What To Do If You Owe Taxes To The IRS

Tax season has arrived and many Americans are still struggling financially. The recent economic crisis is still having a dire impact on the ability for families to manage their day to day finances. It is no surprise that an increasing number of people are having trouble meeting their income tax obligations. So what can you do if you find yourself unable to pay your income taxes?

Do not panic or procrastinate. IRS tax notices and balances due on recently filed tax returns can bring out a lot of negative emotions. Once you recognize that you owe taxes to the IRS take action immediately. Just because you cannot afford to pay the taxes due immediately does not mean there are no options. Many people make a tax problem worse by procrastinating or avoiding it altogether.

Create a financial plan. The creation of a financial plan is the single most important step to take when you owe taxes to the IRS. Why? A financial plan provides the guidance needed to help you address the tax situation and other important financial life goals. Unfortunately, most people tend to avoid this step altogether. When working with clients experiencing tax debt problems I refer to their financial plan as a tax resolution plan.

In order to resolve tax problems the most cost-effective way possible you need a tax resolution plan. The ultimate goal should be to get out of debt quickly so you can focus on other more important aspects of your financial life. Goals such as saving for your child's education, retirement, paying off debt, buying a house, etc. are difficult to achieve if you owe the IRS. A financial plan will also help you with future income tax planning. Some areas of focus could include maximizing all potential tax deductions, reducing future taxes, tax efficient investing, and planning ahead for future tax related events.

File your taxes. Go ahead and file a tax return even if you cannot pay the taxes owed in full. This will eliminate the failure to file or late filing penalties. In many cases the IRS will not work with you until you have filed all past due tax returns.

Stay current with future tax obligations. While you are working to resolve your tax debt problems you must stay current with your tax obligations. For self-employed individuals this requires you to continue (or begin) making estimated tax payments. If you are a wage earner you need to make sure that you are having sufficient taxes withheld from your pay.

Establish a plan. By following the financial planning process you should obtain a good understanding of where you stand financially. Complete a net worth analysis that explores everything you own and everything you owe to others. You will also need to complete a cash flow analysis that looks at your income and expenses. These two factors are critical when exploring all of your available options to resolve the tax debt.

Explore all available tax resolution options. If a taxpayer cannot pay taxes owed in full, the most common tax resolution alternative is to establish a payment plan or Installment Agreement. Other alternatives include Partial Payment Installment Agreements, Currently Not Collectible Status, bankruptcy, or requesting an Offer in Compromise. If you are considering an option other than setting up a payment plan you should consult an Enrolled Agent, CPA, or tax attorney.

Follow the plan and take action. Tax debt resolution requires discipline and planning. If you follow basic elements of the financial planning process you will be able to get out of debt sooner and move on with your life. Tax problems are stressful. However, effective solutions do exist for those that take action and follow a tax and financial plan.

For more information on the LifeSpan Process of Tax Resolution and Financial Freedom contact LifeSpan Financial Planning at 843-469-3505.

How to Get 2010 Off to a Great Financial Start

Plenty of people make resolutions to lose weight, get a new job or make other things happen in their personal life, but relatively few make solid resolutions about money. Make 2010 the year you’ll live a better life financially. Here are a few resolutions to think about:

Write down the things you really want in life: Have you ever written down the big things you want in life? Granted, all great dreams don’t cost money, but many of them do. Money buys freedom – to travel, to retire early, to start a business, to change careers. Putting goals in writing gives them a formality and a starting point for the planning you must do.

Evaluate your risk tolerance: One of the most beneficial things financial planners do is help you articulate your financial goals and establish (or re-establish) your tolerance for risk. With the recent recession and market turbulence, many individuals would benefit from an analysis of how much risk they want (or need) to take based on what they want to achieve with their money.

Track your spending: If you haven’t purchased financial accounting software or set up a reliable accounting method of your own, this is the year to do it. Diligent expense tracking is the first critical step to getting personal finances in order whether you do it on paper or on your computer. Mint.com or QuickenOnline.com are free online programs that help you do this.

Get tax and planning advice toward retirement, other goals: Maybe you’ve always winged it with your taxes and considered your company 401(k) the ticket to your financial future. Chances are your planning is inadequate. Start getting references on good tax professionals and consider sitting down with a CERTIFIED FINANCIAL PLANNER™ professional to discuss your whole financial picture.

Cut your debt: If you can’t ever seem to get yourself completely out of credit card debt, make this the year to do it. Take inventory of your balances, figure out if you can consolidate them under your lowest-rate card, and resolve to pay off an amount that exceeds the minimum -- on time, every month. And if you can pay extra toward mortgage, auto, student or other borrowings, do so.

Start saving -- or save more: If you haven’t signed up for your employer’s 401(k) plan or begun a savings plan tailored for the self-employed, this is the year. And resolve to save at least 5-10 percent of your take-home pay based on your cash flow, and place the maximum amount in your retirement plans and savings.

Invest in yourself: If going back to college or taking specific coursework will help you advance in your career, plan to do it. If investing in a health club membership that you actually use makes sense for your health as well as your insurance costs, do it. Keep in mind that bettering yourself is always a good investment.


Redefine the way you shop: If you’re an impulse shopper, break the habit in 2010. As a suggestion, get a legal pad and make that your centralized shopping list – use a single page for groceries, stock-up goods (it’s wise to start buying essentials in bulk if you can measure the savings), essential clothing or big expenditures you’ll need to make at specific times. Taking that pad with you wherever you spend money is a good way to keep a grip on your wallet as long as you don’t stray from the list.

