The tax attorneys at Nardone Law Group frequently advise our clients in Ohio and throughout the U.S. on various collection alternatives in dealing with the Internal Revenue Service. Taxpayers who find they are unable to pay their taxes and their associated penalties should know that the single worst course of action is inaction. To help alleviate their concerns, we typically talk to our client about the following alternatives: (i) Offer-in-Compromise; (ii) Installment Agreement; (iii) currently not collectible status; and (iv) discharge of income taxes in bankruptcy, as well as a combination of several of those alternatives.
Since March 12, 2012, when the IRS announced its fresh start initiative, the IRS has actually come through and remained committed to this initiative. We have seen a serious uptick in offer-in-compromises being accepted. Now, you still have to disregard the advertisements and false information being presented by firms regarding the likelihood of having an offer accepted for the amount that you propose. But, Nardone Law Group has had significant success in the area of Offer-in-Comprises since the IRS announced its initiative in March, 2012. We strongly encourage our clients to contact us if they are experiencing difficulty with the IRS and the payment of their taxes. What everyone needs to know is that there are options.
Also, see an excerpt from our frequently asked questions regarding Offer-in-Comprises below:
How does an Offer-in-Compromise work?
Answer: The IRS prefers a partial payment to no payment at all. Thus, the IRS is sometimes willing to settle a tax liability for less than the full amount if (a) the taxpayer is unable to pay the full amount, (b) there is doubt as to how much the tax liability is, (c) collection of the liability would create economic hardship for the taxpayer (such as where the taxpayer is out of work due to health problems, or where sale of assets to pay the tax would leave the taxpayer without enough money to meet basic living expenses), or (d) compelling public policy or equity considerations exist, and due to the exceptional circumstances IRS's collection of the full liability would undermine public confidence that the tax laws are being fairly and equitably administered. Exceptional circumstances for this purpose might include situations where a taxpayer relies on erroneous advice from the IRS, or a medical condition prevents a taxpayer from managing his financial affairs
The taxpayer starts the settlement process by submitting an Offer-in-Compromise. If the offer is grounded on any reason other than doubt as to how much the tax liability is, financial information must be submitted along with the offer. If it is grounded on doubt as to the liability, IRS does not generally request a financial statement.
Except where the offer is based only on doubt as to liability, the taxpayer must agree to comply with all tax law rules on filing returns and paying taxes for five years or until the offered amount is paid, whichever period is longer. If these requirements are not met, the compromise terminates and IRS can seek collection of the original liability amount.
It is also important to note that notwithstanding the unwieldy amount of paper required to process a successful Offer-in-Compromise, the odds of acceptance are weighted against the taxpayer from the beginning. The IRS will reject an Offer-in-Compromise if: (1) all of the documents are not properly submitted; (2) the taxpayer fails to submit any additional requested documents; (3) the amount offered is less than what the IRS could expect to collect; or (4) if there is a public policy reason to reject it.
Are there other collection alternatives if I do not qualify for an Offer-in Compromise?
Answer: Yes. Another way to defer your tax payments is to request that the IRS enter into a payment plan with you—called an Installment Agreement. Under an Installment Agreement, the taxpayer repays the entire tax liability over a period of time in monthly installments. A taxpayer makes a request for an Installment Agreement on Form 9465. The IRS charges a $43 fee for Installment Agreements, which will be deducted from your first payment if your request is approved. Form 9465 requires less information than the hardship extension application. Under certain circumstances, if your outstanding tax liability is under $50,000, you will not be required to submit financial statements. Even if the IRS grants your request to pay in installments, you will be charged interest on any tax not paid by its due date. But the IRS will impose the late payment penalty at only half the usual rate (1/4% instead of 1/2%), if you file your return by the due date (including extensions).
Nardone Law Group represents individuals and businesses with federal tax issues, including those who have fallen behind on their tax payments to the IRS. The tax lawyers at NLG have vast experience in representing individuals who owe money to the IRS. A recent article about IRS collection alternatives can be found here. If you are struggling with tax liabilities or are interested in working with the IRS to review collection alternatives, you should contact an experienced tax attorney today. Our experienced tax lawyers will thoroughly review your case to determine what options and alternatives are available. Contact us today for a consultation to discuss your case.