Unpaid taxes and IRS Tax Debt

Unpaid taxes and IRS Tax Debt

We have resolved thousands of matters before the IRS and realize how scary and confusing it can be to individuals and business owing tax or having unfiled returns with the IRS.  The final and complete resolution of a tax debt will depend upon many factors including the taxpayer’s financial status & circumstances, their current status within IRS Collections and other issues such as health and age.  The good news is, you do have rights as a taxpayer and multiple options to resolve your tax issues.  Below are some common resolution options that may apply to your situation and allow you to resolve your tax debt or tax issue with the Internal Revenue Service. 
 
Offer in Compromise (Tax Settlement)
 
An offer in compromise is in essence establishing a settlement agreement with the Internal Revenue Service to pay less than the full amount of tax debt you or your business may owe.  We are constantly asked, “what can I settle my tax debt for.”  Well, our answer to this is, “it depends.”  Of course this may sound like an answer from an attorney, but it is completely true because the amount you offer to the IRS to settle is based upon your financial circumstances.  The offer amount the IRS will accept is not based upon what John Smith may have settled for or even so much how much tax you owe.  As an example, we settled a taxpayer’s total debt of over $1,000,000+ for approximately $10,000 in one situation, and in another situation we settled a taxpayer’s debt of $250,000 for approximately $80,000.  Thus, the total tax debt is not a direct indicator of the amount you may need to offer and pay to resolve the tax debt through an offer in compromise.

How is the Offer Amount Calculated?
 
The offer is calculated based upon an equation using your equity in assets and your “disposable income”.  You may be able to reduce the fair market value of your assets applying exemptions allowed by the IRS and your disposable income is calculated by taking your total monthly income less allowable expenses.  The IRS does apply what is call the “National Standards for Allowable Living Expenses” when calculating your disposable income. 

What is the Process of Submitting an Offer in Compromise?

To submit an offer to the IRS, the necessary financial statements (either forms 433A OIC or 433B OIC and perhaps other) and the offer in compromise form, with all necessary attachments are submitted to the IRS Offer in Compromise Unit.  It can take as long as 6-12 months for an offer examiner to make an initial determination regarding the offer you submit.  If the IRS rejects the offer you do have appeal rights.

Installment Agreement
 
Not everyone can resolve their tax debt with an offer in compromise.  The IRS does allow you to resolve your tax debt with an installment agreement whereby you would make a monthly payment.  The amount of your monthly payment can depend the total tax owed, how much you can afford each month, the current collection statute and other factors.  When an installment agreement is established, all collection action by the IRS is put on hold. 
 
To speak with a Columbus tax attorney, contact The McGuire Law Firm and schedule your free consultation.  We offer a free consultation to all potential clients and allow payment plans for your fee.