Change the way you commute: If driving is the single best option to getting to work or other destinations, it’s tough to make that switch. But if you have the option to leave the car in the garage at least one day a week and walk, bike, carpool or take public transportation instead, try it. You’ll save money on gas, maintenance, insurance and parking costs, you’ll benefit the environment and in the case of walking or biking, the exercise may do you good.

Cut unnecessary expenses: Do you really need deluxe cable? How much are you paying for your Internet service? Can you wear a sweater around the house and lower the thermostat? In every budget, there are items that can be cut – or at least trimmed. Take a hard look at all your “essentials” to see how essential they really are. Aim for a target of at least 10 percent and start setting that money aside on a regular basis.


January 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by LifeSpan Financial Planning, LLC, a local member of FPA serving Charleston, Mount Pleasant, Daniel Island, Goose Creek, Summerville, Moncks Corner, and Beaufort, South Carolina.

Financial Life Planning and Tax Resolution

Financial life planning is about more than just money. A financial life planning approach can provide a deeper meaning to the management of personal finances. Every person going through the tax resolution process needs a vision, purpose, and a plan if they want to succeed. George Kinder is a well respected financial planner and a leading proponent of the life planning movement within the financial planning industry. His financial counseling process includes three questions that are popular for their ability to help clients focus on what really matters to them about money. While I have adapted a version of these questions for the tax resolution client, similar questions are also asked of my Fee Only financial planning clients.

The main purpose of this exercise is to begin thinking about what you want your money to do for you. The first question is designed to initiate the process of thinking about all of life’s possibilities; the second and third questions are created to help people with tax troubles focus on their priorities in life.

Since the accumulation of excessive tax and consumer debt has such an immediate and overwhelming impact on household finances it is easy to lose sight of long-term goals and dreams. Looking beyond the current state of financial stress is an important way to help prioritize goals during the tax resolution process. It also helps to have something to work to achieve while reinforcing the need to attack your tax problems with passion and enthusiasm.

The life planning questions below should be used to help you identify what you want to get out of life. Since money plays such an integral role in our lives it is important that you are able to understand your values that lie beneath the surface of your financial world.

1. Imagine that you have paid off all of your tax and consumer debt. You owe absolutely nothing and have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything?

2. Imagine that you visit the doctor and he or she says you have only five to ten years to live. You will not feel any pain or sickness, but you will never know when death will actually come. What will you do? Will you change your life? How?

3. Finally, now try to imagine that your doctor says you have only one day left to live. Ask yourself: What did I miss? What did I not get to be or do? Do I have any regrets?

This three questions exercise is designed to tap into the heart’s core. What are your values? What is your vision?

Now is the time to start thinking about a life without any debt. Setting a goal to resolve a tax liability is usually the #1 priority during the tax resolution process as it should be. It can be difficult to look beyond the stress of the here and now when it comes to tax and financial matters. Establishing life planning goals add more meaning to the tax resolution process. If you have avoided debt and do not have a tax problem, these questions are just as relevant during your financial life planning journey.

Tax Debt and IRS Levies

Can you afford to let the IRS levy your bank account or garnish your wages? That is what could happen if you owe back taxes and avoid their attempts to contact you.

IRS collection activities are negative events and represent anything but freedom, and therefore should be avoided. You must be proactive and take action to avoid IRS collection measures such as wage garnishments, bank account levies, property seizures, and liens placed on your property. It is important to know what the IRS is capable of doing. Most people find this knowledge a helpful motivator to stay on track with the tax resolution process. If the collection process has already started you should still proceed through the tax resolution process quickly and accurately to start resolving your tax problems on your terms rather than simply accepting defeat and allowing the IRS to control your financial life.

What does the IRS typically attempt to levy?
The IRS may intent to levy any federal payments due, retirement benefits, Social Security benefits, wages, or employee travel advances or reimbursements. The IRS can also levy property such as real estate, automobiles, business assets, bank accounts, wages, commissions, and other income. A levy is a seizure of property. The IRS will try to levy assets unless you TAKE ACTION. Why allow the IRS or any creditor to take control of your assets on their terms? If you owe taxes you need to pay them (or at least come up with some type of tax resolution alternative). However, you need to have a plan to pay them on your terms and not the terms of the IRS.

The IRS may involuntary collect the tax debt owed to them through different types of levies. A levy is served after the IRS has exhausted all other collection efforts to encourage taxpayer compliance. Levies commonly attach a taxpayer’s bank account, salary and wages, and/or business accounts receivable.

The IRS is required to release levies in several circumstances, including:

• The levy is creating an economic hardship.
• The taxpayer agrees to make an Installment Agreement.
• The liability is no longer owed.
• The 10-year statutory collection period has expired.
• The levy was wrongfully served.
• An Offer in Compromise is accepted for review.

The two circumstances most often utilized to request a levy release are when the levy is creating an economic hardship or when the taxpayer agrees to make an Installment Agreement. In both of these situations, the taxpayer must provide a Collection Information Statement for Individuals and Self-Employed Individuals (Form 433-A) and/or Collection Information Statement for Businesses (Form 433-B). To obtain a levy release, the taxpayer must also file all required tax returns and be current in estimated payments or Federal Tax Deposits, if required.

