenient, it serves an important role in maintaining the integrity of the tax system and ensuring that refunds are issued correctly.

How to Report Gambling Winnings and Losses

Gambling income often creates confusion at tax time because the reporting rules do not follow what most taxpayers naturally expect. Many assume they are only taxed on their “net” winnings for the year. However, the IRS does not allow gambling to be reported that way. Instead, winnings and losses are handled separately, and that distinction drives the outcome on your tax return.

Reporting W-2G Gambling Winnings

When you receive a Form W-2G, it means your gambling winnings have been reported to both you and the IRS. These forms are typically issued for larger payouts from casinos, sportsbooks, lotteries, or similar gambling activities that meet reporting thresholds. Even though a W-2G is issued, it does not change how the income is treated. The full amount shown on the form is taxable and must be included on your return.

From a reporting standpoint, W-2G winnings are included as Other Income on Schedule 1 (Form 1040). That amount then flows through to your Form 1040 and increases your total taxable income. The key point here is that the IRS is always looking at the gross winnings reported on the form, not any net figure after losses. If federal income tax was withheld and shown on the W-2G, that withholding is treated as a prepayment toward your total tax liability. It is applied when you file your return, similar to wage withholding, but it does not change the fact that the full winnings are still taxable.

How Gambling Losses Are Treated

Gambling losses are not reported in the same place as winnings, and they do not automatically reduce the income shown on a W-2G. Instead, losses are only deductible if you itemize deductions on Schedule A. This is an important distinction because many taxpayers take the standard deduction, and in those cases, gambling losses provide no tax benefit at all. Even when itemizing, losses are limited. You can only deduct gambling losses up to the amount of gambling winnings reported on your return. There is no ability to create a net loss or carry excess losses forward to future years.

For example, if you have $10,000 in W-2G winnings and $12,000 in losses, your deduction is limited to $10,000. The remaining $2,000 is not usable for tax purposes.

No Netting of Winnings and Losses

One of the most common mistakes taxpayers make is assuming they can simply net their gambling activity for the year. The IRS does not allow this approach. Gambling winnings are reported in full as income, and gambling losses are only considered separately as an itemized deduction if you qualify. There is no single calculation on the tax return where the two are combined into a net result.

State Tax Considerations (Illinois)

Illinois follows a different approach than the federal return when it comes to gambling losses, and this is where taxpayers often get caught off guard. At the federal level, gambling losses can be deducted if you itemize, up to the amount of gambling winnings. Illinois does not follow this treatment in the same way. Illinois still taxes gambling winnings in full, but it generally does not allow a deduction for gambling losses. This means that even if you had significant losses during the year, those losses typically do not reduce your Illinois taxable income. Your gambling winnings remain fully included in your Illinois return, without the same offset you might see federally.

As a result, you can end up in a situation where your federal return reflects gambling losses (if you itemize), but your Illinois return still taxes the full amount of gambling winnings. This difference can be especially noticeable for taxpayers with regular gambling activity, where the overall economic result of the year does not match the taxable outcome at the state level.

Recordkeeping Requirements

The IRS places the responsibility for documentation on the taxpayer. This means maintaining records that support both winnings and losses, including dates, locations, types of gambling activity, and amounts. While casino or sportsbook statements can be helpful, they should not be relied on as the only source of documentation if records are ever requested.

Bringing It All Together

The most important takeaway is that gambling winnings reported on a W-2G are fully taxable and must be included in income regardless of losses during the year. Those winnings flow through Schedule 1 into Form 1040 and increase taxable income directly. Losses, on the other hand, are limited, conditional, and reported separately. They only provide a benefit if you itemize deductions and only up to the amount of reported winnings.

Once you understand that winnings and losses are reported in different parts of the return, the structure of how gambling is taxed becomes much clearer and easier to follow.

By Jared R. Rogers, CPA|2026-08-24T13:25:19-06:00August 24, 2026|Categories: IRS Talk, Tax Talk|Tags: casino winnings taxes, federal gambling tax rules, Form W-2G, gambling income reporting, gambling income tax return, gambling losses tax deduction, gambling recordkeeping, gambling tax deductions, gambling tax reporting, gambling tax rules, gambling taxes 2026, gambling winnings and losses, gambling winnings taxes, how gambling winnings are taxed, how to report gambling losses, how to report gambling winnings, How to report gambling winnings and losses, Illinois gambling losses, Illinois gambling taxes, Illinois gambling winnings, IRS gambling income, IRS W-2G, lottery winnings taxes, Schedule 1 gambling income, Schedule A gambling losses, sportsbook winnings taxes, tax preparation gambling income, tax tips for gamblers, taxable gambling winnings, W-2G income, W-2G tax reporting|0 Comments

Understanding the “No Tax on Tips” Provision Under the One Big Beautiful Act (OBBA)

Tax rules continue to evolve, and every so often a provision gets a headline that sounds far simpler than what the law actually does. The “no tax on tips” provision under the One Big Beautiful Act (OBBA) is a good example of that. While the name suggests that tip income is no longer taxed, that is not what the law provides.

