Halftime for Tax Year 2005: Estimated Tax Deadline Looms on Sept. 15
Tax Debt Expert Outlines Payment Strategies and Alternatives for Hurricane Katrina Victims

SAN MATEO, Calif., Sept. 13, 2005 - Sept. 15 marks the third of four annual tax deadlines for the thousands of Americans who pay estimated taxes - and at this point in the tax year, many taxpayers are coming to one of two realizations: either they haven't adequately prepared for their payments or they don't know they owe payments at all, says Bradford Stroh, founder and co-CEO of Freedom Financial Network, LLC.

Stroh reminds consumers that they have options in managing tax payments."Estimated taxes typically are owed by the self-employed, by people who pay special taxes - including the household employee tax - or by those who have had a significant capital gain, such as a stock market gain," he says. "For these folks, the IRS wants their taxes paid as they go, in four quarterly increments, but this time of year, a few payers run into problems."

"At any point when a consumer (taxpayer) has a tax liability that s/he cannot afford, that person has an opportunity to settle the IRS debt. No need to wait - and the sooner the better, as the accumulated interest and fees will be lower," Stroh says. Any underpayment will require penalties. If you suspect you owe estimated taxes this year but haven't made payments, or if a downturn in your income has made it difficult for you to pay, you have several options.

1. Direct negotiation with the IRS – The IRS will negotiate directly with taxpayers, but the IRS is a powerful government entity that can use draconian tactics. Unlike a private creditor, the IRS can garnish wages or put a lien on a home for repayment. Taxpayers in serious debt can attempt to negotiate an offer in compromise (essentially, an agreed-upon substitute for the amount owed), but the IRS typically accepts only about 13 percent of these arrangements offered by individuals.

Pro: You show willingness to pay your debt. Cons: Many confusing forms, low chance of success.

2. Tax resolution – Tax resolution firms negotiate with the IRS on the consumer's behalf to reach an agreement on the amount to be paid. Consumers then pay the tax resolution firm a percentage of savings obtained. A skilled negotiating attorney can have a success rate of greater than 90 percent in obtaining one of two types of solutions:

a. Offer in compromise - Reduces the principal amount owed; requires immediate payment.

b. Installment agreement - Establishes a payment plan for the total amount due; often includes reduction in penalties owed.

Pro: It can eliminate liens and wage garnishments and, in the case of an installment agreement, reduces your total tax liability. Makes sense for people who owe about $10,000 or more. Con: It can impair your credit score.

3. Chapter 13 bankruptcy – Historically, consumers in IRS debt would file for Chapter 7 protection to wipe out all debt, or try to wait for the statute of limitations on tax liability to expire (10 years). However, with bankruptcy reform taking effect Oct. 17, people will be more limited in the ability to obtain a Chapter 7 filing. The new "means test" will require many people to file for Chapter 13 bankruptcy, which establishes a repayment plan.

Pro: May reduce debt and stop collection calls. Con: The publicly available bankruptcy judgment remains on a consumer's long-term record, and repayment plans are generally less favorable than those provided by debt resolution.

4. Special consideration for victims of Hurricane Katrina – The IRS is temporarily suspending collection (levy, lien, garnishment) and penalty accruals on impacted areas, says Stroh. "If you owe taxes, this would be a great time to take advantage of this opportunity to get your financial life back on track as well as your personal life."

Pro: A tremendous opportunity for those starting over after Katrina's devastation. Con: It can be difficult to resolve these issues alone in the midst of such tumult, so obtaining professional assistance will be important.

Freedom Financial Network, LLC (www.freedomfinancialnetwork.com) provides consumer debt resolution services through its Freedom Debt Relief, Freedom Foreclosure Relief and Freedom Tax Relief divisions. Working for the consumer and negotiating with creditors to lower principal balances due, the company offers an alternative to bankruptcy, credit counseling, and debt consolidation. Based in San Mateo, Calif., Freedom Financial Network serves more than 3,000 clients nationwide and manages more than $100 million in consumer debt.

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CONTACTS:

Brad Stroh,
Freedom Financial Network, LLC
650-571-0961, x210
bradford@freedomdebtrelief.com