The IRS usually will not release a levy until the taxpayer has proposed a solution to the delinquent tax problem and demonstrated that they will remain in compliance with future obligations. In certain circumstances, the IRS may release a levy if the taxpayer promises missing tax returns or financial information by a fixed date, but this cannot be counted on. It is always best if the taxpayer can get all of the needed documentation before contacting the IRS for a release of levy.

In conclusion, if you are facing the possibility of an IRS levy it is always in your best interests to take action. Do not avoid the tax problem. A tax resolution plan is a proactive strategy that will help you resolve tax debt problems the best way possible for your situation.

Contact LifeSpan Financial Planning at 877-TAX-9110 if you are interested in finding out more about using a Tax Resolution Plan to overcome tax problems.

Creating a Personal Spending Plan

The definition of insanity may be doing the same things over and over again and expecting different results. I think the key defining element of seeking financial change (and eliminating insane amounts of debt) is doing the right things over and over again and actually getting positive results. Spending with a plan is the right thing to do, and it must be done over and over again.

The creation of a personal spending plan is one of the most important steps of the tax resolution process. A personal spending plan is also the foundation for achieving financial freedom. On the surface a spending plan or budget is extremely basic. Most people do not even have a simple budget much less a spending plan to guide their financial decisions. The purpose of this tax resolution step is to create a personal spending plan that will help you make sure that your money is working for you the best ways possible. Spending plans are also needed to resolve your tax debt and reach your other life planning goals.

A budget is generally defined as:

a) an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them,

b) a systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period, and

c) the total sum of money allocated for a particular purpose or period of time.

When used as a verb the word budget means to plan in advance the expenditure of something. These definitions each focus on the action of planning. Budgeting is defined as estimated projection of the amount of certain expenses. During the tax resolution process you should use the word budget as a verb and take action. Tell your money where you want it to go rather than trying to figure out where it all went or worse, spending more than you have available and relying on credit cards and debt to get you through the month.

Unfortunately, most people approach the budgeting process the wrong way and do things backwards. They use a legal pad, spreadsheet or budgeting software and track where spending occurred across various categories (food, utilities, credit card bills, etc.). This is a great way to see where your money went during the previous month. But it is a horrible way to plan where your money will go in the future. During the previous step we analyzed where your money has been going in the past. Going forward, you should use the information gathered during the cash flow analysis to create a spending plan or budget.

The budgeting process is often misunderstood because it is typically viewed in a negative manner by the people who need one the most. We have discussed at length how many individuals in debt display problematic financial behaviors. One of the biggest problem behaviors is trying to manage personal finances without a plan. The lack of a personal spending plan or budget is common in the majority of people with tax problems. Many people are resistant to change when it comes to budgeting. Some tax resolution clients view a budget as a form of constraint that inhibits freedom. This is ironic because a personal spending plan will actually lead to financial freedom if used consistently.

Every single household spending plan is unique and each person will be presented with his or own set of challenges. Do not expect your personal spending plan to work perfectly the first time around. It may take a few months to figure this process out. This is normal. Whatever happens on a month to month basis, DO NOT QUIT and NEVER allow frustration to get in your way. Remember that the LifeSpan Process of Tax Resolution and Financial Freedom requires you to take action to replace negative financial behaviors with positive alternatives. The old way of doing things got you into this mess. Replace the old way with a new and improved way of handling your personal finances.

Tax Resolution: Embracing the Need for Change

As people with tax or other financial problems embark on their tax and financial planning missions they need to embrace the idea of change. Dealing with tax problems can be a significant challenge. Tax resolution planning requires you to take a different approach to managing taxes and personal finances. The tax resolution process may be difficult and frustrating at times and you should always prepare for and expect minor setbacks. If you take the steps one at a time and prepare to take control of your life as it relates to money you will be able to obtain meaningful change.

Taking Action: Elements of Change
1. Readiness to change
2. Barriers to change
3. Expect setbacks

The concept of tax resolution planning involves taking action. If you want to change your financial life and get out of tax debt you have to take action. You have to want to change and be ready to accept it with courage and a positive attitude. Improving your financial well being requires a constant pursuit of meaningful change in all aspects of your life.

Many barriers to change exist along life’s journey no matter what the challenge. In the tax and financial planning world these barriers could be procrastination and fear. Other obstacles such as lack of support or marital discord may also stand in the way of change. Whatever your personal barriers are you need to go ahead and accept the fact that there will be obstacles. You should expect to incur setbacks and prepare for them. This does not mean that you should accept failure. You simply need to prepare for the minor setbacks and never allow them to stop you on the journey to financial freedom.


Assessing the Change Process
Behavior change is an ongoing process and in theory progresses through a series of stages. These theoretical stages were introduced by James Prochaska, Ph.D. and are generally referred to as the Transtheoretical Model of Change (Stages of Change Theory). I know that is a big word. Do not focus on it as much as the importance of assessing where you are in the change process while seeking ways to resolve tax problems. As you progress through the Tax Resolution Steps (and then focus on the Steps to Financial Freedom) always keep in mind as to which stage you are in.

