CTRS Tax Problem Resolution Strategies 2

Question 1

A taxpayer owes $85,000 in back taxes and cannot pay in full. They own a home with $20,000 in equity and have monthly disposable income of $300. Which resolution strategy is most appropriate to explore first?

Accepted Answer

Offer in Compromise based on doubt as to collectibility

Answer

With significant equity and some disposable income, an Offer in Compromise based on doubt as to collectibility allows the taxpayer to settle for less than the full amount owed.

Question 2

Under the Fresh Start Initiative, the IRS expanded the Offer in Compromise program by changing the calculation period for future income from how many months to how many months?

Accepted Answer

From 60 months to 24 months for lump sum and 12 months for periodic payment offers

Answer

The Fresh Start Initiative reduced the future income multiplier from 60 to 24 months for lump sum offers and from 60 to 12 months for periodic payment offers.

Question 3

A taxpayer has a federal tax lien filed against them. They want to sell their home to pay off the lien. What is the IRS process that allows the sale to proceed with lien proceeds applied to the tax debt?

Accepted Answer

Lien Discharge

Answer

A Certificate of Discharge removes the federal tax lien from a specific property, allowing the sale to proceed with net proceeds applied to the tax liability.

Question 4

Which IRS program allows a taxpayer to have their federal tax lien removed from the public record even though the tax debt has not been fully paid?

Accepted Answer

Lien Withdrawal

Answer

A lien withdrawal removes the Notice of Federal Tax Lien from public record, which can help the taxpayer obtain credit, even if the underlying tax debt still exists.

Question 5

A taxpayer enters a Direct Debit Installment Agreement (DDIA) under the Fresh Start Initiative for a balance under $50,000. What is a key benefit of a DDIA compared to a standard installment agreement?

Accepted Answer

The IRS will not file a Notice of Federal Tax Lien

Answer

Under a DDIA for balances under $50,000, the IRS generally will not file a Notice of Federal Tax Lien, protecting the taxpayer's credit and asset position.

(CTRS) Certified Tax Resolution Specialist Practice Test

(CTRS) Certified Tax Resolution Specialist Practice Test

CTRS Tax Problem Resolution Strategies 2