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Offer in Compromise
Clients who owe the IRS thousands of dollars in unpaid taxes may be eligible for an Offer in Compromise. An Offer in Compromise is an agreement between you and the IRS in which you pay the IRS less than the amount you owe. This is the only way you can settle your IRS tax debt for less than you owe. You may be able to make one single affordable payment to resolve tens of thousands of dollars in tax debt. There are many instances, in fact, where the IRS will accept pennies on the dollar.
If and when your offer is accepted, the balance of your tax liabilities is forgiven. This provides a fresh start for taxpayers who are overwhelmed with tax debts that have grown beyond their ability to pay. After your offer is accepted you must remain compliant by filing all future returns and paying balances, otherwise the IRS can retroactively reject your offer and reapply all amounts owed.
It is important when submitting an Offer in Compromise that you submit an offer that the IRS is likely to accept. There is a lot of documentation that must be provided with the required forms. The attorneys at Rogers & Russell are experienced and have successfully wiped out over a million dollars in tax debt for clients. We know exactly what the IRS is looking for when evaluating Offers in Compromise. We often hear from other attorneys and accountants that Offers in Compromise are not successful. That is only true if the offer is submitted by someone who does not know the rules of the game. Call us today for a free evaluation of your situation, you may be able to settle your tax debt for pennies on the dollar.
The IRS will almost always allow a delinquent taxpayer to pay their past due balance(s) over time through an Installment Agreement. An Installment Agreement is a monthly payment plan between you and the IRS. The amount owed and the Service’s collection period will determine the monthly payment amount and the length of time allowed to pay the balance. Inexperienced attorneys and accountants often are unable to negotiate the best deal to repay delinquent tax balances. At Rogers & Russell, we know the IRS’s standards and policies. We can get you the best deal to repay your taxes over time.
One benefit an Installment Agreement is that it stops any adverse collection action by the IRS. If an Installment Agreement is agreed upon, then the IRS will not levy bank accounts or garnish wages so long as you continue making the monthly payment amount. Another benefit of the Installment Agreement is the fact that the collection statute on the debt continues to run. This means that if the statute expires while in an Installment Agreement, then the remaining balance is discharged. You might be able to enter into a partial pay Installment Agreement with the IRS if you can only make a limited payment and the IRS has little time to collect the full balance owed.
If you owe the IRS less than $25,000, the IRS will usually approve an Installment Agreement that spans over 72 months (6 years). If you owe more, however, you may be required to fill out certain forms and provide documentation substantiating your monthly income and expenses. We know how to develop a complete plan for you to get the best outcome when trying to enter in an Installment Agreement with the IRS.
Regardless of the Installment Agreement entered into, once all liabilities are paid in full, or after the collection statute expires, any recorded tax liens will be removed and will no longer negatively affect your credit. Call us at Rogers & Russell so we can answer your questions and develop a plan that will give you the best deal while paying your delinquent taxes.
Expiration Date on Taxes
The IRS has its own deadlines to meet. If the IRS does not collect the money you owe within 10 years of those balances being assessed, they can no longer attempt to collect those amounts and they must release all tax liens associated with those balances. The debt is essentially discharged. This is known as the Collection Statute Expiration Date (CSED). Unlike milk that’s gone bad, this expiration date is good for you. Ten years seems like a long time, and it seems like the IRS would never miss a due date like that, but they often do for various reasons.
Certain events, such as bankruptcy, submission of an offer in compromise and time out of the United States can pause the CSED date. Once you have resumed life after those events, the timer starts back up where it left off.
The calculation of the CSED can be complicated and often requires a complete review of your tax transcripts. It is important to know what balances you owe the IRS and what the expiration date is on each balance. We have tools to find out just how long the IRS has to pursue you for your past due taxes.
If you haven’t filed your taxes for years then it’s time to start. Though it may seem scary, and you might be worried about what the taxing authorities will do once they see you’ve filed a bunch of returns, it is always best to take the first step and start getting it done. For one thing, the collection statute doesn’t even start running until you’ve filed those returns. You want to get those returns filed so you can at least start the timer on the IRS’s collection period. If the IRS is left to file your taxes for you, it can limit the options you have to repay and is often the worst case scenario for your tax returns.
We have professionals who can prepare your delinquent or current year taxes for you. Partner Nic Russell holds an advanced law degree in taxation and knows how to get the best tax rate for you.
Substitute for Return
If you do not file your own returns, sometimes the IRS will take it upon themselves to file one for you. This is called a Substitute for Return (SFR). This is not the IRS doing you a favor. The IRS will take all the income reported to them by third parties and plug it into a basic tax return. This is bad for you because the IRS will not give you credit for any deductions to which you might be entitled. More often than not a substitute return is much higher than if you had filed the taxes yourself.
If the IRS has filed a substitute return for you, you can still file your own return to replace the substitute. Again, we have the tools to find out if any substitute returns have been filed by the IRS for you and whether or not it is in your best interest to file your own original returns.
Taxes and Bankruptcy
People often ask if their taxes can be discharged in bankruptcy. The answer is complicated, but in a nutshell, usually no, especially in our jurisdiction. There are some instances when taxes can be discharged in bankruptcy so long as some very particular requirements are met. However, options like Chapter 13 bankruptcy may still be a good option for people who do not qualify for an IRS Offer in Compromise and have other consumer debts they might want discharged. This allows you to prioritize your debts so you pay the IRS, who will get paid no matter what, and deal with all other debt issues you are facing. The correct evaluation of whether this is a good option takes an experienced attorney. The attorneys at Rogers & Russell have dealt with millions of taxes in bankruptcy and can advise you on your options. If you are considering bankruptcy we can tell you if your taxes are actually dischargeable in a Chapter 7 bankruptcy or if a Chapter 13 bankruptcy is a good option for you.
There are other remedies available to taxpayers who owe the IRS for past due tax liabilities. Sometimes the IRS will agree to put a taxpayer in a currently non-collectible status. This means that they have put a collection hold on your account due to a hardship or inability to pay your debt. The benefit to currently non-collectible status is that the collections statute continues to run, and the IRS does not pursue any sort of collection action.
For taxpayers who owe the IRS solely because they filed a joint return with a spouse, innocent spouse relief may be available. If you filed a joint tax return with a spouse or ex-spouse and you meet a few other strict guidelines, you may be able to sever yourself from that liability, leaving your spouse or ex-spouse the only one on the hook for the tax liability.
We can help you determine what remedies are available to you. We have experience helping taxpayers get relief in every way the IRS has available.
Utah State Taxes
If you owe the state of Utah for past due taxes we can help you find a solution that will help you pay off the debt owed and keep the state from garnishing your wages or levying your bank accounts. Like the IRS, the state offers payment plans that allow you to pay your past due taxes over time. These time periods vary from 2-4 years. You may also apply for a hardship. If the state agrees that you cannot currently pay the taxes you owe, they will put your account on hold and suspend all collection activity until a later date.
We have experience working with the state tax commission resolving issues related to state income taxes, sales tax, and other local taxes. We can help you decide what course of action is best for you.