1. Pre-contemplation- person does not intend to take action in the next six months

Example: IRS letters are completely ignored, unwilling to discuss the need to file past due tax returns, continue to spend more than you earn, no personal spending plan, may not even realize a tax problem exists

2. Contemplation- person intends to take action in the next six months

Example: Realizes the need to deal with tax issue, understands the need for a tax and financial plan, lack of awareness where to turn to for help and guidance, do not understand the financial mess they are in, tried to create a budget in the past but failed, defensive (pulled into action before they were ready)

3. Preparation- person intends to take action in the next 30 days

Example: Researching available tax resolution options, deciding whether or not to seek professional help, beginning stages of organization, gathering tax and financial documents

4. Action- person has taken action, but for less than six months, hardest most demanding step, make a commitment to place the tax resolution and financial planning process as the top priority for the next six months,

Example: Seeking help with tax resolution issues, creating a personal spending plan, determining the best particular tax resolution alternative, working the steps of tax resolution and financial freedom

5. Maintenance- person has take action for more than six months, stress is the top reason people regress at this stage, there is a need to create positive choices or alternatives to deal with stress (social support/talking, exercise, relaxation, following a financial "life plan")

Example: Staying current with IRS payments, filing future tax returns on time, reviewing personal spending plan on an ongoing basis, communicating regularly with spouse about money

6. Termination- person will not revert to self-defeating, self-destructive financial behaviors; learning new behaviors and making them a part of who you are, similar to the challenge that people are faced with addiction

Example: Tax freedom is achieved by paying off the tax liabilities. Future tax and financial problems are avoided by consistently using positive financial behaviors. Developed the ability to take control of money and focus on other parts of life.

The LifeSpan Process of Tax Resolution and Financial Freedom promotes the termination of problematic financial behaviors. The best way to do this is to learn better alternatives such as planning, eliminating debt, avoiding debt, saving and investing. This process of change eliminates debt faster and reduces the likelihood of future tax or financial struggles.

Do's and Don'ts of Tax Resolution and Financial Freedom

It is no secret that money plays an integral role in our lives. Think about the things that you do on a daily basis. Money is right there whether we see it or not. Everyone has their own belief systems related to money. In fact, we all begin creating the framework for how we view money early on in life. It is difficult to see beyond the here and now during any stressful life event. Dealing with tax or other financial problems can definitely be classified as a challenging life event that has an impact on all aspects of the life experience.

How people with tax and financial problems choose to respond to a particular financial challenge will have long-lasting implications. Similarly, the approach that tax and financial planning professionals use when dealing with their clients’ problems will also go a long way in preparing others for tax and financial freedom.

The goals of tax resolution and financial planning are quite simple. Replace the old way of dealing with money and taxes with a proven system that will help you achieve financial freedom.

STOP

Engaging in negative financial behaviors
Living paycheck to paycheck
Procrastinating and living in fear
Going deeper and deeper into debt
Worrying about your money
Putting off retirement and other life goals
Being intimidated by the IRS
Allowing interest and penalties on tax debt to grow
Trying to figure out where your $$$ went at the end of the month
Overdrafting your accounts or getting late fees
Arguing with your spouse about money

START

Planning your future and enjoying life now
Making smart decisions about your money
Taking action and eliminating negative financial behaviors
Paying cash for purchases
Living on less than you earn
Getting out of debt
Investing for retirement and other goals
Dealing with the IRS with confidence
Resolving your tax debt in the most cost-effective manner
Telling your $$$ where to go at the start of the month
Making your money work for you rather than working for it!
Working with your spouse and communicate more effectively

Money and Tax Matters on the Radio

LifeSpan Financial Planning will be represented again on the airwaves as I make another guest appearance on the Money Matters Radio Show this Saturday morning at 9:00. Money Matters is hosted by Rick Durkee and airs in the Charleston, SC market on 94.3 WSC FM. The program also streams online via http://www.wscfm.com.

Money Matters typically features a diverse group of tax and financial professionals. The show addresses all aspects of the financial planning process including topics related to tax, retirement, investments, insurance, and estate planning. My appearance will be focusing on the application of basic financial planning principles during the tax resolution process. Listeners will be provided with an opportunity to pick up a free copy of my book Tax Resolution and Financial Freedom.

Scott M. Spann, CFP(R), EA
LifeSpan Financial Planning
(877) 829-9110
scott@lifespanplanning.com

Tax Debt Problems: Finding the Ideal Solution

Do you owe back taxes to the IRS?
Are you behind with filing tax returns?
Is dealing with tax matters becoming frustrating or overwhelming?
Or…
Are you compliant with your tax obligations but would like to establish a plan to minimize the impact of future income taxes?

If you have tax problems, what is the ideal solution for your tax struggles? The answer depends on the “big picture” of your financial situation. There is no one option that is the best choice for each person. A one size fits all approach does not work with tax resolution. The IRS simply wants to ensure that you pay your tax obligation and they will take various measures to make sure you do so according to their terms. It is up to you, the taxpayer (with some professional guidance), to make smart financial decisions when choosing among your tax resolution alternatives. Keep in mind that the IRS is essentially the accounts receivables department of the U.S. Government. Their job is to make sure that everyone that should pay taxes does. If a taxpayer is not compliant with IRS procedures they have the authority to collect.

The Internal Revenue Service does not necessarily care that you choose the best tax resolution option available. They simply want to ensure that you pay your tax obligation and they will take various measures to make sure you do so according to their terms. It is up to you, the taxpayer, to make smart financial decisions when choosing among your tax resolution alternatives.”

