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What is the TaxSmith IRS Federal Asset Protection Agreement? – Kelli

Written by Steve Rhode

Question:

Dear Steve,

My research online has found your name repeatedly when it comes to matters of “tax-relief” companies, consumers and the IRS.

I’m at my wits end. Yes, I owe back taxes; I admit it and I contacted the IRS, did exactly what they told me to do (submit form 433D with my bank account information with a payment plan amount and do not wait because it may take a while to get that established, but make my payments until the IRS sets up the debit to my checking account).

I did everything and I get a reject letter in the mail with a payment amount that I could only afford if I didn’t come to work, didn’t eat and lived in a shelter. I have already gotten rid of cable, home phone and the only reason I have internet at home is due to my employer requiring us to have internet access when we telework. I only pay the minimum on my 3 credit cards so that I can make this payment to the IRS, which I calculated by taking the total I owe, factor in the interest and divide by 6 years. My payment that I can actually pay my mortgage, eat, get to work and back and pay an average on my utilities is $600. They said I have to pay $1481.

So of course in research of how to fix my plan’s rejection–numerous tax relief companies popped up. I reached out to a company in Florida, TaxSmith, LLC, with attorney Angie Smith (license #64072), who claims that the first thing they will do is file a “Federal Asset Protection Agreement” and then request my tax transcripts to basically see what years may not longer be eligible for collection and have those expunged from my record. I cant find this so-called form anywhere or any reference to anything like that. It sounds great, but my gut says no.

My question to you is whether my gut is correct or are these people for their $2500 fee, which is $200 now and $230 per month for 10 months not pulling my leg.

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I think they are full of it, but I was absolutely crushed when the IRS rejected the plan that they told me to do and how to do it. Do I have back taxes that are close to being uncollectible? Yes.

Thank you.

Kelli

Answer:

Dear Kelli,

I emailed TaxSmith a couple of hours before I published this to ask them for clarification on what exactly a Federal Asset Protection Agreement is.

I then asked a high level tax expert I know and he didn’t have a clue either. The IRS website does not list anything called a Federal Asset Protection Agreement.

My tax friend said, “My guess is she owes more than $50K and has several years of debt. She definitely needs assistance. I never heard of an “asset protection” filing- not sure what that means with the IRS – probably an agreement with the IRS- i.e. currently not collectible, installment agreement, extension to pay, or OIC. Snappy name that probably confused their potential client.

She should know that she can request a Collection Appeals Program (CAP) hearing to dispute the IRS installment agreement proposal. My guess is that the correspondence between her and the IRS did not get coordinated and explained.”

According to the client agreement you sent me, TaxSmith says they are offering the following services:

Services to be Performed: Client understands and affirms that the services listed below are the specific and only services for which Client has contracted TaxSmith. If Client requests TaxSmith to perform additional services not listed below or in this Contract, a new written contract must be executed and additional fees may be required. Unless specifically mentioned below, Client has not contracted TaxSmith for any other services.

  1. File for 2848, IRS Power of Attorney. This allows a TaxSmith attorney to represent Client on all matters related to the Client’s tax issues.
  2. Forensic Tax Investigation. This includes a collection and review of all federal and/or state tax transcripts. Also a review of Client’s prior year tax return transcripts with reported wages to the state to determine if there are any inaccuracies. TaxSmith will review Clients current balance to determine whether or not that balance is correct and if anything can be done to correct it.
  3. Asset Protection Agreement – Federal. TaxSmith will assign a licensed Attorney to consult as to the scope of the federal tax debt. TaxSmith will prepare and file all required forms and supporting documentation to request a Federal Asset Protection Agreement with the IRS that will allow client to make an affordable monthly payment to the IRS to satisfy the tax liability without fear of aggressive collection actions such as levies and/or seizures. This amount will be paid based on the financial analysis prepared by TaxSmith based on client’s current financial ability to pay.

I understand the need for the Form 2848 IRS Power of Attorney.

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I somewhat understand the possible benefit of looking at previous tax returns to determine if there are inaccuracies that would alter the debt you owe. But it’s not clear that any such additional action would be covered by the client agreement you sent.

And when it comes to the Asset Protection Agreement I’m afraid without some clarification on what exactly that is, neither my tax expert friend, the IRS website, or myself have a clue what this is all about. There are programs to work out solutions for past debt but nothing under that name.

So the prudent thing to do would be to get a second opinion from a tax professional in your area, call the IRS to ask them what that heck an Asset Protection Agreement is and talk to the company, TaxSmith, and ask for clarification.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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