Tax debt for multiple years

Some taxpayers, particularly those with large tax debts for a number of tax years, may find no tax debt help as they can’t meet the requirements of the traditional installment agreement. This is because installment agreements are required to pay off the tax debt for all tax periods within the remaining life of the tax collection statute of limitations plus five years. For that reason, some taxpayers may be unable to get tax debt relief through IRS Offer in Compromise program, bankruptcy or even a traditional tax installment agreement. Well, for such taxpayers the best bet may be a relatively new hybrid arrangement called a tax installment agreement on specific balance due accounts also called a “part pay” installment agreement.

Do I qualify for “part pay” installment agreement?
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Recently, the IRS introduced new tougher rules regulating filing Offers in Compromise with the IRS and getting tax debt relief. These new rules require up-front tax debt payments when an offer is made. The IRS recently issued guidance explaining these prepayment rules plus what they think would be considered a reasonable offer. It certainly doesn’t make taxpayers life easier and indicates that this trend will continue into the future.
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The days of the “good” IRS are over and the bad cop is back on the beat. Over the past several years, it has become almost impossible to get a bank levy released. Also, things have got very complicated with releasing wage levies.  What course of action will IRS take when they claim you owe taxes? First, they can file a Notice of Federal tax lien that is recorded in the county in which you reside. The IRS may also service a Notice of Levy upon your employer to attach your wages or upon your bank to attach any funds you have in there. And, the worst, the IRS may seize an asset such as a vehicle, a business or even a home. Read the rest of this entry »

Once your Offer in Compromise is rejected, the IRS will probably start tax collection proceeding. The IRS is very strong when it comes to collecting tax debts. IRS can do wage garnishments, put lien on bank accounts,  residence, cars or even seize any of your property without first giving you a hearing. Don’t panic. However, you aren’t entirely helpless. Here are some tips that may help you if an IRS collector is at your door.
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So, you are thinking to offer IRS compromise and settle your back taxes for less – for something that you can actually pay without going broke. How much to offer the IRS? How the IRS is going to look at my offer? Your dilemma is obvious: offer too little – IRS will deny my offer; offer them too much – may still not be able to pay.
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It is important not to miss the following information when prepare your offer in compromise. Otherwise, you offer will probably be returned by the IRS as “unprocessable”.

“Must be there” information

Internal Revenue Manual 57(10)9.1 outlines the conditions in which an offer will be considered unprocessable. They include the following:
(a) The taxpayer is not identified.
(b) The liabilities are not identified.
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The IRS likes cash offers. If a taxpayer can’t make a lump sum offer, and must by necessity deal with the taxes through monthly payments, the IRS will probably agree with a Tax Installment Agreement, but generally will reject an Offer in Compromise. A cash offer means anything up to paying 90 days after the IRS notifies that the offer has been accepted. Deposits are encouraged, but not required.
However, despite the IRS’s strong preference for cash offers, if you simply can’t come up with the money, you should know that the Internal Revenue Manual does permit the acceptance of offers to pay tax debt with deferred payment periods of up to two years:
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The IRS’s authority to accept compromises in full settlement of tax debt is set by Congress in IRC §7122. There are only two statutory grounds for such compromises: “doubt as to liability” and “doubt as to collectibility.” Compromises bosed on doubt as to whether the underlying tax is properly owed are handled by the Examination Division. IRS Collection Division investigates offers based on doubt as to collectibility.

New “Frendlier” IRS
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The Eighth Circuit Court of Appeals held that courts can review an IRS decision to reject a taxpayer’s offer in compromise.*
A Taxpayer exercised incentive stock options to buy shares of a corporation worth over $740,000 for $34,254. The Taxpayer incurred a $224,869 AMT tax liability when the shares were valued at $1,647. He submitted an offer in compromise to settle tax debt for $4,457 when the back taxes balance was $148,745; the IRS rejected it. Arguing an abuse of discretion, The Taxpayer appealed to the Tax Court and then to the Eighth Circuit after the Tax Court held for the IRS.
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