Tip income is still fully taxable and still must be reported. The core reporting rules have not changed. What OBBA introduces is not an exclusion from income, but a potential deduction that may reduce taxable income for certain qualifying tip earnings.

Tip Income is Still Reportable Income

The most important point to understand is that nothing about tip reporting has been removed or reduced. Employees and self-employed individuals are still required to report all tip income as part of gross income.

For employees, this continues to be reflected on Form W-2 as part of Box 1 wages. For self-employed individuals, tip income is still included in business receipts and ultimately flows through to Schedule C and Form 1040.

So despite the branding of “no tax on tips,” the income itself is still very much part of the tax system. The change occurs later in the return process, not at the reporting stage.

What the Provision Actually Does

Under OBBA, certain taxpayers may be eligible for a federal income tax deduction tied to qualified tip income. This is where the terminology often causes confusion. The law does not remove tips from taxable income. Instead, it allows a deduction against taxable income if the tips meet specific requirements. To qualify, the income must come from occupations that customarily and regularly received tips prior to December 31, 2024. This keeps the benefit focused on traditional tipped industries such as restaurant staff, bartenders, salon workers, and similar service-based roles.

Not all payments labeled as tips qualify. Service charges, mandatory gratuities, and standard wages are not included in the definition, even if they may resemble tips in practice.

How the Tax Benefit Is Applied

Even when tip income qualifies, it is still included in gross income. There is no exclusion at the wage or income reporting level.

Instead, the benefit is applied later as an adjustment to income. This means the taxpayer first reports all income normally, and then, if eligible, applies a deduction that reduces taxable income. This structure is important because it changes how the benefit is felt. Rather than removing tax from tip income entirely, it reduces overall taxable income after everything has already been reported.

Income Limits and Phase-Out Rules

The deduction is not unlimited and is subject to both a cap and income-based reductions. The maximum deduction allowed under OBBA is $25,000 per year. However, not every taxpayer will receive the full amount. The benefit begins to phase out once adjusted gross income exceeds certain thresholds. For single filers, head of household, and married filing separately, the phase-out begins at $150,000 of AGI. For married filing jointly, the threshold is $300,000. As income increases above these levels, the deduction is gradually reduced until it is fully phased out.

For self-employed taxpayers, there is also an additional limitation. The deduction cannot exceed the net profit of the business generating the tip income, which prevents the deduction from creating or increasing a loss position.

How Tip Income Is Reported Under Current Rules

Despite the introduction of this provision, the way tip income is reported has not changed. Employees still receive Form W-2 reporting their wages, including tip income in Box 1. Employers may separately track qualifying tip amounts for reporting purposes, but the overall structure remains the same. For individuals, all tip income continues to flow into Form 1040 as part of gross income. There is no separate exclusion or adjustment at the wage level. The only difference appears later in the return, where eligible taxpayers may apply the deduction.

Where the Deduction Appears on the Tax Return

The deduction is claimed on Schedule 1A of Form 1040, which is a new schedule introduced beginning in 2025 under OBBA. This schedule is used for “Other Adjustments to Income,” including several new provisions created by the legislation. In general, the deduction is based on either qualified tips reported by the employer on Form W-2 or tip income reported directly by the taxpayer on Form 4137 when applicable.

Regardless of the reporting method, the key requirement is that the income must be properly documented and traceable through official records.

Documentation and Compliance Requirements

As with most tax provisions tied to income adjustments, documentation is essential. The IRS will expect consistency between employer reporting and taxpayer reporting, and discrepancies can create issues during review. Supporting documentation may include payroll records, employer tip allocation reports, Form W-2, and Form 4137 when tips are not fully captured through payroll systems.

Accurate reporting matters not just for compliance, but also for ensuring the deduction is not disallowed due to incomplete or inconsistent records.

Final Takeaway

Despite its name, the “no tax on tips” provision does not eliminate taxation on tip income. Instead, it creates a targeted deduction that reduces taxable income for qualifying taxpayers in certain tipped occupations. The income is still reported, still tracked, and still subject to the same reporting rules as before. The difference lies in how the tax calculation is adjusted after reporting is complete.

