IRS Simplifies Requirements To Resolve Unpaid Tax Debt

Owe Taxes? Check out the IRS’s “Fresh Start” Initiative

The Internal Revenue Service (IRS) wants taxpayers to be aware that the “Fresh Start” initiative has been expanded to help those who owe taxes. Below are 4 tips provided by the IRS:
1. Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill. The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2012 taxes. Interest still applies on the 2012 taxes from April 17, 2013 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2013.

The penalty relief is available to two categories of taxpayers:

* Wage earners who have been unemployed at least 30 consecutive days
during 2012 or in 2013 up to this year’s April 16 tax deadline.

* Self-employed individuals who experienced a 25 percent or greater
reduction in business income in 2012 due to the economy.

To qualify for this penalty relief, your adjusted gross income must not exceed $200,000 if married filing jointly or $100,000 if your filing status is single, married filing separately, head of household, or qualifying widower. Your 2012 balance due can not exceed $50,000.

Taxpayers who qualify need to complete a new Form 1127A to request the 2012 penalty relief. The new form is available on or by calling 1-800-829-3676 (TAX FORM).
2. Installment agreements An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use streamlined installment agreements to catch up on back taxes and also more time to pay.

The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.

If your debt is more than $50,000, you’ll still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). You also can pay your balance down to $50,000 or less to qualify for this payment option.

With an installment agreement, you’ll pay less in penalties, but interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, you must agree to monthly direct debit payments.

You can set up an installment agreement with the IRS through the On-line Payment Agreement (OPA) page at
3. Offer in Compromise Under Fresh Start in 2012, the IRS expanded the Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers and has simplified the information and documentation required on the Form 433 Financial Statement. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS recognizes many taxpayers are still struggling to pay their bills so the agency has been working on more common-sense changes to the OIC program to more closely reflect real-world situations.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

If you are facing tax issues or need assistance dealing with the IRS, call The Schreiber Law Firm at (619) 269-8600. The Schreiber Law Firm serves clients primarily in the areas of tax problem resolution, foreclosures, bankruptcy, short sales, and estate planning.
At The Schreiber Law Firm, you receive personalized, individual attention and you always speak to an attorney, not an assistant, regarding your case. The Schreiber Law Firm provides representation at a lower cost – in order to assist those who need help the most, but can afford it the least.
The contents of this blog are intended for general informational purposes only and should not be used or relied upon as legal advice or legal opinion on any specific facts or circumstances. You are encouraged to consult with the attorney concerning this information in this blog or any specific legal questions you may have.

Likely IRS Audit Areas

IRS is flexing its muscle

According to, the Internal Revenue Service (“IRS”) is scrutinizing groups of wealthier taxpayers for underreporting of income.  In fact, the IRS is showing far less sympathy than in the past few years and appears to be pursuing tax collection much more aggressively.

In an effort to decrease under-reporting of income this year, the IRS will begin reviewing credit card statements and cross-checking data against tax returns.  The IRS won’t limit its actions to only the wealthy……even small Schedule C  audits are worth it because everyone who knows the average-Joe being audited is more likely to comply with the rules in their tax return.

Some of the groups who are more likely to be audited by the IRS include:

•Taxpayers who own their own business

•Taxpayers with income of more than $200,000

•Taxpayers claiming refundable tax credits

•Taxpayers over reporting deductions

•Taxpayers with offshore accounts.

It is uncertain how long the IRS will, or can afford to, keep taking its aggressive approach.  Regardless, even in tough times being honest can payoff in the long run!

If you are facing tax problems, call The Schreiber Law Firm at (619) 269-8600.  The Schreiber Law Firm serves clients primarily in the areas of tax problem resolution, bankruptcy, short sales, foreclosures, and estate planning. 

At The Schreiber Law Firm, you receive personalized, individual attention and you always speak to an attorney, not an assistant, regarding your case.  The Schreiber Law Firm provides representation at a lower cost – in order to assist those who need help the most, but can afford it the least.

The contents of this blog are intended for general informational purposes only and should not be used or relied upon as legal advice or legal opinion on any specific facts or circumstances.  You are encouraged to consult with the attorney concerning this information in this blog or any specific legal questions you may have.


Foreclosure Versus Short Sale: The Good, The Bad, And The Ugly

Losing your home to foreclosure is one of life’s most unpleasant experiences. In addition to the current disruption of your life, it can keep on affecting you long after your home is gone with a major impact on your credit score. Events such as a serious illness, a major accident, divorce or job loss can happen to anyone and put you in a situation where your house is now in jeopardy. Therefore, it’s a good idea to understand the available alternatives should you face this situation.

The first thing – of all available options, foreclosure is the worst.