The bottom line is that avoidance is not an option. Take control of your tax problems, and while you are doing so assume control of something more important- your total financial situation. There are many options available during your quest to deal with resolving a tax liability. However, taking control of your life by establishing a financial plan is NOT an option…it should be viewed as a requirement if you truly want to reduce your financial stress and get on with your life on your terms (not the IRS’s). Remember, the IRS is interested in one thing during the collections process and that is collecting taxes that are past due.

If you are faced with the task of dealing with a past due tax liability, you need to understand how to organize your financial life in order to deal with the IRS in the most effective manner. This means putting your goals and objectives first and being proactive. Engaging in the financial planning process is your best option as you begin the journey to tax resolution with the IRS. Tax debt inhibits freedom. It distracts you from other more important goals and objectives.

Debt is Dumb. Tax Debt is even Dumber if not dealt with immediately. Resolving tax debt without a plan is not a smart decision. Tax resolution requires a plan. The tax and financial planning process is the solution to resolve tax problems.

Scott M. Spann, CFP(R), EA, MA
Financial Life Planner
LifeSpan Financial Planning, LLC
(877) 829-9110

For more information on the LifeSpan Process of Tax Resolution and Financial Freedom, contact Scott toll-free at 877-TAX-9110. LifeSpan is currently offering complimentary copies of the book "Tax Resolution and Financial Freedom" to everyone that schedules a free Tax Resolution Analysis before July 4th.

The Importance of Eliminating Debt from your Life

The presence of debt problems affects more than just the individual in debt. Tax and consumer debt can create additional strains on relationships with a spouse or other family members. Similar to most problems that go unaddressed over long periods of time, financial problems related to debt will compound if not eventually dealt with. This is undoubtedly the case with past due tax liabilities and related penalties and interest as well as other forms of problematic debt (e.g., credit cards, installment loans, etc.).

Biopsychosocial Impact of Debt (a.k.a. The Triple Whammy)
The presence of debt affects more than just the wallet. Debt problems can also create an increased risk of health, psychological, and social pressures. Engaging oneself in a debt reduction plan will do more than improve the finances. The following problems are associated with debt.

• Health Problems- Being in debt is associated with an increased risk of digestive track issues, migraines, and even heart attack. Other related problems are high blood pressure, insomnia, lower back pain or tension, and concentration problems.
• Psychological Problems- Anxiety, depression
• Social Problems- Marital tension and debt stress have a negative impact on relationships in general, trouble focusing on work can also result in poor productivity and increased problems at your workplace

A life without debt may seem difficult to imagine if you are one of the millions of Americans struggling financially. Debt will not go away on its own. Take action and create a debt management plan that puts you in control of your financial future.

The Need for Emergency Savings

According to the National Foundation for Credit Counseling, one third of all Americans do not have any emergency savings- ZERO SAVINGS. Of those households that do have an emergency fund in place, only 43% have adequate savings available for emergencies. If you genuinely want to reach a state of financial liberation then you need to be different from the average person. As indicated above, the majority of people in this country have no emergency savings. Financial freedom requires being a renegade who approaches money matters in a unique way. Planning for unforeseen events and the unpredictable in life is not unique. However, in this day and age of negative savings rates and growing debt an emergency fund will go a long way in separating you from others who are seemingly content living in a world of debt.

Fighting Procrastination

Are procrastinating behaviors holding you back as you attempt to deal with tax and financial matters? You have probably heard the saying, “Why do today what you can put off tomorrow?”. It seems that a significant number of people with tax or financial problems experience a tendency to put off or get overwhelmed by their financial obligations.

Procrastination is defined as putting off things that you should be doing now. Most people procrastinate at some point in their lifetimes. Approximately 20% of people in this country are classified as “chronic procrastinators”. Typical distractions that delay tax and financial planning include family commitments, work, email, cell phones, internet, iPods, and 400 plus channels of digital television with video on demand. Not surprisingly, procrastination is a common characteristic of many tax and financial planning clients.

“To do” lists provide good reminders of what needs to be done. However, a “to do” list is also a good way to delay things actually getting done in a timely manner. Have you ever had good intentions in the past in relation to financial planning tasks? Some common tax and financial intentions are listed in the statements below:

• “I need to file my taxes on time this year.”
• “I really need to set up a savings fund just in case an emergency occurs.”
• “We should pay off our credit cards.”
• “Let’s get our paperwork to our accountant.”
• “I need to get my financial planning forms to my planner.”

Unfortunately, the good intentions listed above lack direction. A better alternative as you follow the steps of the tax resolution process is to develop what I refer to as “implementation intentions” or “planning intentions”. In the tax resolution world, planning intentions decide how, when, and where you are going to accomplish the steps of the tax and financial process. They increase the likelihood you will follow through on the important steps needed to improve your financial well-being.

If you are undergoing the tax resolution process to deal with tax debt you should be sure to define the specifics (how, when, where, etc.) of your planning behaviors. Put your planning actions in writing and hold yourself accountable. Never miss a deadline.

For more information on the LifeSpan Process of Tax Resolution call Scott Spann toll-free at 877-TAX-9110.

