I Owe Taxes I Can't Afford to Pay

Sometimes, seniors owe taxes they cannot pay. Often these taxes are old and from prior years when they were working. Some are paying these taxes and going without the basics of life. Although it is rare, some HELPS clients are being garnished 15% of their Social Security. You should know that there is a way to stop harassment and garnishment by the IRS. You can take steps to stop paying past taxes you can’t afford to pay.

The IRS can declare a taxpayer "currently not collectible," after the IRS receives evidence that a taxpayer has no ability to pay. This can be an enormous relief to seniors with a tax liability who are hounded by the IRS to pay their back tax debt. In order to receive Currently Not Collectible status from the IRS, you must prove that you do not have any assets that would enable you to pay the back tax debt you owe (this includes almost all HELPS clients). You must prove that you have enough money to pay for the very basic necessities of life and nothing else. The necessities of life would include: rent, mortgage, food and clothing, health insurance, car payments, auto maintenance, secured loans, utilities, etc. These are called allowable expenses.

Congress has set up an independent department in the IRS called the Taxpayer Advocate Service. It is their job to help persons, including poor elderly, obtain uncollectable status and stop garnishments. This can be done over the phone and it can be done fast! You can find the number for your location here. The Taxpayer Advocate Service is very helpful. We have found them to be kind and patient, after all that is their job.

For HELPS clients:  If you would prefer, we at HELPS will assist you with one of our
volunteers. You will call the IRS together with us on the phone, provide the information they require and in a very short time you can be placed on uncollectable status. No more letters, no more phone calls, no garnishment. 
This all costs you nothing! If you are paying taxes you cannot afford to pay, please pick up the phone and call HELPS.

To learn more about HELPS visit us at our website: http://www.helpsishere.org/

By Attorney Eric Olsen

What To Do With a 1099c?

As we approach the end of the year, it becomes a common occurrence for the IRS to send our office a flurry of forms known as 1099c. These are intended for people who have had debt forgiven during the preceding year. 

Oftentimes, these forms can be intimidating as is nearly any communication received from the IRS. In fact, as strange as it may seem, collection agencies may use the threat of debt cancellation as a collection tactic; telling you that if you don’t pay them they will cancel the debt and then you will have to deal with the IRS. This is scary! The idea behind form (1099c) is that you would normally be responsible for paying taxes on the canceled debt amount which could possibly be significant.

Here is where we can all pause and take a deep breath. Six years ago, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which also covers debt cancellation for persons who are considered to be insolvent. This is great news for our HELPS clients and more generally people on a limited income. For amounts forgiven prior to January 1, 2014, the law states that as long as a person is insolvent (their total debts are more than their total assets); they may submit form 982 with their tax return which will allow this money to be exempt from being taxed.

What happens if you do not normally file a tax return? You can simply send form 982 to the IRS along with a very simple form that lists your debts and your assets. Be aware that if the amount to be forgiven is significant, the IRS may request that you submit a simple tax return for that year.

HELPS staff is available to answer your questions regarding form 1099c. Remember, this is a good thing! It means that your debt is truly being canceled and as long as you qualify (nearly everyone we work with does) you will not be paying taxes on the amount listed.