Offer in Compromise

An Offer in Compromise is an agreement between yourself and the IRS or state that closes the tax debt for less than the amount owed. A tax debt can be legally compromised for one of the following reasons:

  • Doubt as to Collectability: There is some doubt as to whether or not the IRS is able to collect from you.


  • Doubt as to Liability: There is some doubt as to whether you truly owe tax debt.


  • Effective Tax Administration: You have sufficient assets to pay in full but, due to an unusual situation, payment would create an economic hardship that would be unfair or inequitable.

Offer in Comrpomise can include taxes, penalties, and interest fees. 

Installment Agreement

The taxpayer agrees to make regular monthly payments to the IRS until the balance is paid in full when they accede to an Installment Agreement. There are different formulas that the IRS uses to calculate the amount of the monthly payment for each person.

An Installment Agreement can be more costly than paying the back taxes you owe the IRS in full. The IRS charges interest and penalties on the unpaid portion of the debt. Methods of paying an Installment Agreement include:

  • Personal or business checks, money orders, or certified funds.
  • Payroll deductions from your employer.
  • Electronic transfers from your bank account.


Penalty Abatement

The IRS enforces penalties to encourage voluntary compliance by supporting the standards of behavior required by the Internal Revenue Code. Compliance consists of preparing an accurate return, filing it in a timely manner, and paying any tax due. Efforts made to fulfill these obligations constitute compliant behavior according to the IRS. Most penalties apply to behavior that fails to meet any or all of these obligations.

To qualify for Penalty Abatement, you must show reasonable cause for your failure to fulfill your obligations. Reasonable cause is based on all the facts and circumstances in each situation and can include:

  • Death of a family member

  • Serious health problem

  • Bad or erroneous financial advice

  • Flood, hurricane, fire or other natural disaster

  • Theft of funds, including embezzlement

  • Lost or destroyed records


  • Divorce that caused extreme stress and deteriorated your financial condition


  • Unemployment for an extended period of time


  • Fixed income or retiree


  • Financial strain caused by caring for another person

Your application for a Penalty Abatement is reviewed by a revenue officer. It is entirely up to the discretion of this officer to make the final decision. According to the IRS, reasonable cause does not exist if, after the facts and circumstances cease to exist, the taxpayer fails to comply with the tax obligation within a reasonable period of time.

Payroll Taxes

The IRS is particularly aggressive when it comes to collecting on delinquent payroll taxes (form 940 and 941). These are taxes withheld from an employee's pay by the employer and which are supposed to be submitted to the Federal Government.

If you wait too long, the IRS may take more aggressive steps to collect, including looking to you and your officers to paying the debt.

If the IRS has already taken action against you for back Payroll Taxes, we can still help. In many cases, we may be able to convince the IRS not to touch your personal assets, wages, and bank accounts as long as an acceptable agreement on behalf of your corporation is negotiated quickly.

Regardless of the stage of collection the IRS is in, we will always work to negotiate on your behalf to get the IRS to seek recovery of the payroll taxes from your company and not from your personal assets.
 
Innocent Spouse

Couples filing jointly are held equally responsible for the return and the payment of appropriate taxes. In some cases, one spouse has underestimated the tax liability and, unknowingly, the other spouse signed the return. In this case, the Innocent Spouse may not be responsible for paying the additional taxes and penalties. The rules governing the application of the Innocent Spouse solution include the following:

  • The innocent spouse did not know there was an understatement of taxes and would have no reason to know that there was an understatement of taxes.


  • All or some of the understatement was the responsibility of, and can be attributed to, the liable spouse.


  • It would be unjust to hold the innocent spouse responsible for the actions of the liable spouse.

You must qualify for Innocent Spouse within 24 months of the mutual notice regarding the tax debt.

The IRS warns that a request for Innocent Spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or a third party, such as a creditor, ex-spouse, or business partner.

Currently Not Collectable

The IRS may classify a taxpayer's case as Currently Not Collectible in certain circumstances where the taxpayer:

  • Is unemployed
  • Has little or no income
  • Is sick or seriously ill
  • Is too elderly to reasonably expect to pay the back taxes, or
  • Has no assets of any liquidation value
This status means that the IRS will, for the time being, stop any collection action. This status is temporary and may change at any time if the taxpayer's situation improves. The IRS will continue to monitor the taxpayer's situation to see if any changes occur and will then act appropriately to collect on the debt. Circumstances that may qualify for Currently Not Collectible status include:

  • Receiving an inheritence
  • Returning to Work
  • Recovering from an illness

Appeals

In the event that the outcome of your case is less than what you believe is fair and equitable, you have the right to appeal the IRS' decision. The objective of the IRS Appeals Division is to resolve disputes between taxpayers and the IRS. The rules governing the appeals process are precise and must be adhered to. The appeal is your chance to restate you case and explain why you should be given another evaluation.