IRS Tax Debt Resolution: The Financial Planning Approach

Trying to find the best way to resolve tax problems can be a difficult process. Writing about the best practices to help taxpayers is also a unique challenge. When I started the project of writing a book on tax resolution planning I had a simple goal in mind. I wanted to present an overview of how to use the tax and financial process to deal with tax problems. However, I quickly noticed that very few tax and financial planning professionals actually provide comprehensive financial counseling and planning for a group of people that needs help the most. While exploring this specialized area of tax and financial planning, I have learned a great deal about my own approach to the tax resolution process.

My conclusion is quite simple. The ideal solution to tax and financial problems includes a dual focus on tax resolution and financial planning. Rarely are both disciplines combined in an effective manner. Resolving IRS tax liabilities by using fundamental principles of the financial planning process is the most effective way to deal with tax problems. The use of these same principles is also needed to prevent future IRS tax problems.

One thing that I realized during my research and practical application of this approach is that comprehensive financial planning does work for people with federal and state tax liabilities. However, tax resolution planning is a unique process that needs to be structured in a way that increases the likelihood that someone with significant tax issues related to financial management problems will actually succeed in taking control of their situation.

The LifeSpan Process of Tax Resolution and Financial Freedom combines the fundamental principles of tax and financial planning in a holistic manner that focuses on the psychological and behavioral aspects of managing money and taxes. Simply put, most other approaches to tax problems only deal with the elimination of tax debt rather than the elimination of poor financial decision making. In order to achieve freedom from tax debt you must start with a plan that emphasizes smart financial decisions. When the tax resolution process is performed the right way it always places the focus on “big picture” issues.

Give LifeSpan Financial Planning, LLC a call at 1-877-TAX-9110 if you have any questions regarding tax resolution planning.

Scott M. Spann, CFP, EA
scott@lifespanplanning.com

Common Traits of Millionaires and Financially Secure Individuals

Financial change requires the understanding of past financial behaviors to figure out what needs to be changed. The development of positive financial behaviors will allow change to happen. This new approach to life and financial planning means there is a need to have models of success. It is generally not good to only place the focus on negative financial behaviors. That is the old way of approaching tax and financial matters. Instead let us shift our focus to positive models of success. Based on the work of Thomas Stanley’s "The Millionaire Mind", I have selected a set of positive behavior patterns of wealthy and successful individuals.

An analysis of the personality traits of millionaires and financially successful individuals is more than relevant during the tax and financial planning process. It is required. In order to achieve tax resolution and financial freedom you need to be able to identify some of the most common characteristics of people who have already accomplished success. You also need to strive to possess these qualities.

As you read these traits ask yourself if you possess these qualities. Be honest with yourself as you assess your internal resources. On a personal level I try to ask myself these same questions any time that I am faced with a major life decision.

If there are a few areas that are in need of improvement write them down and make a list of ways that you would like to improve. Keep in mind that you are not expected to currently possess all of these traits. However, the closer that you can get to 100% of these traits the easier your journey may be. Here are three of my favorites that were highlighted in "Tax Resolution and Financial Freedom".

1. Integrity

“Integrity is doing the right thing, even if nobody is watching.” - Author Unknown

Successful people never sacrifice their integrity and are always honest with themselves and others. If you behave with a high degree of personal integrity you have a greater likelihood of financial success. Most importantly, you will live a life of strong resolve and consistency. There are many wealthy individuals in this country who have amassed large sums of wealth through corruption and deception. The acquisition of wealth without integrity is not a sign of success. True financial success requires high standards of integrity through good and bad times.

2. Courage

“Promise me you'll always remember: You're braver than you believe, and stronger than you seem, and smarter than you think.” - A.A. Milne

“Courage is resistance to fear, mastery of fear - not absence of fear” - Mark Twain

Change requires personal sacrifice. To live like nobody else with a sense of financial freedom requires the courage to take risks and live like nobody else until you reach your goals. Often successful people are risk-takers, but more importantly they are courageous. They tap into the courage that lives deep inside them and use it to break ground, try new things and put themselves out in front. When making a commitment to learn new strategies and techniques you are taking risks.
It takes courage to admit failure and pick oneself off the ground and try again at anything in life. Courage is also needed to change one’s approach to taxes and finances. Some of the most successful people in this world have failed time and time again only to get up again and display the courage needed to accept the next challenge in life.

3. Willingness to Act

“Faith means belief in something concerning which doubt is still theoretically possible; and as the test of belief is willingness to act, one may say that faith is the readiness to act in a cause the prosperous issue of which is not certified to us in advance.” - William James

Knowing and doing are two separate things. The key ingredients of tax and financial freedom include three parts behavioral change and one part knowledge and expertise. Knowing what to do during the tax resolution process is important. Having the willingness to act on this knowledge is more important.

Successful people are willing to dig in, do the work and learn new things. They are simply willing to do whatever it takes to create the life they want. TAKING ACTION is a core theme throughout the Tax Resolution and Financial Freedom Process. Be willing to take the steps needed to improve your financial life.

-Scott Spann
LifeSpan Financial Planning, LLC
(843) 469-3505

What is the “LifeSpan Process of Tax Resolution and Financial Freedom”?

I chose the name LifeSpan Financial Planning, LLC for my financial counseling and tax planning practice for a specific reason. An effective financial plan should do more than simply help individuals and families reach their financial goals. In my opinion, the planning process should include a holistic approach that addresses life planning goals as well as concepts of money management. A “LifeSpan Plan” helps define what is important to each unique individual and addresses underlying dreams and visions across the entire lifespan. It also helps individuals and families find ways to maximize the resources available to accomplish these lifelong ambitions. My main goal as a professional has always been to help my clients achieve important life goals and understand the role that money plays in their lives.