As with most tax law changes, the real impact comes down to details, documentation, and income level. For taxpayers who rely on tip income, understanding how this provision fits into the broader return is key to avoiding confusion at tax time.

A Guide to the “No Tax on Overtime” Provision in the OBBA

Understanding the “No Tax on Overtime” Provision Under the One Big Beautiful Act (OBBA)

One of the more commonly misunderstood changes introduced under the One Big Beautiful Act (OBBA) is the “no tax on overtime” provision. At first glance, the name suggests that overtime pay is no longer taxable. In reality, that is not the case. This provision does not eliminate tax on overtime wages. Instead, it creates a limited deduction that applies only to a specific portion of overtime compensation, and only when it is properly identified, calculated, and reported.

What “No Tax on Overtime” Actually Means

Under OBBA, the provision applies only to the overtime premium portion of wages. This is the additional amount paid above an employee’s regular hourly rate for hours worked beyond standard thresholds. Regular wages remain fully taxable, only the premium portion may qualify for the deduction. Overtime is generally defined under FLSA (Fair Labor Standards Act) rules, typically for hours worked over 40 in a workweek. This provision applies strictly to employees and does not extend to independent contractors or other forms of compensation such as bonuses. It is also important to understand that simply working overtime is not enough to qualify. The overtime must be separated into its regular rate and overtime premium, and only the premium portion is eligible for consideration.

Limits and Income Phase-Out Rules

Like most tax provisions, the overtime deduction includes strict limitations. The deduction for qualified overtime compensation is capped at $12,500 per year for most filers and $25,000 per year for Married Filing Jointly.

The benefit also phases out based on income. The phase-out begins when adjusted gross income exceeds $150,000 for Single, Head of Household, and Married Filing Separately, and $300,000 for Married Filing Jointly. As income increases beyond those thresholds, the deduction is gradually reduced until it is fully phased out.

Employers are required to separately account for qualified overtime compensation. This reporting requirement is part of the framework that ensures proper identification of eligible amounts.

How Overtime Is Reported

Even with this provision, overtime reporting has not changed at its core. On Form W-2, total wages are still reported in Box 1, which includes both regular and overtime earnings. However, the overtime premium portion must now be separately identified using updated IRS wage codes or reporting fields.

On Form 1040, overtime income is still included in gross wages. The key difference is that the tax benefit is not applied at the wage level. Instead, it is calculated later in the return as an adjustment to income.

Where the Deduction Is Claimed

The deduction is reported on Schedule 1A of Form 1040 under “Additional Deductions.” This is a new OBBA-related line item beginning in 2025. This is considered an above-the-line deduction, meaning it reduces adjusted gross income before either the standard deduction or itemized deductions are applied. This structure is significant because it can affect taxable income more broadly than a typical below-the-line deduction.

Documentation and Verification Requirements

Proper documentation is a key part of this provision. The IRS will expect clear support showing how overtime was calculated and separated from regular wages.

Pay stubs alone that simply label overtime are not sufficient. The underlying breakdown must clearly show regular pay versus overtime premium amounts. Verification should be based on employer payroll records, which serve as the primary source of truth, followed by pay stubs as supporting documentation. Employee statements or estimates are not reliable on their own and should not be used in place of formal records. Consistency across all documentation is essential. The classification of overtime must match across payroll systems, W-2 reporting, and any supporting forms used in the return.

Final Takeaway

The “no tax on overtime” provision under OBBA does not eliminate taxation on overtime earnings. Instead, it provides a limited deduction that applies only to the overtime premium portion of wages and only for taxpayers who meet specific income and reporting requirements.

While the provision may offer meaningful tax relief for eligible individuals, it depends heavily on accurate payroll reporting, proper classification of wages, and strong documentation. As with many tax changes, the details determine the outcome, and precision in reporting is essential for compliance.

How OBBA New Car Loan Interest Deduction Works

Understanding the New Car Loan Interest Deduction Under the OBBA

The One Big Beautiful Act (OBBA) introduces a new deduction for car loan interest that can be easy to misunderstand or misapply if the requirements aren’t carefully reviewed. While it may sound straightforward, the details around vehicle eligibility, loan structure, and income limits are critical. Missing any one of these rules can result in claiming a deduction that doesn’t actually apply.

Below is a breakdown of how it works, who qualifies, and how it must be reported.

