Audit -Professional expertise can be vital during an audit,
and our experience with tax authorities enables us to
represent clients in their dealings with federal, state and
local tax agencies.
Collection - We
also work with taxing authorities to settle or minimize your
current and past due taxes. In situation, where inability to pay exist we can work out a
significant forgiveness with the government.
How an IRS Settlement Works
The IRS will allow a taxpayer to either negotiate a tax settlement for less than the total amount owed or come to an agreement on another method for the IRS to collect taxes owed over time. For either of these situations the taxpayer must meet the qualifications of one of the tax settlement programs set forth by the IRS. The taxpayer will first have to determine which type of tax settlement they would like to apply for and then submit the appropriate forms to the IRS for review before making a decision. A taxpayer can either fill out the information themselves or they can have a designated tax professional make the filing on their behalf. Once a settlement has been reached by both parties, the taxpayer will be considered good standing with the IRS for the tax year/years that the settlement covered (unless the taxpayer defaults or doesn't hold up to all the terms of the agreement).
How to Settle Taxes Owed
In order to make a settlement or agreement over your taxes, you first need to make sure you are in full compliance with your tax filings and be sure to file any unfiled tax returns. If you did not file and the IRS has filed for you, it is highly suggested you use a tax professional to file an amended return to decrease the amount of taxes owed (this is because the IRS does not give the taxpayer the benefit of the doubt on anything when they file for an individual and it is highly likely that they owe far less). Once you have filed and know how much you owe, you can review the tax settlement options and see what settlement method would qualify for (if any at all). Below is a list of different tax settlements offered by the IRS.
Settling Taxes for Less
•Offer in Compromise
An offer in compromise is the most common settlement method individuals think about when it comes to settling with the IRS. Not only is this the most thought of method, but also the hardest one to qualify for. With an offer in compromise you will be required to make an offer to the IRS of an amount of money that you can afford to pay (payment plans available) and the IRS must be willing to accept that amount of money in order to wipe the remaining liability clean. When making the offer you will have to convince the IRS that the amount you offer them is equal to or greater than the amount that they would be able to collect from you through forced collections without forcing you into financial hardship.
•Partial Payment Installment Agreement
A partial payment installment agreement allows the taxpayer to enter into an agreement with the IRS to pay back the taxes owed over a specified time and this amount can be less than the total amount initially owed to the IRS. This option is typically available to those individuals that cannot meet the minimum payment amount required with the normal installment agreement.
Penalty abatement allows the taxpayer to eliminate all or part of penalties owed. Penalty abatement does not eliminate any of the base amount of tax owed, just penalties added onto that initial amount. This is one of the easier ways to settle taxes owed for less. The IRS uses penalties as a way to bully taxpayers and scaring them into paying sooner. The IRS does realize that there are times that the taxpayer has a legitimate reason for not paying or filing on time and they have created penalty abatement for this reason.
When You Can't Settle Taxes For Less•Installment Agreement
An installment agreement is the most common method for individuals to pay back IRS taxes owed if they cannot pay in full. Under this form of agreement the taxpayer is allowed to pay back the taxes they owe in monthly payments if they can pay off the entire amount owed in a three year period. This agreement is fairly easy to obtain if an amount of $25,000 or less is owed, if greater, a tax professional will be needed for assistance.
•Uncollectible Status / Financial Hardship
This form of agreement puts the taxpayer off the hook temporarily until their financial situation has improved enough for the IRS to begin taking collection actions against them again.
Important Tax Settlement NotesAn important thing to know about the IRS is that they will continue to enforce collections on individuals even if they cannot pay. Even if these collections cause extreme financial hardship on the taxpayer the IRS will not stop until the taxpayer proves to the IRS that they cannot pay. The IRS is a very automated machine and collections can only be stopped by tax filings. The IRS does not intend to put individuals in severe financial hardship, their system just has no way of knowing without receiving a tax settlement filing. The IRS is very complex and it is advised to use a tax settlement professional when attempting to make a settlement with the IRS. Most tax professionals will be able to analyze your financial situation and know if you are a likely candidate for the settlement before any filings are done.
Abate Penalties to Eliminate Penalties
With an abatement, you may be able to eliminate part or all of your penalties and interest, but not the initial base tax amount that caused the penalties and interest. Most of the time with an abatement, you will be able to eliminate the majority if not all of the penalties, but not the interest. Eliminating these penalties may lift a huge financial burden off of you, most of the time the penalties make up 25% of the total tax debt amount owed.
When You Should Apply For a Penalty Abatement
A penalty abatement can be right for you if you can pay the tax liability owed, but you believe you should not be held liable for the penalties incurred. If you apply for an abatement and it is accepted, it is expected that you then pay your tax liability in full. In order to qualify, you must be very convincing that you should not be responsible for the penalties. Below is a list of some reasons for not being responsible, this is not a complete list, but gives you a good idea:
1.Major family problems that you can prove, such as a divorce
2.Theft or destruction of your records
3.A major illness
4.Incarceration or a major disruption to your life
5.Bad advice from a tax expert
6.A disaster that was out of your control (Hurricane, wind storm, flooding, riot, etc.)
7.Lengthy time of unemployment
8.Death of a close family member
In short, you will most likely qualify for an abatement if there were factors that were out of your control that influenced you not to pay your tax debts. Even if you do meet the criteria above, this may not be the right choice for you if you can't pay abated amount in full.
Filing For IRS Penalty Abatement
Filing for penalty abatement can be fairly simple for those that know the steps involved. There are three ways to file for an abatement.
1.The first way is by sending a written petition to the IRS with a few paragraphs stating your case and request a refund.
2.Second, if for some reason you writing is not practical, you can request an oral interview and you can then state why you qualify for an abatement.
3.Third, you can use the claim for refund and request for abatement form provided by the IRS (IRS Form 843) and follow the instructions on the form for filling out.
Provide as much information as you can, it is a must that you have a very strong case stating why you should qualify, don't worry about providing too much documentation. If you need assistance with requesting penalty abatement, fill out the form to the right or give us a call.
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