Financial planning is both an art and a science. Life planning is a relatively new approach that is usually seen as the art or human side of financial planning. The process of life planning is used to help people discover their deepest and most profound lifelong goals. This can be accomplished through a process of self-awareness and inquiry. If major obstacles such as significant tax debt or poor financial management exist it is difficult to focus on life and financial planning goals.

Tax problems create a need for tax and financial planning strategies that will solve tax issues the best way possible. On the surface it would appear to be a fairly simple approach. This assumption is based on the belief that most people deal with money in a rational way. The reality is that there are many cognitive-behavioral factors that operate as barriers to change in the lives of people with tax problems. These tax liabilities are significant obstacles that delay or prevent people from accomplishing their innermost dreams in life.

Tax Resolution and Financial Freedom is a two-stage process that combines two primary areas of focus: tax resolution and financial planning. Tax Resolution and Financial Planning are typically viewed as separate processes. This system simply does not work due to the sometimes conflicting approaches that do not generally work together. You must start the tax resolution process to be able to progress into comprehensive financial planning. The line between the two stages should be viewed as a barrier that stops people from achieving financial freedom. Tax resolution must be achieved prior to working to accomplish most financial planning goals. Otherwise, you will keep running into the brick wall that blocks the path to financial freedom.

As a whole, the “Tax Resolution and Financial Freedom Process” can be overwhelming and confusing. If you break the process into two parts it becomes a more manageable process. A strong need exists to create a new paradigm for dealing with tax problems. Debt is dumb. Tax debt is dumber. Trying to deal with tax and financial problems without a strategic plan is pure stupidity. Good intentions without direction will most likely lead to eventual failure. This step by step plan has been created to provide the direction needed to address tax problems with a plan.

Identifying Tax Solutions With A Plan

Do not feel overwhelmed if you owe back taxes to the Internal Revenue Service or a state taxing authority. The $300 billion plus federal tax gap is evidence that millions of people are experiencing tax problems. Do not expect tax problems to go away anytime soon. In 2009 our nation finds itself in the biggest economic crisis in modern history. Financial institutions are failing in record numbers. A credit crunch continues to loom, and the housing market continues to struggle amid global financial concerns. It is only natural that the tax gap will continue to increase as million of taxpayers face unemployment, reductions in pay, and related cash-flow problems. Small business owners and self-employed individuals are also facing increased financial pressures. Do not wait on a federal bailout to get you out of debt. A tax resolution plan should be your own individual bailout plan.

There are a variety of tax resolution options available depending on the individual circumstances surrounding each taxpayer’s financial situation. In addition, there is a growing body of financial professionals (CPA’s, Enrolled Agents, attorneys, etc.) that specialize in helping their clients overcome federal and state tax liabilities. Whatever tax resolution option is right for your financial situation, you must take action in order to obtain a financial solution to tax problems.

The Tax Resolution and Financial Freedom book provides a step by step explanation of how to resolve tax problems and get your financial life organized. Many tax resolution alternatives exist for taxpayers that owe the IRS. The ideal solution varies from person to person. The most common solutions include the following:

· Paying the debt in full using existing resources (selling assets, obtaining low-interest loans, etc.)

· Establishing an Installment Agreement (payment plan) to pay off the debt over time

· Requesting an Offer in Compromise (resolving the tax debt for less than the amount owed)

· Being placed in Currently not Collectible Status (financial hardship cases)

· Filing for Bankruptcy

A tax resolution plan is needed to help make sure that every individual with tax debt chooses the best alternative for his or her unique financial situation. Tax resolution plans use the basic financial planning process to take control of tax and financial problems. The ultimate goal is to achieve tax resolution and financial freedom. In order to identify the best “solution” you need to follow a financial life plan that focuses on tax “resolution”.

10 Common Tax Resolution Myths

If you are seeking professional guidance with a tax resolution issue you should pay attention to these common myths that some tax representation firms perpetuate through various media outlets in the form of television and internet marketing. Always remember there is a large group of ethical tax professionals available to assist people with tax problems. However, it is necessary to separate fact from fiction when determining the best tax resolution plan.

MYTH: The IRS offers a “one time only” opportunity to resolve your tax liabilities.

FACT: The impression that tax resolution is a one shot deal is completely false. This “act now before you lose your chance” approach implies that the Offer in Compromise (OIC) program is a new service with the IRS. OIC’s were initially introduced in the 1990’s in order to increase voluntary tax compliance, reduce taxpayer burden, and improve IRS productivity. The Tax Increase Prevention and Reconciliation Act of 2005 made major changes to the program and altered the rules for lump-sum offers and periodic-payment offers.

These marketing techniques are intended to encourage you to “act now” and sign up for a service. Many tax resolution clients actually become repeat clients and contact the same firm or a different tax resolution company. Is this the client’s fault or a problem with the tax professional? Most typically the client is ultimately responsible for changing negative financial behaviors. However, it is up to the tax professional to provide as much education and guidance as possible to keep clients out of future tax problems. Although tax resolution is not a one-time opportunity, delinquent taxpayers should view it as a one-time only event that needs to be dealt with correctly the first time.