What This Deduction Is

Under the OBBA, taxpayers may deduct interest paid on a qualified passenger vehicle loan. The key distinction here is that only the interest portion of the loan qualifies—not the purchase price, not the down payment, and not any related costs like insurance or registration. Another important feature is how the deduction is claimed. It is available regardless of whether you itemize deductions, which makes it more broadly accessible than many traditional tax breaks. Instead of being reported on Schedule A, it is taken on Schedule 1A, reducing your adjusted gross income directly.

Vehicle Qualification Requirements

This is the most important part of the rule set, and it cannot be overlooked. Before considering any interest amounts, the vehicle must be confirmed as qualifying.

The vehicle must be for personal use and cannot be used for business or mixed-use purposes. It must be a passenger vehicle and must have final assembly occurring in the United States. It also needs to meet IRS passenger vehicle weight limits.

In addition to the vehicle requirements, the loan itself must also qualify. The loan must be incurred after 2024 and must be secured by a first lien, meaning it is a secured loan used specifically to purchase the vehicle. If any of these requirements are not met, the deduction does not apply.

Caps, Phase-Outs, and Reporting

The deduction is capped at $10,000 of interest per tax year. It begins to phase out when adjusted gross income exceeds $100,000 for single filers and $200,000 for married filing jointly. Once income exceeds these thresholds, the available deduction is gradually reduced until it is fully phased out.

How to Report the Deduction

The deduction is calculated and reported on Schedule 1A of Form 1040. This is a deduction, not a credit, meaning it reduces taxable income rather than directly reducing tax liability.

Proper documentation is also required. Taxpayers must have lender interest documentation such as Form 1098-V or a similar statement to support the deduction.

Important Reminder for Business Vehicles

Business vehicle interest follows entirely different rules and must not be combined with this deduction. The OBBA provision applies strictly to qualified personal-use vehicles, and blending business interest into this calculation would result in an incorrect application of the rules.

In Summary

This deduction is temporary and is currently available for tax years 2025 through 2028. Proper application requires careful verification of vehicle eligibility, loan qualifications, adjusted gross income thresholds, and correct reporting on Schedule 1A. While it can provide meaningful tax savings, it is highly dependent on meeting all qualification rules exactly as outlined.

By Jared R. Rogers, CPA|2026-07-22T11:34:53-06:00July 22, 2026|Categories: IRS Talk, Tax Talk|Tags: 2025 tax law changes, 2026 tax planning strategies, above the line tax deductions, adjusted gross income phase outs, car loan interest deduction 2025, car loan tax break, Form 1040 new deductions, Form 1098-V car loan interest, how OBBA new car loan interest deduction works, how to deduct car loan interest, income limits for car loan deduction, IRS car loan interest rules, IRS reporting requirements, IRS vehicle eligibility requirements, new IRS tax deductions 2025, new vehicle tax deduction 2025, OBBA car loan interest deduction, OBBA tax provisions, One Big Beautiful Act tax changes, One Big Beautiful Bill Act tax updates, personal vehicle tax deductions, qualified passenger vehicle loan, qualified vehicle requirements IRS, Schedule 1A deductions, tax benefits of buying a new car, tax deductions for taxpayers, tax documentation requirements, tax planning for individuals, tax updates for taxpayers, temporary tax deductions 2025-2028, vehicle tax deduction rules|0 Comments

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Can the IRS Seize My Car?

You may have heard about the IRS seizing a taxpayers assets for unpaid taxes. These can include, among other things, the vehicles that they own. So the short answer to the question is yes, the IRS can seize a taxpayers vehicle. But let’s discuss the mechanics of how it gets to this point and some other important items shall we?

Why does the IRS seize vehicles? The first thing to know is that if you owe the IRS under $5000, your assets may not necessarily be seized and sold off. Per the 2019 IRS Data Book, in 2018 and 2019 the IRS seized a total of 275 and 228 assets respectively. Also, if you lease property, then you aren’t the legal owner. The IRS can’t seize items you don’t own, unless you have built up equity, or an ownership interest, in a leased asset. For most items, such as a rented auto, you won’t have any equity or it will be too small for the IRS to consider.

In the instances above, the IRS will seek to satisfy the collection of the debt owed through other means. This could include garnishing your income or seizing your federal tax refund. Now if the debt is substantial, then that’s where vehicle seizure comes into play.

The IRS utilizes progressively serious methods to try to collect your tax debt before seizing your vehicle. It will begin by informing you of your tax debt and giving you the opportunity to pay it. When they have sent numerous notices and attempted to collect, but have been unable to or can’t communicate with you regarding a reasonable plan for repaying your debt, it will proceed to file a federal tax lien against you. The Notice of Federal Tax Lien will alert creditors that the government has a legal right to your property.

