When faced with tax problems, managing the debt without destroying your budget can be daunting. Depending on how much you owe, it could take years to get out from under the financial burden. The longer it takes, the more penalties you face, including interest and potential tax liens or levied assets.
Fortunately, the IRS offers several programs to ease that burden and in some cases reduce the total amount you will need to repay. These programs have been augmented to provide greater tax relief as part of an IRS policy change known as the Fresh Start Program.
Offers in Compromise (OIC)
An OIC is an IRS program that permits taxpayers to relieve their tax problems by agreeing to pay an amount less than the original tax liability. For example, a California employer with payroll tax problems could submit an Offer in Compromise to reduce the payroll debt owed.
The IRS can accept a reduced amount based on how much it considers the taxpayer is able to repay. After considering factors such as income and assets versus taxes owed, the IRS will decide on your ability to repay the full amount. A tax attorney can help you negotiate this amount.
The IRS provides an Offer in Compromise Pre-Qualifier tool to determine whether you are a candidate for the program. Download the OIC Booklet for more information on how to apply. Although it seems straight-forward there are many traps for the unwary, and a good tax attorney can help you present an OIC in a way that it is more likely to be accepted.
Office of Appeals
Another avenue that is open to taxpayers who have a pending dispute about their tax debt is the Office of Appeals. An Appeals Officer has the ability to settle your case for any amount he or she thinks is appropriate based upon the tax law, and internal IRS guidelines.
The Appeals Office works independently of the IRS Audit and Collection divisions to resolve tax problems to the mutual benefit of both the IRS and the taxpayer. If you have received notification from the IRS of your right to appeal a decision on your tax debt, then you are eligible to request an Appeals hearing. Brager Tax Law Group can offer you assistance if you need help preparing for your hearing or require representation.
In some circumstances, taxpayers may qualify for an installment agreement in which their tax debt can be paid in monthly installments. You may submit an Online Payment Agreement Application specifying the amount you can pay each month. Several payment options are available including payroll deduction, direct debit from a bank account, or credit card. A one-time fee will be charged in an amount based on the type of payment you select, unless you opt to pay the full amount within 120 days. The Online Payment Agreement is ONLY available for individual taxpayers who owe $50,000 or less in combined tax, penalties and interest, and filed all required returns. It is also available for businesses with $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities, and which have filed all required returns. For larger amounts you will need to negotiate on the telephone, by mail or in-person for an installment agreement.
Temporary Collection Delay
In the case where collection of your tax liability would present a financial hardship, you can request a temporary delay of tax debt collection. The delay will not stop interest or penalties from accruing, however, and the full amount of the tax debt will still be owed. You will be required to provide proof to the IRS of your financial hardship, and may be asked to submit a Collection Information Statement.
To find out if you qualify for one of these, or some other IRS program, contact the former IRS tax attorneys at Brager Tax Law Group, to represent you and help solve your tax problems. We may be able to help you reduce your tax liability, negotiate repayment alternatives, or advise you on how avoid tax levies. Call our office to schedule a consultation at 310-208-6200.