RESOLUTION PROGRAM OPTIONS
CURRENTLY NOT COLLECTABLE STATUS (CNC)
The IRS places certain delinquent tax cases in a "currently-not-collectable" (*CNC") status, after its agents have determined that there is no ability to collect the taxes from the delinquent taxpayer. The typical scenario is as follows. A taxpayer falls behind in filing tax returns, paying taxes, or both. The IRS will eventually attempt to collect the taxes and/or missing tax returns through its notice process, by phone calls, or via home or office visits. If these attempts fail, the IRS will begin enforced collection action, which may include garnishing salaries, seizing bank accounts, recording tax lien notices, and seizing other assets. If at any point in this process the taxpayer can demonstrate that the payment of the back taxes, either through voluntary or enforced means, would create an "economic hardship" on the taxpayer, then the IRS will close the collection case by placing the taxpayer's account in "CNC" status. This simply means that the IRS inputs a computer code on the taxpayer's account that reflects the fact that the taxpayer cannot afford to pay the back taxes and meet his or her minimum monthly living expenses. It is important to recognize that what the taxpayer may view as a hardship, the IRS may view as just an economic or personal inconvenience. In most cases, the IRS will not cease collection action until the taxpayer is in compliance. What that means is that the taxpayer must file any missing tax returns and must address any ongoing underpayment situation. For example, if the reason the taxpayer owes delinquent taxes is because the taxpayer does not have sufficient income tax withheld from his or her paycheck, the IRS will not close the case as CC (and will not suspend enforced collection action) until the taxpayer adjusts his or her withholding Also, if the taxpayer is self-employed, the taxpayer will be required to become current with estimated tax payments prior to the IRS halting collection action and placing the case in CNC status
OFFER IN COMPROMISE (OIC)
An Offer in Compromise is an agreement between a taxpayer and the government to settle a tax liability by paying less than the full amount owed. The IRS may accept an offer when it is not likely that the tax liability can be collected in full and the offer amount reflects what could be collected over a reasonable period of time. The goal of the offer in compromise is to collect what is reasonably collectible at the earliest possible time and at the least cost to the government. There are three bases under which an offer in compromise may be accepted: Doubt as to Collectability - Under this basis, there is doubt that the amourt of tax owed can ever be paid back in full. In order to successfully negotiate this type of offer in compromise, the taxpayer must demonstrate through complete and thorough financial statements and supporting documentation that there are insufficient assets and income to pay the full amount of tax owed. Doubt as to Liability • The IRS may also accept an offer in compromise when doubt exists that the amount of tax owed is correct. The taxpayer needs to explain why they believe that they do not owe the tax that they would like to compromise. Financial inability to pay will not be considered under this basis alone Effective Tax Administration - Under the third basis for an offer in compromise, there is no doubt that the tax owed is correct and there are sufficient assets and income to pay the entire liability. However, the taxpayer believes that, due to exceptional circumstances, it would be unfair and inequitable to require full payment of the tax.
IRS HAS THE AUTHORITY TO ASSESS OVER 140 DIFFERENT TYPES OF PENALTIES, WHICH INCLUDE THE FOLLOWING
Failure To File A Return
Failure To Pay A Balance Due
Failure To Make Estimated Tax Payments
Failure To Deposit Payroll Taxes
Failure To Conduct Due Diligence As A Tax Preparer
And Many More. The purpose of penalties is to encourage voluntary compliance to fulfill certain obligations, i.e, preparing an accurate return, filing it timely, and paying any tax due. Since the application of these penalties must promote a tax system that is fair and effective, a taxpayer may seek relief from penalties if they have not been administered uniformly, accurately, and impartially. The taxpayer has the opportunity to have their interests heard and may qualify for relief from those penalties under one of the following categories: reasonable cause, statutory exceptions, administrative waivers, correction of service error. Under the most common method of abatement, reasonable cause, the IRS will look at all of the facts and circumstances surrounding the situation that led to the assessment of the penalties. Relief will be granted on the basis of reasonable cause if the taxpayer exercised ordinary business care and prudence in determining their tax obligations but was unable to comply with those obligations. The existence of any of the following factors may establish reasonable cause: death, serious illness, or unavoidable absence unable to obtain records incorrect advice from the service or from a tax advisor fire, casualty, natural disaster, or other disturbance or living in an official disaster area
PARTIAL PAYMENT INSTALLMENT AGREEMENTS
A Partial Payment Installment Agreement is a great alternative to an Offer in Compromise. This program is still based on your current financial situation and can still save you a ton of money, in some cases it can actually provide a larger savings than an OIC. However, the PPIA does take longer to complete than a typical OIC because you will make monthly payments until the statute of limitations expires on the balances owed. May taxpayers find that this program makes better sense financially for them because they can afford to make minimal monthly payments This is only a feasible option if you can prove financial hardship for tax debt that is unresolved and any assets you have, you are willing to use to reduce the amount you owe.
Let's Look at an example of how this program works;
- You owe $100,000 in taxes from seven (7) years ago or so
- The Collection Statute Of Limitations expires in 34 months
- We can that you can only afford to make monthly payments of $200 per month
- $200 X34 = $6,800 which is the total amount you will pay
- You SAVE $93,200 over the next 34 months
Give us a call to have one of our Enrolled Agents get started on putting your Road Map to
Resolution together to see if this is a viable option for your situation.
WAGE OR BANK LEVY RELEASES
When the IRS takes money out of your bank account (levy) or your paycheck (wage garnishment), you have options. You can get the IRS to remove the levy, but only after you pay off all the back taxes you owe, or set up a resolution program that is satisfactory with the IRS. The issuing of a levy is one of the most damaging actions to a taxpayer that the IRS can legally take to collect on back taxes. It hits you where it hurts, in your checkbook, so it is no wonder the IRS uses this quite frequently.
WHAT DOES A BANK LEVY ACTUALLY DO?
A Bank levy holds all available funds in your bank account for 21 days, then the bank must send all funds to the IRS.
WHAT DOES A BANK LEVY ACTUALLY DO?
A wage levy attaches to your wages and takes a specified % based on what you claim on your WA with your employer. Most of the time, a levy will take the majority of your paycheck leaving very little for you to live on each pay period. Assuming you can't pay all the taxes, the real question is: How long does it take to set up a payment plan of other arrangement with the IRS to stop (or, "release") the levy/garnishment? Unfortunately, the answer to this question is complicated. You could be one of the few taxpayers who can simply set up a Streamlined Installment Agreement to release a levy. However, you may be one of the taxpayers that have to go through a full financial disclosure and negotiation of a resolution program to get the levy released. If you are one of these taxpayers, you need to contact a tax professional that SPECIALIZES in tax resolution.
AUDIT DEFENSE AND REPRESENTATION
A tax audit may be an intimidating experience as you must be prepared to explain the nature of your income and substantiate the expenses and deductions claimed on your tax return. It is likely that the examination of one tax return may lead to other tax years being opened for audit. Additionally, in order to properly defend yourself, you may be required to have an extensive knowledge of the tax codes and regulations. However, you should always keep in mind that you do have rights as a taxpayer A taxpayer has the right to be represented by a tax attorney, enrolled agent, or CPA during the audit.
UNDER THE TAXPAYER BILL OF RIGHTS;
The taxpayer does not have to be present at the audit interview unless an administrative summons has been issued.
A taxpayer may request that the audit interview be suspended in order to consult with a representative.
A taxpayer has the right to know why the IRS is requesting a specific piece of information.
A taxpayer has the right to make an audio récording of the audit interview if advance notice is provided.
The IRS may conduct only one inspection of a taxpayer's books unless the IRS provides written notice.