Once other methods of collection have been exhausted, the IRS will use its power to seize assets by use of a levy. An IRS levy permits the legal seizure of your property to satisfy a tax debt.

How does the IRS seize a vehicle? A typical IRS seizure usually goes as follows:

Local law enforcement accompanies IRS Revenue Officers so they are not interfered with nor attacked.
The Revenue Officers will present their credentials to the taxpayer as well as the order (typically from a judge) that states they have a right to take the property.
The IRS contractors (e.g. towing companies) will then secure the asset and remove it from the property for storage at a IRS facility.

We scoured the internet for a video showing an actual IRS vehicle seizure in process. This very dated video is all we could come up with. Regardless of how old it is, note how high the tension is!

Despite the video’s title stating that the IRS is violating someones rights, this is actually lawful

What does the IRS do with the seized vehicles? The first thing that happens is that the vehicle gets moved to a storage facility. Next, the taxpayer is usually given one last attempt to settle the debt and reclaim the asset. But simultaneously, the IRS post public notice that the item is available for purchase from the US Government.

Generally speaking, the vehicle will be sold off relatively quickly, usually at an auction that is open to the public. The money raised from the sale is then applied to the tax debt that you owe to the IRS. The goal of seizing assets is to satisfy the debt as quickly as possible since you failed to pay it off yourself.

The image below shows seized vehicles by the IRS and how they notify the public of an auction. Anyone want to purchase a 2018 Ferrari??

How to avoid seizure. The best way to avoid having your assets seized is to file your taxes and pay what you owe on time each year. However, if you cannot fulfill either of these obligations, you should communicate with the IRS and be honest about your financial situation.

You could be eligible for a payment arrangement, which would allow you to pay off your debt in monthly payments. The arrangement will take into consideration:

How much money you make
Your household size
How much you pay in rent, utilities, and other basic expenses
The total value of your assets

The IRS will then determine a monthly amount that you should be able to pay toward your debt. In extraordinary situations, your tax debt could be forgiven. Forgiving a tax debt is a rare occurrence. However, it could be possible if you experience hardships like:

High medical costs
Divorce
Death of an immediate family member
Terminal illness
Job loss
Slowing down of your business

What is the IRS Fresh Start Initiative?

Each sunrise is a fresh start, a new day, a brand new pencil on an empty page!

If you you have tax debt, you have undoubtedly heard a lot about the Fresh Start Initiative (FSI) in radio ads, TV advertisements, online and more. Many of these advertisements will make you think that the IRS has some “special program” or that it is some recent change the IRS made. Both of these facts could be further from the truth.

You see, many tax experts and consumer advocates had accused the IRS of failing to assist those who had significant tax debt, but were trying to pay it off. So in 2011 (yes, 8 years ago at the time of this writing), the IRS announced the creation of a new initiative known as the FSI. This was in response to the critics, law makers and the fact that people were still being impacted by the recession.

The primary objective of the FSI was to give taxpayers who owed substantial back taxes the opportunity to consolidate their tax bills and pay them off in a convenient and orderly fashion. The key thing to take away is that the IRS made it easier for one to pay their debt. Contrary to what the advertisements say, the FSI was not:

A program to forgive a persons tax debt
Some magical bullet to simply give the IRS a fraction of the tax debt or “pennies on the dollar” and call it good
A program at all

What Changes Did the IRS Make with the FSI?
The primary provisions of the program included the following:

Tax Lien Changes. The FSI increased the tax debt threshold at which the IRS will file a Notice of Federal Tax Lien (Letter 3172). The threshold amount increased from $5,000 to $10,000. This was a good thing because having a tax lien on your credit report can hinder several things (e.g. ability to get credit, a job, etc). But do keep in mind that the IRS (at its discretion) can still file a tax lien on someone if they have a debt that is below $10,000.

The IRS also made changes regarding the withdrawal of tax liens, which eliminates the Notice of a Tax Lien publicly. Specifically, it made it so a lien could be withdrawn via these situations:

The tax debt was paid off in full or the statute of limitations (CSED) was reached. Although IRS liens are generally self-releasing, they don’t always come off. Therefore, a taxpayer could now call the IRS and tell them to release the lien because they met either of the two qualifications.
If you have entered into OR converted your regular installment agreement to a Direct Debit installment agreement, the tax lien can be withdrawn if:
- You are a qualifying taxpayer (i.e. individuals, businesses with income tax liability only, and out of business entities with any type of tax debt)
- You owe $25,000 or less (If you owe more than $25,000, you may pay down the balance to $25,000 prior to requesting withdrawal of the Notice of Federal Tax Lien)
- Your Direct Debit Installment Agreement must full pay the amount you owe within 60 months or before the Collection Statute expires, whichever is earlier
- You are in full compliance with other filing and payment requirements
- You have made three consecutive direct debit payments
- You can’t have defaulted on your current, or any previous, Direct Debit Installment agreement.

