What You Should Know
Offer In Compromise
The US Treasury Department (IRS) is authorized to settle your taxes for what can be a small fraction of the amount you actually owe. Other grounds for settlement, besides your ability to pay the tax, are available in special circumstances.
Note: tax rules are complicated! According to the National Taxpayer Advocate 2003 Annual Report to Congress, 24% of all Offers In Compromise submitted were rejected because they were filled out incorrectly. Of those accepted for processing, nearly half still failed. Kent Anderson & Associates has the experience to greatly improve your chances for success.
Installment Payment Agreements
One of the most common ways to stop IRS enforced collection activities is to enter into an installment payment agreement. Under some circumstances, the IRS will stop collecting a tax debt if we prove that your income is below a certain national standard.
Penalty Forgiveness
The IRS can write off penalties that have been assessed. If you made an "honest mistake or if circumstances beyond your control made it difficult or impossible to prepare and file a correct tax return, penalty can often be reduced or eliminated. The "abatement" of penalty must be for reasonable cause beyond your control and must be properly applied for before it will be authorized.
Payroll Taxes
The government considers Payroll Withholding Tax to be a special type of obligation for an employer. Payroll taxes withheld from an employee's pay check are intended to be a "Trust Fund" held by you for the government. Even if your business is a corporation, you as an individual can be responsible. The person or persons responsible for payment of these taxes, or even those who have authority to sign company checks, can be specially assessed for these tax liabilities.
Unfiled Tax Returns
In most cases, individuals are required to file tax returns if they earn a certain minimum level of income. Almost everyone who is regularly employed must file tax returns with the IRS. The failure to file tax returns when due is a federal crime and can lead to a fine or jail sentence. Even if no criminal penalty is assessed, the civil penalty can be quite high. If required tax returns are not filed when due, the IRS may assess a tax based upon income shown in their records. A non-filing taxpayer is not given many breaks in calculating tax due.
While the IRS is not required to accept a late filed return under all conditions when it has taken the trouble to assess by this process, they usually will allow you to correct their records if you do so within a reasonable period of time.
Tax Liens
The IRS has many tools available for the collection of past due tax. One of the most powerful is the Federal Tax Lien. The lien will attach to all of your property, of any kind and wherever it is located if it is filed correctly by the IRS. The lien can be filed without court approval and need only the signature of authorized IRS personnel. Once filed, a tax lien can make transfer of property difficult or even impossible without full payment of all tax due.
While the tax lien can cause many problems for a taxpayer, we can help to remove the lien or make an agreement with the government on conditions for release or discharge of the lien.
The Collection Process
In the last 10 years, Congress has found a great deal of political capital in restraining the IRS with additional rules and requirements that must be fulfilled before enforced collection, such as levy, seizure or garnishment, can take place. This is good news for the taxpayer.
We do not recommend providing any information to the IRS or talking with any government employee about your tax problems. We can handle all communications with the IRS on your behalf in a professional manner.
Bankruptcy And Tax
Certain types of tax obligations, such as income taxes, may be discharged in bankruptcy.
In Chapter 7 Bankruptcy, the minimum requirements for discharging federal or state income taxes are:
- it has been over 3 years since the returns were last DUE (including extensions),
- the returns were timely filed or it has been at least 2 years since the returns were filed,
- there was no fraud involved or attempts to evade the tax, AND,
- the taxes were not assessed within the last 240 days.
If it has been over 3 years since your returns were last due and they have not been assessed in the last 240 days, BUT you have not yet filed the returns or there was some kind of fraud involved in filing them, then they may be dischargeable in a Chapter 13. Again, discharging taxes is an extremely complicated area. Kent Anderson & Associates can help you make the best decisions.
Kent Anderson & Associates are experienced bankruptcy lawyers. Learn more about bankruptcy, click here.