Ignoring back tax debt will only make the problem worse but there are several solutions available to resolve tax debt. It is important to consult with a tax professional to understand your rights and to determine which option is best for reducing or even eliminating the back taxes. Below are some options for common tax problems. Please contact our office to speak to a tax attorney, CPA, or Enrolled Agent to conclude which solution fits best for your particular situation.
Unfiled tax returns are often times the reason for tax bills or notifications from the IRS as well as the state. Some tax bills are due to mistakes made while filing a return. We will review your returns for errors and re-file them with the IRS to rectify your tax bill. Our experienced filing specialists will ensure all delinquent or questionable tax returns are error-free. We will find all allowable deductions and claims available to you. This ensures you do not pay more tax than necessary.
Wage Garnishment or Levy by the Internal Revenue Service (IRS) can be traumatic and financially crippling. The IRS is granted broad authority in regard to the collection of delinquent taxes, including levying bank accounts and garnishing wages.
Wage garnishment will typically attempt to collect 30 to 70 percent of each paycheck until the back tax debt is resolved. This can be devastating to you’re finances as well as extremely embarrassing to have happen at your place of work. Every effort should be made to resolve your tax situation before this takes place.
Bank levy allows the IRS to freeze and eventually seize an individual’s bank account in an effort to resolve an outstanding tax liability.
The IRS will send notices to alert you that a wage garnishment or bank levy is imminent. If you receive a notice of impending wage garnishment or bank levy, contact our office for immediate assistance.
Offer in Compromise is an agreement with the Internal Revenue Service to settle back taxes for an amount substantially lower than the current tax liability. However, the IRS is not obligated to accept the offer. If the IRS believes that the taxes owed can be paid by the individual, then the Offer in Compromise will be rejected. Offers will also be rejected if the amount offered is less than what is known as the Reasonable Collection Potential.
Reasonable Collection Potential is used by the IRS to assess the value of the individual’s assets and determine from these assets whether or not the individual has the ability to pay their tax liabilities. In cases where the IRS determines the individual does not have the means to pay their tax bill, a successful Offer in Compromise can be reached. This will provide the individual with a clean slate in regard to tax liabilities.
Filing for an Offer in Compromise can be complicated, and requirements are strict. More than half of the Offers in Compromise submitted to the IRS are not accepted. Thus, it is important to work with an attorney, CPA, or Enrolled Agent that can guide you throughout this process and ensure your case is properly presented.
Payment Plans can lower your overall tax burden as well as allow you to pay off outstanding tax debt over time. The way in which a Payment Plan is established with the IRS will depend on the amount of back taxes owed. Those with greater debt will be required to take additional steps in the payment plan process.
Not all Payment Plans require full repayment of the tax debt. A Partial Payment Installment Agreement, for example, ensures that the statute of limitations will expire before the debt is fully repaid. In effect, this Payment Plan lowers the total amount paid to the IRS. A Payment Plan such as this may be ideal for those individuals unable to procure enough financial resources for a lump-sum payment.
Non-Collectible Status is for individuals that lack the financial resources to pay their outstanding tax liabilities. Achieving a Non-Collectible Status with the Internal Revenue Service (IRS) can be extremely beneficial. In order to be eligible for Non-Collectible Status, individuals must provide the IRS with certain financial information. This financial information must prove to the IRS that the individual does not have any surplus income after paying their necessary monthly living expenses. They must also prove they have no additional assets. Evidence used to establish Non-Collectible Status includes financial statements, bank records, and other such materials. While this does not eliminate your tax debt, it will stop collection efforts. However, it is quite common for these tax accounts to remain in Non-Collectible Status until the statute of limitations expires, thereby eliminating the tax debt.
Elimination of Tax Debt can be achieved through a Chapter 7 or Chapter 13 bankruptcy. In order to be eligible for this type of tax debt discharge, individuals must meet certain requirements.
One of the major requirements is that the tax debt must have existed at least 2 years prior to the date of the bankruptcy petition. Furthermore, the IRS must have been aware of this debt prior to the filing of the bankruptcy petition.
Evidence of accurate and truthful tax returns for the 4 years preceding the bankruptcy filing is also required. If copies of financial documents such as current tax returns are requested, individuals must comply with these requests. This process can be quite complex, and navigating this process can be troublesome. Therefore, individuals are encouraged to seek the advice of a skilled tax attorney, CPA, or Enrolled Agent for help with elimination of tax debt through bankruptcy.
Before choosing a particular method of tax debt relief, please speak with one of our senior tax analysts. Resolving tax debt can be very complex and solutions are not always clear and evident. Tax issues require a thorough analysis before selecting a plan of action. Our staff has the experience and knowledge necessary to help you determine which option is the best for you and your particular situation.