Installment Agreement Changes. The FSI increased the threshold for which an individual can qualify for a Streamlined Installment Agreement from $25,000 to $50,000. It also expanded the tax debt amount threshold for small businesses to qualify for a Direct Debit Installment Agreement (DDIA) from $10,000 to $25,000. Furthermore, small businesses can pay down balances above $25,000 in order to qualify for a DDIA. The reason these increases are important is because they:

Require minimal, if any, financial disclosure to the IRS;
Don’t require an IRS manager to approve the payment terms;
Don’t require taxpayers to liquidate assets to pay the IRS; and,
Can be set up in one phone call or interaction with the IRS.

Offer in Compromise Changes. If a person qualifies, the OIC program allows a person to settle their debt for a “reduced” amount. The FSI made changes regarding the financial analysis component used to determine which taxpayers qualify for an OIC (or not). Specifically it made the following changes:

Lump Sum OIC Payment – The IRS now looks at only one year of future income versus four years (i.e. 12 vs 48 months).
Short-Term OIC Periodic Payment – The IRS now looks at two years of future income versus five years (i.e. 24 vs 60 months).

Currently Not Collectible Changes. When a taxpayer is in this IRS status, enforcement actions cease. To get into CNC, generally the taxpayer will need to provide sufficient documentation to justify this status with the IRS. The FSI made the process easier for individuals who owe $10,000 or less to qualify for a CNC by easing the documentation requirements.

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Look, we know that most with tax debt would love nothing more than for someone to waive a magic wand and make their debt disappear. While we can’t offer that, we can help you make your problem disappear if you engage us! For example, did you know that the IRS only has 10 years to collect on your tax debt? After that, it will vanish!

So take a look at the post above where we offer a flat fee product where we will calculate your CSED. Or, you can visit this page and learn more about our IRS Debt Representation services. In either case, we encourage you to act NOW so that your fresh start can begin as soon as tomorrow!

By Jared R. Rogers, CPA|2021-09-29T18:26:58-06:00September 1, 2019|Categories: IRS Talk|Tags: Can IRS debt be forgiven?, Can you negotiate IRS debt?, CSED calculating service, Do I qualify for the IRS fresh start initiative, Does IRS debt ever go away?, Does IRS forgive tax debt after 10 years?, How do I get my IRS debt forgiven?, How do I make my Offer in Compromise successful?, How does the IRS Fresh Start Program work?, how to find csed irs, IRS Collection Statute Expiration Date (CSED), irs fresh start initiative, IRS Fresh Start Plan, IRS Fresh Start Program, IRS Fresh Start Program Form, IRS Fresh Start Program requirements, What is the Fresh Start program with the IRS?, What is the IRS Fresh Start Initiative?, Who qualifies for Fresh Start initiative?, Who qualifies for IRS Offer in Compromise?, Will the IRS settle for a lesser amount?|0 Comments

IRS “Expanded” Installment Agreement

Complete this form to set up your IRS payment plan!

When a person owes the IRS money that they can’t pay in full, they typically will qualify to deal with the debt via a payment plan. This payment plan is called an “installment agreement” in IRS terminology. Simply stated, an installment agreement is a contract with the IRS to pay the taxes you owe within an extended time frame. There are many types of installment agreements, but two of the most common are the guaranteed and streamlined variety.

Guaranteed & Streamlined Installment Agreements
We discuss the guaranteed installment agreement at length in this blog post. But what exactly is a streamlined installment agreement? For individual taxpayers who have filed all required returns and have an assessed balance of tax, penalties and interest of $50,000 or less, they can enter into an installment agreement with “relaxed” criteria. Basically, they don’t have to go through as many hoops or submit as much documentation. The following criteria apply to those who wish to apply for a streamlined installment agreement:

Payment Terms Up to 72 months – or – the number of months necessary to satisfy the liability in full by the Collection Statute Expiration Date (CSED), whichever is less
Collection Information Statement (financials) Not required.
Payment Method Direct debit payments or payroll deduction is preferred, but not required.
Notice of Federal Tax Lien
- Determination not required for assessed balances up to $25,000.
- Determination is not required for assessed balances of $25,001 – $50,000 with the use of direct debit or payroll deduction agreement. If taxpayer does not agree to direct debit or payroll deduction, then they still qualify for Streamlined IA over $25,000, but a Notice of Federal Tax Lien determination will be made.