MYTH: If someone owes taxes to the IRS and has negative cash flow they should easily qualify for an Offer in Compromise.

FACT: The IRS has the authority to settle or compromise federal tax liabilities by accepting less than full payment under certain circumstances. OIC’s are generally accepted if the taxpayers can establish that they have either no means of paying the tax or do not actually owe the tax. The IRS calculates a taxpayer’s collection potential by looking at equity in assets and monthly disposable income using a special formula that only includes “allowable” expenses based on national and local standards.

A taxpayer can be living paycheck to paycheck with significant tax and consumer debt and the IRS may still have a legal right to collect on the entire amount owed. This is a common situation that many clients are faced with as they enter the tax resolution process. Cash flow problems also stress the urgent need to change overall financial behaviors and develop a coordinated plan to achieve financial freedom.

MYTH: It is best to work with a large tax representation firm that has ex-IRS agents working for them.

FACT: Enrolled Agents (EAs), Certified Public Accountants (CPAs), and attorneys are the only professionals who have demonstrated special competence in tax matters and have earned the privilege of practicing or representing clients before the IRS. Enrolled Agents, like attorneys and CPAs, are unrestricted as to which taxpayers they can represent, what types of matters they can handle, and in which IRS offices they can practice. Past service and technical experience with the IRS is one category that can qualify a person to become an Enrolled Agent.

The most important thing to look for when seeking professional help is integrity and expertise in tax resolution planning. Note the word “planning”. This is an essential element that tax resolution professionals should be focusing their attention. IRS experience definitely helps professionals understand the tax representation process. It does not always guarantee expertise in the important area of tax resolution planning.

MYTH: If someone is drowning in debt he or she should easily be able to qualify for “pennies on the dollar” resolution.

FACT: First of all, avoid any companies that use “pennies on the dollar” advertising or provide guarantees that you will qualify for an Offer in Compromise. The OIC program is the most widely advertised and promoted tax resolution technique marketed on television and the internet. OIC’s are also grossly oversold to people experiencing significant cash flow stress due to broader financial problems related to consumer debt. If you have the assets or future income potential to pay off your tax debt over time you will not qualify for an Offer in Compromise (except in special circumstances). The IRS only uses “allowable expenses” in the tax resolution analysis. Certain expenses such as credit cards, tuition, retirement contributions, and cable television bills are not allowable expenses during the tax resolution process.

MYTH: Large tax representation firms can perform their services more efficiently and at a lower cost than local Enrolled Agents, CPAs, or tax attorneys.

FACT: Costs vary from firm to firm. The level of customer service and professionalism also varies. If you take action and actively participate in the “LifeSpan Process of Tax Resolution and Financial Freedom” you will know where to find the most cost-effective solutions to your tax problems, whether or not you choose to use the services of professional tax representation.

MYTH: Tax resolution companies have a regulatory body that provides them with a specific set of guidelines and a professional code of ethics.

FACT: Currently there is no existing regulatory body to protect consumers doing business with tax representation firms. Most individual practitioners such as CPAs, EAs, and attorneys have professional standards they must uphold, but tax representation firms as a whole do not have anything other than legal precedent and IRS policies and procedures to guide them. The IRS issued a consumer alert to taxpayers in 2004 advising them to “beware of promoters’ claims that tax debts can be settled for “pennies on the dollar” through the Offer in Compromise Program”.

MYTH: Tax resolution firms represent me by appearing directly in front of the IRS on my behalf.

FACT: The majority of tax representation work occurs over the phone, internet, and through regular mail correspondence. Effective tax representation most often avoids the need for a one on one meeting with the IRS or appearances in Tax Court.

MYTH: The IRS may have forgotten about you if they do not contact you after a few years of not filing or paying taxes.

FACT: One of the biggest problems with the IRS collection process is the fact that it can often take years before the collection process actually begins. The tax system in our country is based on voluntary compliance. If you let months and years pass the IRS will eventually track you down, and you will be hit with enormous penalties and interest. This cycle of procrastination and avoidance only creates a bigger tax and financial problem. Delays and avoidance behaviors only intensify tax problems. Besides, if you owe taxes then you need to get the problem resolved quickly. Not paying taxes is essentially stealing from the federal government and all of the honest Americans who paid their taxes. Ignoring the problem will only make it worse.

MYTH: Taxes and finances are too confusing to understand. Besides, individuals are not capable of resolving tax problems by dealing with the IRS on their own.

FACT: Financial ignorance can be overcome through action and some basic education. Tax resolution and financial planning is 75% behavioral and 25% knowledge and technical expertise. Everyone has the ability to deal directly with the IRS themselves with proper guidance and preparation. Professionals play an important role in the tax resolution process. The ultimate responsibility lies with the individual to make smart financial decisions. Knowledge will only get you so far. You have to be able to take action and use financial knowledge to your benefit. Too many people with tax problems are paralyzed by fear because they do not understand basic concepts of money and taxes.

MYTH: If someone has a tax problem they do not need a financial plan.

FACT: This common misconception is the entire reason that the “Tax Resolution and Financial Freedom” process was created. Tax problems are most often the result of poor planning, economic hardships or emergencies, financial ignorance, fear, and procrastination. The only way to resolve tax problems and take control of your life as it relates to money is to establish and implement a tax and financial plan. Whether you call it financial planning or counseling the end result should always be an improved sense of direction when it comes to financial matters.