Owing IRS taxes and not being able to pay them causes many of my clients’ extreme stress. This is very understandable because the IRS can be an 800-pound gorilla, swinging a baseball bat at you! Naturally, many people believe their best and only defense from this type of adversary is to run and hide for as long as is humanly possible. Sticking your head in the sand, however, is never the right choice. As appealing as this option may seem at first glance, I always advise my clients that ignoring the IRS is never the answer. In fact, ignoring your IRS tax problems may cause them to become worse. Some IRS tax problems can become criminal matters, and provide justification for the IRS Criminal Investigation Division (CID) to intrude into your life, turning over every rock they can find (and they find a lot of them). Once IRS CID gets involved, their only aim is to bring a successful criminal prosecution against you. Also, other than the potential for criminal liability, the decision to ignore your IRS tax problems can bring with it very expensive monetary civil penalties. Many times, these monetary civil penalties alone are incredibly burdensome and will for many extra (and unnecessary) years stifle a family’s ability to save and grow for the future. It is for these reasons the best IRS tax defense is a good offense.
When clients retain me to help resolve their civil IRS tax problems, my primary goals are to assist them in determining their true IRS tax liability, find the most suitable IRS payment plan option legally available, and reach a fair resolution with the IRS within the scope of this IRS payment plan option.
After nearly 20 years of being a IRS tax attorney, I can confidently say that no two IRS tax cases are identical, even though they may involve the same type of IRS tax. The first step in resolving any IRS tax problem, however, usually begins the same way. We begin by determining how much (if any) the IRS is really owed in unpaid taxes (including accrued interest and penalties) and ensuring that all required IRS tax returns are accurately prepared and filed. Once this is accomplished, usually the only remaining issue is to determine how best to pay the IRS. Many times, this is where things can get a bit “sticky”. Depending on several factors, this process can either be reasonably straightforward and quickly resolved or it can become complicated and take longer. Some factors influencing the path an IRS tax case’s resolution may take include:
While no two IRS tax cases are ever identical, and the complexity of their final resolutions can depend on many factors (some of which are mentioned above), all IRS tax problems will eventually come down to one decision. This is deciding how you will pay the IRS. Without oversimplifying the IRS payment plan options which may be legally available to you, they generally are the following:
IRS Offer in Compromise: Most people have heard on the radio or seen on television at some point in their lives, a commercial advertising the “miracles” of settling IRS tax debts “for pennies on the dollar”. Usually these types of “IRS tax resolution” commercials concern me (the many reasons why I’ll save for another article), however, I believe they do provide one value to the public. That is that they do inform the public - in general – that the IRS does have payment plan options available for individuals and business to assist with paying their IRS taxes. Unfortunately, these 30 second commercial spots oversimply the IRS’s various tax payment plans and help promote unrealistic IRS settlement expectations. I mention these commercials in the context of the IRS Offer in Compromise program because it is the IRS tax payment plan option for which most people who come into my office hope they qualify, and they know about the IRS Offer in Compromise program from radio and television commercials.
An IRS Offer in Compromise is a tax relief settlement that does allow for you to settle your tax debts with the IRS for less than the total owed amount ... "if" you qualify. The truth about this IRS payment plan option, however, is that it can be complicated to qualify for and it requires careful financial and legal consideration before submitting your Offer in Compromise package. Usually, an offer will be accepted only if you can prove to the IRS that it would not collect more from you by forcefully collecting your unpaid taxes (seizing your assets, which include your banks account, retirement plans, land, other types of property, etc.) than the amount you are offering in you Offer in Compromise submission. A proper analysis – given all the legal rules and exceptions that must be considered – makes this particular IRS payment plan option one which should be handled by an experienced tax professional, such as an IRS tax attorney. Don't go this one alone.
IRS Installment Plans: The good news in the world of IRS installment plans is that there are a variety of options available to help you pay your IRS tax debt. Generally, each payment plan requires monthly payments and, except for a partial payment installment agreement, requires that the entire IRS tax debt be paid in no more than 72 months. Qualifying for a IRS installment plan is initially determined by the amount of tax owed, and the different types are:
An IRS tax attorney can help properly analyze your financial situation and determine the best type of IRS installment plan for you, determine the minimum required monthly amount to be paid, and handle all related filings for the plan to be properly setup.
IRS Penalty Abatement: The IRS uses tax penalties to discourage individuals and businesses from not timely filing their IRS tax returns or paying their IRS taxes. IRS tax penalties can be financially devastating and, in my professional opinion, one of the most unfair aspects of federal tax law. Fortunately, many times they can be partly or fully removed by properly requesting penalty abatement from the IRS. If you can prove to the IRS there was "reasonable cause" for not staying in compliance with IRS tax regulations, then you may be successful when requesting that your penalties be abated.
Talk first to a tax attorney before confiding in your accountant anything about your IRS tax problems!