The criteria discussed above also apply to business taxpayers, but only for income tax debts up to $25,000.

So what if you owe more than $50,000 as an individual or $25,000 as a business? Well, this is where the “expanded installment agreement” comes into play.

Expanded Installment Agreements
From late 2016 through late Fall of 2018, the IRS tested “expanded” criteria for the streamlined processing of taxpayer requests for installment agreements. During the test, taxpayers who owed more than $50,001 but less than $100,000 were allowed to use most of the criteria outlined under the streamlined installment agreement. Well, based on test results, the expanded criteria for streamlined processing of installment agreement requests were made permanent. If you are a practitioner, you can find the “new” criteria in IRM 5.19.1.6.4 under item “11” (09-26-18 update).

So, for individual taxpayers who have filed all required returns and have an assessed balance of tax, penalties and interest between $50,001 and $100,000, you can use the following criteria to apply for an expanded installment agreement:

Payment Terms Up to 84 months – or – the number of months necessary to satisfy the liability in full by the Collection Statute Expiration date, whichever is less
Collection Information Statement (financials) Not required if the taxpayer agrees to make payment by direct debit or payroll deduction
Payment Method Direct debit payments or payroll deduction is not required; however, if one of these methods is not used, then a Collection Information Statement is required.
Notice of Federal Tax Lien
- Determination is required.

The criteria discussed above also applies to all out of business sole-proprietorship debts between $50,001 and $100,000.

Do you owe the IRS and need to enter into a resolution option?
Check out this page of our website where you can receive our special report entitled 5 Questions To Ask Any Tax Resolution Firm Before Paying Them A Dime, a comprehensive 30-minute Tax Debt Settlement Analysis AND your personalized Tax Resolution Plan (a package valued at $175, but FREE to you for a limited time). You can also visit this page to read about how you can find out the date (i.e. CSED) the IRS will write off your tax debt!

By Jared R. Rogers, CPA|2019-10-19T09:54:10-06:00November 26, 2018|Categories: IRS Talk|Tags: Collection Statute Expiration Date, CSED calculating service, how can I find my CSED date, how to find csed irs, IRM 5.19.1.6.4.11, IRS "Expanded" Installment Agreement, irs 72 month installment agreement, irs 84 month installment agreement, IRS Collection Statute Expiration Date (CSED), IRS Form 433-D, IRS guaranteed installment agreements, irs installment agreement over 50000, irs installment agreement requirements, IRS payment plan, IRS streamlined installment agreement, Streamlined Installment Agreement Expanded, What is a streamlined installment agreement?|Comments Off

Can The IRS Revoke My Passport?

Don’t want to pay your taxes ehh? We’ll get your attention!

So the short answer to the question is yes, the IRS can revoke your passport if you have a “seriously delinquent” tax debt. But what exactly does that mean? More importantly, what can you do if your passport is at risk of being revoked? Read on to learn more my friend!

Background
On December 4, 2015, President Obama signed the Fixing America’s Surface Transportation (FAST) Act (Pub. L. No. 114-94) into law—the first federal law in over a decade to provide long-term funding certainty for surface transportation infrastructure planning and investment. But like all legislative bills/acts, other things that may appear unrelated often get inserted into them. This act was no different.

Internal Revenue Code Sec. 7345 was enacted as part of the FAST Act. A seriously delinquent tax debt is defined as an unpaid, legally enforceable, and assessed federal tax liability greater than $51,000 (adjusted annually for inflation) and for which:

The IRS has filed a notice of federal tax lien and the individual’s right to a hearing has been exhausted or lapsed, or
The IRS has issued a levy.

Generally speaking a federal tax debt is the sum of all current tax obligations, including penalties and interest. However, a “seriously delinquent tax debt” does not include any of the following tax debt even if it meets the criteria stated above:

Being paid timely with an IRS-approved installment agreement (IA),
Being paid timely with an offer in compromise (OIC) accepted by the IRS, or a settlement agreement entered with the Justice Department,
For which a collection due process hearing is timely requested regarding a levy to collect the debt,
For which collection has been suspended because a request for innocent spouse relief under IRC § 6015 has been made

Furthermore, a passport won’t be at risk under this program for any taxpayer:

Who is in bankruptcy
Who is identified by the IRS as a victim of tax-related identity theft
Whose account the IRS has determined is currently not collectible (CNC) due to hardship
Who is located within a federally declared disaster area
Who has a request pending with the IRS for an installment agreement (IA)
Who has a pending offer in compromise (OIC) with the IRS
Who has an IRS accepted adjustment that will satisfy the debt in full

What the IRS does when you have a seriously delinquent tax debt
The IRS is required to notify you in writing at the time the IRS certifies seriously delinquent tax debt to the State Department. This is done via IRS notice CP 508C. If you have been certified to the Department of State by the Secretary of the Treasury as having a seriously delinquent tax debt, you cannot be issued a U.S. passport and your current U.S. passport may be revoked.

