The Path to Tax Relief begins with Tax Compliance
All of the tax relief options offered by the IRS to “fix” your tax problems require you to be in compliance. Compliance requires 2 things.
Offer in Compromise
An Offer in Compromise (OIC) is the tax relief that everyone seems to read about. Per the internal revenue manual, “An offer in compromise is an agreement between a taxpayer and the government that settles a tax liability for payment of less than the full amount owed.” What you don’t read about is that not everyone qualifies for an OIC. Only about 42% of those taxpayers who qualify for an OIC are accepted.
The rules for an OIC are:
Currently Not Collectible
Currently not collectible is a status the IRS assigns to taxpayers who have little to no assets, and for whatever reason are not able to work. Taxpayers have to qualify for this status every year to 18 months. This status stops collection activities and no payment is required to IRS. If the taxpayer can stay in this status until the statute of limitations has lapsed, then total tax relief is obtained.
Installment Agreement
There are 2 types of installment agreements. Full payment and partial payment.
Full Payment Installment Agreement
If you are reading our website, it is safe to assume that you are not financially able to pay the IRS in full and are looking for relief from your taxes. This is the option that the IRS and/or state would prefer you choose, but if you have had outstanding taxes owed for some time you may owe more in penalties and interest than you owe in tax.
Partial Payment Installment Agreement
A partial payment installment agreement is used when you are not able to pay the entire balance owed including accruing interest and penalties before the statute of limitations expires. The amount of your payment is determined by the amount the IRS/state agency believes you can pay each month. However, once the statute of limitations expires you are no longer obligated to make further payments. This can be a good strategy for both the government and the taxpayer. The government collects as much as they can for the time period allowed, and the taxpayer pays less than the amount owed
Collection Due Process
Only about 3% of taxpayers who receive Notice of Federal Tax Lien or a 504 Letter file the required paperwork to take their case to Appeals if a satisfactory settlement can’t be made with the revenue officer handling their case. Filing notice of intent to take your case to a Collection Due Process hearing, also give you the right to take your case to tax court if you believe an error in interpreting the tax law was made by the appeals officer
That’s why it’s so important to open the envelopes you receive from the IRS and read the contents. As a taxpayer, you have rights but you have to exercise those rights in a timely matter. In the case of filing the paperwork for a collection due process hearing, it has to be done within 30 days or you lose your chance to go to tax court. If you don’t file the paper work within 1 year, you lose your right to take your case to appeals.
Most of the CDP hearings are done by telephone. You can request a face to face meeting but the IRS is moving toward Zoom meetings.
Bankruptcy
Bankruptcy may also be an effective tax relief option. Several criteria must be met. If you choose to file bankruptcy we will refer you to a tax attorney.