In this article, you can learn about:
- Common options to resolve tax debt
- When you should think about hiring an attorney
- When you will be notified about outstanding debt by the IRS
- And more…
The IRS let a lot of things slide during COVID while their staff was working from home. Now that COVID is over and everybody is back to work, they are hitting it hard. So, more notices are going out and they are getting more aggressive on collections. Now that the IRS is getting funded, they are ready to go after the taxpayers more.
What Can You Do To Resolve Tax Debts?
The most common and the most straightforward option in resolving tax debt is the installment agreement. Depending on how much a person owes and if it’s a business or personal tax debt, the installment agreement is usually the easiest thing that can get collections off your back and an orderly plan in place to pay the taxes off.
Although, if the debt is way too high versus the assets and the income of the person, then you can request the IRS do an offer in compromise. That means the IRS would take less and that is hard to get, but not impossible. It depends on you, as you must show that you have some income and assets so you can pay some of the debt. If you do not have anything, the IRS will not even talk with you.
When our firm negotiates with the IRS, we always look for a win-win. We advise that our client needs this help and that we understand that the IRS is trying to collect as much of the debt as possible. Our goal is to:
- Find a way to help our clients do something that is manageable to get a fresh start
- Help our clients clear their debt
- Help our clients get their liens removed
- Help our clients move on with their lives but still be able to satisfy some of their liabilities
Our firm tries to give people a realistic picture because there are a lot of tax resolution places out there that will say everyone can get total relief when they can’t. This is something that our firm talks to clients about: that we will do our best, but there is no guarantee the IRS will accept the offer. We have to show them proof of why you can’t pay the outstanding debt and why you can pay what we are telling them you can pay. It is time-consuming and difficult; it is not easy.
Our clients need to provide a lot of information. The hardest thing is getting all the information needed to prove to the IRS that this person qualifies for the program. Items needed are:
- All the financials
- All the bank statements
- Other documentation regarding assets
- And more…
How Large Does Your Tax Debt Need To Be To Hire A Tax Attorney?
Usually, tax debt over $25,000 would need the assistance of an attorney. For anything under $25,000, and with attorney fees added, you are better off paying the IRS. Fees for tax resolution range from $2,500 to $10,000. It could be more depending on if it’s a payroll tax type debt where there is a huge liability.
If someone owes less than $25,000, they can usually resolve it themselves by calling the IRS and doing their own installment agreement themselves. I focus on the large debts and small business owners because that’s a little more complex.
Will The IRS Notify Me Before I Am Sent To Collections For A Tax Debt?
The IRS will send you a slew of notices and you should never ignore a notice from the IRS. The IRS will start with an assessment such as what you filed on your return. If the IRS claims you owe $10,000 more than you told them then you will answer if it’s true or not. Either the taxpayer made a mistake and they do owe the $10,000, or they don’t.
In any event, once the taxpayer responds and they go back and forth with the IRS, the IRS will finally say that this is what you owe. Once they do that, then they will ask you to pay. They’ll give it some time and if the taxpayer doesn’t pay then the penalties and the risks get worse. The worst thing about owing the IRS is penalties and interest. Not only are they going to charge you interest on what you owe, but they are going to charge penalties if you underreported income on your tax return.
If you knew you owed money and didn’t pay it, there are late payment penalties as well as filing penalties if you didn’t file. Penalties can double whatever you originally owed.
When Should You Start Working Toward Tax Debt Relief?
We always recommend the sooner you start working on this, the better. Don’t ignore the IRS when you get mail from them. We know getting mail from the IRS is nerve wracking, but just open it and deal with it. Call your accountant or our firm, because if you ignore it, it is just going to get worse.
If you haven’t responded to anything, then they will either file a lien or levy your bank account. For example, if you owe the IRS $10,000 and they see that you have $20,000 in the bank, they will just take it. They will notify you by sending you a Notice of intent to levy, which means they are about to levy your account.
People call our firm when they get a bad notice like this and want to know what is going to happen now. We try to stop it by showing them that you have representation. This gives our firm a grace period to investigate the case and try to resolve it in an amicable way with the service.
It is important that as soon as you get the notice you either deal with it yourself or get somebody to help you because they do send plenty of notice. Nobody gets a tax levy without a notice.
For more information on The Problem Of Individual Tax Debt In The US, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (225) 465-1090 today.