How do you resolve the situation?
The IRS will reverse a certification when the tax debt no longer qualifies as a seriously delinquent tax debt. This happens when:

- The tax debt is fully satisfied or becomes legally unenforceable.
- The tax debt is no longer seriously delinquent meaning:
  1. You and the IRS enter into an installment agreement allowing you to pay the debt over time.
  2. The IRS accepts an offer in compromise to satisfy the debt.
  3. The Justice Department enters into a settlement agreement to satisfy the debt.
  4. Collection is suspended because you request innocent spouse relief under IRC § 6015.
  5. You make a timely request for a collection due process hearing regarding a levy to collect the debt.
- The certification is erroneous.

The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable.

The IRS will not reverse certification where a taxpayer requests a collection due process hearing or innocent spouse relief on a debt that is not the basis of the certification. Also, the IRS will not reverse the certification because the taxpayer pays the debt below $50,000. So…if you have been notified that your tax debt has been certified, you should consider:

paying the tax owed in full,
entering into an installment agreement, or
making an offer in compromise.

But what if the IRS made an error?
The State Department is held harmless in these matters and cannot be sued for any erroneous notification or failed decertification under IRC § 7345. If you believe that the IRS certified your debt to the State Department in error, you can file suit in the U.S. Tax Court or a U.S. District Court to have the court determine whether the certification is erroneous or the IRS failed to reverse the certification when it was required to do so. If the court determines the certification is erroneous or should be reversed, it can order the IRS to notify the State Department that the certification was in error.

Can I contact the State Department to find out the status of my passport?
The State Department does not have any information about your seriously delinquent tax debt. For questions, or to resolve your seriously delinquent tax debt, they recommend that you contact the IRS via phone at 1-855-519-4965 (1-267-941-1004 international) of via mail at:

Department of the Treasury
Internal Revenue Service
Attn: Passport
PO Box 8208
Philadelphia, PA 19101-8208

How can we help?
As you can tell from above, the IRS will only really reverse the certification if the debt is no longer enforceable (i.e. collectable) or if you enter into a resolution option (i.e. payment plan, currently not collectible, etc).

With regards to enforceability, the IRS only has 10 years from the date of assessment to collect on unpaid taxes. If you are getting letters, your debt is more than likely still active. But do you know when it will expire? This is called the CSED date.

While you could go through the hassle of calculating your CSED (see this blog post), do you really want to? For a flat fee, and us filing a few forms with the IRS (with your consent), we’ll look at however many years you want to analyze, and provide you with a comprehensive report that will include:

Total tax assessment, penalty, interest and accrual amounts for each year (so you know how much you really owe)
CSED calculations for each year requested (i.e. when your debt will expire)
Tolling events (if any) and the days your CSED has been extended
All IRS notices sent/received for each year
IRS account activity by year
And much, much more (we promise)

If your debt will not expire for some time, we are fully authorized to represent your before the IRS and can can help negotiate a resolution option (i.e. IA, OIC, CNC) that will satisfy the IRS conditions to have your certification revoked/lifted. You can learn more about our representation services by visiting the IRS Debt Representation page or reading the IRS Talk post within our blog.

When you are ready to get started, simply call us at (773) 239-8850 or click our email address at the bottom of this screen.

By Administrator|2021-09-29T18:30:01-06:00July 28, 2018|Categories: IRS Talk|Tags: 26 U.S. Code § 7345 - Revocation or denial of passport in case of certain tax delinquencies, Can The IRS Revoke My Passport?, CSED calculating service, Fixing America’s Surface Transportation Act, how do I know if my passport has been revoked?, how much in back taxes can I owe to still get a passport, how to check if passport is revoked, IRS CNC Status, IRS Collection Statute Expiration Date (CSED), IRS CSED, irs csed calculator, IRS IA, IRS Notice CP 508C, IRS OIC, IRS passport denial 2018, IRS passport restriction, IRS passport revocation, IRS Passport Revocation or Denial for Unpaid Taxes - CP 508C, IRS passport status, passport revoked for back taxes, Passports and Seriously Delinquent Tax Debt, revocation or denial of passport in case of certain tax delinquencies|Comments Off

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