Chapman's Tax Service
WAYS TO RESOLVE TAX PROBLEMS
CURRENTLY NOT COLLECTIBLE
If you agree that you owe the IRS money but are not in a financial situation to pay any money, the IRS may agree to put you into a Currently Not Collectible status. The currently not collectible status stops all forms of collection activity. We often recommend to clients that while they are in this status they use this time to file an Offer In Compromise. While in a currently not collectible status the IRS will still continue to charge you penalties and interest, and they may keep all future refunds to apply to your debt. The IRS may review your status annually to determine to determine if you still qualify for this status.
INNOCENT / INJURED SPOUSE RELIEF
When filing a tax return with the status married filing joint, both spouses are jointly and severally liable for the entire tax associated with that return. Innocent Spouse Relief may be an option for a spouse who later determines that the other spouse falsely represented their income, embezzled funds, took false business expense deductions, etc. Innocent Spouse Relief must be filed less than 2 years after the IRS first conducts collection activity. Injured Spouse Relief is available for a married taxpayer filing a joint tax return when all or part of his or her portion of a refund on the joint return has been or will be applied to his or her spouse’s legally enforceable debt, such as past-due federal income taxes, child support, or student loans. The injured spouse may receive his or her share of the joint refund.
PENALTY & INTEREST ABATEMENT
Penalty & Interest abatement is when you petition the IRS to reduce or eliminate penalties and interest that you legally owe the IRS but are requesting elimination or a reduction of. The request for penalty and interest abatement has to be written for your unique tax situation. The IRS reviews penalty and interest abatement requests individually thus giving you a higher chance of success. If your request is initially denied, you can appeal the denial as well. However – the appeal is based upon what was originally submitted – which make it even more important that you have a knowledgeable firm prepare you penalty and interest abatement request.
FILING BACK TAXES – COMPLIANCE
The first step in resolving a tax problem is to file any back tax returns which you owe and get you tax compliant. The IRS has little sympathy for those who owe back tax returns and often can not offer any type of penalty or interest abatement or an offer in compromise to anyone who owes back tax returns. In some cases the IRS may file a return on your behalf or assess the amount of back tax owed on a return. In these cases, we recommend having us prepare and file those returns for you. We have saved clients hundreds of thousands of dollars just in this step alone. When the IRS files a return for you, they are not giving you deductions and credits which you are most likely entitled to.
OFFER IN COMPROMISE
An Offer In Compromise is when the IRS agrees to accept less than the amount the IRS has stated you owe. An offer in compromise can be paid in a lump sum or over a period of time. Some reasons the IRS will accept an offer in compromise is because there is a doubt as to collectability, a doubt as to liability, or effective tax administration – meaning you could afford to pay the full debt but it would create an economic hardship or be unfair or inequitable. When an Offer in Compromise is accepted, penalties and interest stop accruing. You are only liable to pay the amount agreed to over time.
If you owe the IRS and can afford to pay them in 72 months or less, you may qualify for an installment agreement. The IRS will charge a fee for the installment agreement, but the fee is waived for low income taxpayers or taxpayers who can pay within 120 days. The installment agreement still permits you to request a reduction of penalty & interest and other tax savings methods. If approved, your installment agreement could be redone to reduce your monthly payments. An installment agreement is an excellent option for quick relief for taxpayers who currently have an IRS Wage Garnishment or are subject to an IRS levy.