Owing taxes to the IRS or state can be devastating to a family. Packey Law Corporation has years of experience assisting families with back tax liabilities.
Depending on your situation, you may qualify for one of the following:
Offer in Compromise:
The Offer in Compromise or often-called “Pennies on the Dollar” is where a taxpayer makes an offer to the IRS to settle a back tax liability for less than the full amount. For example, if a taxpayer owes the IRS $20,000.00 the taxpayer could file an Offer in Compromise and request that the IRS accept only $200.00 to pay off the entire debt. The IRS accepts an Offer in Compromise from a taxpayer for a number of reasons, however the most common is “Doubt as to Collectibility.” This means that a taxpayer is arguing to the IRS that they will never be able to full pay the amount of the tax liability, so the IRS should accept the amount offered. The IRS will accept an Offer in Compromise if they agree with the taxpayer. By doing so the IRS will save money by not spending resources on trying to collect on a liability that it never will receive full payment for and they also are able to give a taxpayer a fresh start. Packey Law Corporation can complete the required paperwork to submit to the IRS or state of California and conduct all negotiations on your behalf. For a free confidential tax analysis with a tax attorney call our office today.
If a taxpayer can not pay a tax liability, the IRS may accept installment payments. These agreements are called Installment Agreements. The more a taxpayer owes to the IRS the more complicated these agreements are to negotiate with the IRS. There are three types of Installment Agreements, Guaranteed Installment Agreements, Streamlined Installment Agreements and Financial Statement Installment Agreements. The type of Installment Agreement depends on the amount owed to the IRS. For example, Guaranteed Installment Agreements are for taxpayers that owe less than $10,000.00. Streamlined Installment Agreements are for taxpayers that owe less than $25,000.00. Financial Statement Installment Agreements are for those taxpayers who owe more than $25,000.00. While each taxpayer’s situation depends on the specific facts of the case, Packey Law Corporation works closely with clients to negotiate an affordable Installment Agreement on a taxpayer’s behalf.
There are three charges that make up most tax liabilities, the underlying tax liability, interest and penalties. The two most common penalties assessed by the IRS are the Failure to Timely File Penalty and the Failure to Timely Pay Penalty. The IRS will abate penalties if a taxpayer can show or prove “reasonable cause” for failing to timely file or timely pay the tax liability. If the IRS abates a penalty not only will the penalty be reduced or removed but all corresponding interest assessed on the penalty will also be removed. This can result in a substantial reduction in a taxpayer’s tax liability. Packey Law Corporation can draft a formal petition requesting that penalties be abated. The IRS will only abate penalties if they believe “reasonable cause” has been proven. Our law firm works with clients on a personal basis to determine whether a penalty abatement petition is in their best interest.
Currently Not Collectible:
The IRS may place a taxpayers back tax liability into Currently Not Collectible status if the taxpayer can prove they have no ability to make payments towards a back tax liability. While a back tax liability is in Currently Not Collectible status all collection actions will be suspended. This means that all tax levies will be removed. The IRS generally has 10 years to collect a back tax liability from the date of assessment. While an account is in Currently Not Collectible status the statute of limitations continues to run.
While each case varies depending on the specific facts of the case, according to the January 9, 2007 National Taxpayer Advocate’s 2006 report to Congress once an account is designated by the IRS as Currently Not Collectible, data for the preceding six years shows that the IRS collected on less than 2 percent of all amounts due.
A tax levy can be issued when a taxpayer owes back taxes. The two most common levies are the wage levy and the bank levy. A wage levy is issued against a taxpayer’s wages. A wage levy only leaves the taxpayer with sufficient income to meet necessary living expenses. Unfortunately, what the taxing authority deems necessary living expenses usually does leave the taxpayer without the ability to meet their actual living expenses. A bank levy issued against a taxpayer’s bank account. While a wage levy is continuous, a bank levy only attaches against the funds in the account at the time the levy reaches the bank. Most tax agencies may release a levy if the taxpayer can prove the levy is creating an economic hardship, or the taxpayer proposes a resolution alternative, such a Offer in Compromise, Installment Agreement or Currently Not Collectible status. A taxpayer usually must be in tax compliance prior to the levy being released. This means that all back tax returns are filed. A tax lien can be issued when a taxpayer owes back taxes. A tax lien is a notice to third parties that a debt is owed. Tax agencies will generally not remove a tax lien unless the liability has been paid in full, the release of the lien will expedite full payment of the tax, or in the case of the IRS an Offer in Compromise has been accepted.