In today’s economy, it is very common for American taxpayers who have paid all of their taxes their entire lives to suddenly find themselves in big trouble with the Internal Revenue Service (IRS). When money gets tight, most people pay their mortgages, utility bills and put food on the table. The IRS usually takes a back seat, which they do not like. Then the countless letters come, first somewhat nice, followed with stronger letters, until that certified mail comes threatening an intent to levy. Wage attachments are also common. When this happens, most taxpayers simply do not know where to turn. The easy answer is to simply pay what is asked. The realistic answer is that is not possible. However, we can help. While it depends on your specific circumstance, the three areas which can help are putting in an offer-in compromise, having the existing liability deemed currently uncollectible, or working out a payment plan.
The offer-in-compromise (OIC) is a program which gives taxpayers a fresh start in life. Simply put, if we can convince the IRS that whatever offer we make is in the best interest of the Government, they usually will take it. Not everyone should do an OIC. For example, if the Taxpayer has substantial liquid assets, available credit, or a significant amount of equity in their home, an OIC may or may not be the best solution. The IRS looks at any possible way they can obtain their money including:
- Liquid Assets of the Taxpayer
- Available Credit
- Non-Liquid Assets, including equity in primary residence, personal property, cars, boats etc.
- Value of closely held Business Interests
- Age, Health, Education, Work Experience, and Earnings Potential of the Taxpayer and spouse
We just settled a case where a Taxpayer owed the IRS over $ 200,000 and we settled it for under $ 5000. The taxpayer was a professional who did own a home, however, he became very ill and was no longer able to work full-time. He had very little equity in his home, his credit was already destroyed, and we were able to convince the IRS that the offer was in their best interest. They put out a counter-offer, which is very common, but we were able to stand firm in this situation and the taxpayer has a new lease on life.
Having the existing liability deemed currently uncollectible
Upon serious analysis of the taxpayer’s individual facts and circumstances, an OIC may not be in the taxpayer’s best interest. While there are many reasons an OIC may not work, a common problem is where the taxpayer has significant equity in their home. This is a common problem we see because on paper, the taxpayer has sufficient assets to pay the taxes, interest and penalty. However, since the IRS already has liens against the property, which is common, and the taxpayer is already in financial trouble, they will not be able to get their equity out of the property as no bank will lend them money. This is a double edged sword for the taxpayer as while they do have assets, they cannot get access to them. We then look at the cash inflows and outflows of the taxpayer.
While the taxpayer must stay up-to-date with all current and future tax liabilities, if we can prove to the government that there is no surplus funds available to pay any more than the current tax obligations, we can usually get the debt deemed currently uncollectible. In a recent case, a Florida taxpayer owed the IRS in excess of $ 100,000 and was unable to pay any of it. He had equity in his home, but no bank would lend him anything on the house because of his credit score. We were able to have this debt deemed currently uncollectible and the IRS will no longer be sending levy notices to him. He will be able to continue with his life with the debt being deemed uncollectible unless he has a significant change in financial circumstances.
One strategy that seems to work for us upon having the debt deemed uncollectible, putting in an OIC, setting the offer at the amount of proceeds he can obtain from a refinance. The IRS Lien Department does work with taxpayers to release liens to free up equity in homes. Upon settlement of the agreed upon OIC, the taxpayers is then free and clear of all prior obligations to the IRS.
When the OIC is not an option and the taxpayer does not qualify to have the debt deemed uncollectible, we can work out payment plans that work for both the taxpayer and the IRS. We have all of the payments applied to the oldest tax due. Upon full payment of the tax balance due, we then put in a request for a waiver of interest and penalty. We have been quite successful in this area. Regardless of which option is the best for the taxpayer, all delinquent tax returns must be filed.
We are experienced in getting the records together from taxpayers to complete delinquent returns. Many times, the taxpayer no longer has any information available to them for the delinquent years. We use forensic techniques to recreate the records and file accurate returns. While it may appear that your life is over and you will never recover from your tax burden, our highly trained staff will evaluate your situation and help you select the appropriate method to resolve your tax debts.
Services for IRS Troubles:
- Free Initial Consultation
- Detailed Evaluation of each Case with Specific Recommendations
- Preparation of All Necessary Forms for the IRS
- Direct Representation before the IRS to Negotiate the Settlement
- Detailed Experience in IRS Representation and Offer-in-Compromise
Problems paying taxes, back taxes, or delinquent taxes?
An Offer in Compromise or Payment Plans might be the answer you’re looking for.
Fill out our OIC Form or call David Heier, CPA today!