The inevitable result of a foreclosure is the lender taking your house. If that isn’t enough, your credit report will reflect a negative condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. Most lenders in California with a mortgage in first lien position will do a non-judicial foreclosure – which will prevent it from coming after you for a deficiency if the house sells for less than what is owed. However, if the lender is a second mortgage or HELOC loan, they usually will not receive anything in the foreclosure sale by the first lien holder. If they are still owed money after the first mortgage holder forecloses, the second mortgage holder can sue and get a judgment against you for the amount still owed and can collect on that judgment by a garnishment of wages or bank accounts. In most circumstances, the only way to get out from under this debt is by either paying the judgment (or an agreed amount in compromise) or by discharging the debt in bankruptcy. There is no upside to foreclosure.

While it is more time consuming, you may want to instead consider a short sale when foreclosure seems the only other option.

A short sale is a popular way for homeowners to get out from under a mortgage debt. With a short sale, you sell your home for less than what you owe your lender. However, you are not allowed to receive any money from the proceeds of the short sale. The biggest obstacle with a short sale is getting your lender to agree to a short sale and the approving the amount of the sales price. Because it may take many months to get a short sale approved, you should pursue a short sale as soon as you know you will soon fall behind, or have already have fallen behind, on your mortgage payments and see it is unlikely that you will ever catch up. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will even be willing to discuss a short sale and may want to just go to foreclosure even if the lender may make more money from a short sale.

A short sale has disadvantages though. While a short sale will save you from foreclosure, which is a far worse impact on your credit rating, it will still have a negative effect on your credit score, frequently lowering it by as much as 200 points. While trying to sell your house at a price less than what is owed, the process is a sale just as if your selling for a profit, including prospective buyers coming through your home, real estate signs and open houses. If you have a second mortgage loan or HELOC, you may also have issues with getting it to approve a sale, if it will require some money being paid to it, thereby releasing its lien. The goal with second lien holders in a short sale situation is to have it release its lien in order for the sale to go through. That does not necessarily mean they are also forgiving the rest of the debt. Borrowers need to make sure the second position lender does not thereafter have the right to pursue you for the unpaid balance or request that you sign a promissory note to pay some or all of the unpaid balance over the next ten years. Further, there may be tax consequences as the difference between the mortgage balance and the amount realized from the short sale may be taxable as income despite the fact that you did not receive any money out of the short sale. This is what is referred to as “forgiveness of debt income.” Currently, there are certain conditions under which a short sale will not be considered taxable income. You should first discuss this with you tax advisor to determine if you qualify to have all or part of that amount not considered to be taxable income under the Debt Relief Act 0f 2007.

Whether you should do a short sale or let the home go to foreclosure depends on several factors. While for some homeowners it is easier to throw up your hands and let the bank take your home, that might not be the wisest thing to do.

Short Sale Benefits

  • You are in control of the sale, not the bank.
  • You may sleep better at night knowing who is buying your home.
  • You will spare yourself the social stigma of the “F” word, foreclosure.
  • Contrary to popular belief, you can be current on your payments and still effect a short sale.
  • Your home sale will be handled like any other home sale. To the rest of the world, it looks like you sold your house, moved out and someone moved in just like in a traditional sales transaction.

Buying Again After a Short Sale

If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. The wait for an FHA loan is 3 years.

If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence.

Buying Again After a Foreclosure

With certain restrictions, you may be eligible to buy another home in 4-5 years if the home was your primary residence. Without restrictions, the wait is 7 years.

If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.

Credit Impact

A short sale is not a derogatory mark on your credit because credit bureaus do not have the term “short sale” on your credit report. It may say “pay as agreed” or “paid as less than agreed,” among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points. The point drop is typically due to having been behind on your payments. Lenders will report short sales differently and some do not report them to the credit bureaus at all.

Credit scores drop from 200 to 400 points after a foreclosure. Generally, as a foreclosure is a public record, the record of a foreclosure will remain on your credit report for 10 years.

For more information on credit scores and how they are calculated, visit the “credit education center” at

Future Loan Applications

Loan applications do not ask questions about a short sale. You may report that you sold your home. In almost every credit or loan application appear the following question: “Have you ever had a property foreclosed upon or given a deed-in-lieu thereof in the past 7 years.” If the bank or credit card company sees you have had a foreclosure on your application, your loan most likely will be denied. If you lie on your mortgage loan application, you may be subject to investigation by the FBI for mortgage fraud.


Despite all of your efforts, if your lender has not, or will not, approve your short sale and wants to take your house to foreclosure, depending on you other financial circumstances, you may want to consider bankruptcy as an option. If foreclosure is the apparent direction you are heading, bankruptcy may allow you to keep control over when and how a foreclosure occurs, or provide you an avenue to keep your home. Further, the impact on your credit of a bankruptcy versus a foreclosure – with other financial problems as well – may not be any different, and a bankruptcy may help in closing out that chapter of your financial life and allow you to move forward to rebuilding credit right after discharge. Also, any second mortgage holder who may sue or is threatening to sue on their loan can be discharged in a bankruptcy along with credit card debts and medical bills.

Jeffrey D. Schreiber is a licensed California real estate broker.

The Law Office of Jeffrey D. Schreiber has successfully counseled homeowners in dealing with short sales and short sale issues, foreclosures and bankruptcy options to resolve their mortgage loan problems.