Category: Taxpayer Representation

The IRS allows taxpayers to resolve their outstanding tax debt via a payment plan, which they call an “Installment Agreement”. Most of these plans have a set monthly payment, but they can also be adjusted based on your seasonal cash flow, and they also permit tiered agreements that call for occasional increases in the monthly payment amounts.

Some taxpayers may qualify for special installment agreements that require little or no financial documentation, similar to a no-doc or low-doc mortgage.

In rare circumstances, based entirely on your financial situation, you may even qualify for an Installment Agreement in which you never fully pay off the back tax liability, called a “Partial Pay Installment Agreement” (PPIA).

As part of negotiating your installment agreement, a comprehensive financial analysis of your business or personal finances will be required. The kind of information we will need to review, as mentioned above, is very similar to what would be required for a loan application. For businesses, this information includes all of the standard business accounting information, such as:

• balance sheets
• bank statements
• profit and loss statements
• accounts receivable aging reports
• asset lists & depreciation schedules

At first, many clients are apprehensive about providing this detailed financial information to a tax consultant. However, this information is necessary to perform a proper financial analysis and properly negotiate your tax resolution.

If your financial situation is such that you can legitimately only pay a a minimal amount, the IRS will likely grant the Installment Agreement, even if the payments will not fully satisfy the tax debt. For example, if you owe the IRS $60,000, and a payment plan of $200 per month is negotiated, and you have 3 years remaining until the statute of limitations runs out on collection, you will have paid in only $7,200, and then the statute of limitations runs out and you’re off the hook for the remaining balance. This is called a Partial Pay Installment Agreement (PPIA), and is nearly identical to an Offer in Compromise being paid under the Periodic Payment option. It is important to weigh the merits of the PPIA option versus the Offer in Compromise option when considering your tax resolution options. Be sure to ask your tax professional about the pros and cons of each of these options.

There are two special types of Installment Agreements that you may be eligible for based on how much you owe. If you owe less than $50,000 … Continue reading

Earlier this week, a reader inquired about whether or not he was required to include his spouse’s income when filing his Offer in Compromise. The reason it was in question is because they maintain completely separate financial lives. They file separate tax returns, have separate bank accounts, and don’t even title anything jointly.

Before you question why somebody would do something like that, there are actually numerous reasons for doing so, especially in regards to various aspects of state law. There are also business and asset protection reasons for keeping things separate. For example, if one spouse owns a business or is involved in a profession or activity with a high degree of litigation, then keeping different financial houses can be a good idea.

Here’s the answer to the question: Believe it or not, even if only one person owes the tax liability, the income (and allowable expenses) of everybody in a household must be taken into consideration in the Offer in Compromise application process. This applies to everybody living in the home — even people just renting a room from you.

Now of course, your representative will work to get the non-responsible party’s income and expenses taken off the reporting requirements. Under the tax code, the only person responsible for an IRS tax debt is the person against whom it is assessed, and nobody else.

If you need help with your Offer in Compromise, search our directory to find a tax firm near you that specializes in IRS Collections representation.… Continue reading

When it comes to resolving your tax debt, you have a number of possible routes you could take. In this article, I’ll go into some of the pros and cons of each option so that you have the information you need to make the best decision for yourself.

Do It Yourself Tax Resolution

Probably the route most people take, doing it yourself seems like the obvious or only choice for most people and small businesses. Simple tax debt problems that only cover a year or two, especially cases where the tax debt is under $10,000 (or under $50,000 if it’s only income taxes) are fairly easy to resolve with only a few phone calls (one phone call, in some cases).

If you can follow written instructions, are good with forms and paperwork, and have your personal financial paperwork in good order, then representing yourself is neither difficult nor time consuming. You need to be able to read and understand IRS notices and publications and forms, and keep good financial records for yourself.

Here’s a quick test: If you file your own tax return every year and have no problem doing so, then you can probably represent yourself. If you struggle with doing your tax return, even if you use step-by-step software, then you might want to consider getting help with the situation. If you have tax debts other than personal income tax liabilities, you should also hire a licensed tax professional to represent you.

Hire a Licensed Tax Professional

If your tax situation is complex, consists of multiple different types of taxes over multiple tax periods, involves any sort of business taxes, or exceeds $50,000 in income tax debt, you should seriously consider hiring professional representation.

I want to stress the word licensed. In my article about 5 Reasons To Use Professional Representation To Resolve Your IRS Tax Debt I gave some warnings about some companies that only do tax resolution work. You want to make sure that the person doing the actual work is licensed. Some of the less reputable companies in this industry have assistants do all the work, and a licensed person is just there to sign the Power of Attorney (POA). Some of these POA signers have literally thousands of POA’s that they are signed onto at any one time. Don’t for a second think that they even know who you are. Always ask to speak to an actual licensed … Continue reading