Offer in Compromise
Many people wonder – can I settle my tax debt with the IRS? The answer is yes but you must qualify. One resolution option is through an Offer in Compromise. Through this process, you offer the IRS a specific amount and if accepted, the IRS would wipe the remainder of the balance off your account. Sounds simple enough but as you might imagine, the IRS is not so willing to settle on tax debts. Their goal is to see the full balance paid including penalties and interest. That’s where having a Licensed Tax Professional on your side to advocate for your best interests comes in handy.
Who qualifies for an Offer in Compromise?
Unfortunately, not everyone qualifies for an offer. In order to determine if you qualify, you must first look at your current financial situation and determine what the IRS considers your “ability to pay” the tax balance by looking at the following factors:
- Equity in assets
The amount that you offer is based upon these factors and plugged into a formula the IRS provides. The primary goal is to show both your monthly disposable income and equity as close to zero as possible. The less you show in these factors means the less you have to offer the IRS. Now, you may think this is pretty black and white but unfortunately, it’s rare that the IRS sees it that way. Where you may think it’s obvious you lack the ability to pay, the IRS will try to find a way to assert you do in fact have the ability to pay the balance, perhaps not in a lump sum, but over time through an installment agreement. Remember, the IRS wants to see the full balance paid even if they don’t get it all upfront.
Does the IRS actually accept Offer in Compromises?
The great news is YES! The IRS does accept Offers. However, it can be extremely rare and difficult to achieve because of the “opponent” in the IRS Offer Specialist. This IRS Agent that will review the offer has typically been with the IRS for several years if not decades. They understand the tax code like the back of their hand and will fight tooth and nail to show that you DO have the ability to pay the full balance. Having conversations with this agent can be difficult to navigate if you don’t understand the bounds they are required to stay within. Here at Hood CPAs, our team of Licensed Tax Professionals have a great deal of knowledge and experience in navigating these conversations with the Offer Specialist to put the taxpayer in the best spot possible.
How long is this process?
This resolution option is one of the lengthiest processes with the IRS. Especially coming out of the pandemic where the IRS is backlogged in processing just about everything, we are seeing processing times of about a year or even longer for an Offer in Compromise. Even though the upfront process can be lengthy, the reward at the end if accepted can be huge!
What if my Offer in Compromise is rejected?
As we have mentioned above, the IRS is difficult when it comes to an Offer in Compromise and has potential to reject the offer that was submitted. But the process doesn’t end there. Typically, when the IRS rejects an Offer, that rejection comes with appeals rights. If appealed, a separate agent of the IRS will be assigned called an Appeals Officer. The purpose of the Appeals Officer is a mediator of sorts where the Offer Specialist has disagreed with the Taxpayer’s submission and their job is to find the facts of the case and make a final determination. They will decide whether to sustain the rejection or to accept the offer that was submitted. Our team of Tax Professionals will fight tooth and nail to ensure your side is seen and will do everything possible to get an accepted offer for you if you qualify.
Have more questions? Set up a free initial consultation by clicking HERE or give us a call at (918) 747-7000 and ask for a free tax resolution consultation to get yours scheduled today!
Revenue Officers are agents that are specifically assigned to collect the full balance due to the IRS. They are notorious for being some of the most aggressive agents of the IRS. They can show up at your house, place of business, and even send notices to your customers. Although a Revenue Officer could be assigned to your case at any time, typical circumstances that lead to one being assigned are personal income tax balances over $250,000 or payroll taxes that exceed $25,000.
Personal Income Tax:
When a Revenue Officer is assigned due to personal income tax balances, they can often seem to “cross the line” in your personal life. They have been known to show up at personal residence and snoop around in an effort to determine whether the taxpayer can repay the tax balance. They will want to see a full picture of your personal finances – look through every bank charge, see what investments you have, how many assets you own, etc.. That’s where our Team of Tax Professionals can step in on your behalf and provide a layer of protection to prevent your assets from being levied or seized.
When it comes to the IRS, payroll taxes is the type of tax the IRS is the most strict on. If payroll taxes aren’t paid, they often will view it as stealing from your employees and the government. When payroll balances reach over $25,000 typically a Revenue Officer is assigned and one of their first priorities is to assess what is called the Trust Fund Recovery Penalty. This is where the IRS can bridge the gap between keeping business and personal items separate. The penalty is assessed to an individual – typically the owner of the business and allows the IRS to have access to their personal assets as well. Did your business get behind on payroll taxes? We understand business owner’s can find themselves in situations where they must make difficult decisions on what is or isn’t paid. Call our team so we can get you back on track and put those tax problems in the rearview mirror!
Regardless of how the Revenue Officer got assigned, our team can take the wheel from here. Once we file power of attorney form, the Revenue Officer must funnel all communication through our team. Although Revenue Officers can be aggressive, our team of Tax Professionals understands the bounds they have to stay within and use that knowledge to protect our client’s assets and put them in the best spot possible. Did a Revenue Officer get assigned to your case? Set up a free initial consultation by clicking HERE or give us a call at (918) 747-7000 and ask for a free tax resolution consultation to get yours scheduled today!
Payroll Tax Representation
Did your business get behind on payroll taxes? Maybe it was due to the pandemic, maybe it was an error someone made – regardless of the reason, all the IRS sees is a balance due and will assign a Revenue Officer, whose only goal is to collect the balance owed in full. Our team sees past that and understands it’s likely not a situation you ever meant to end up in. Even though the IRS may not care about those circumstances, our team does and we use that as motivation to find the best resolution possible for our clients. When a payroll tax balance is owed, typically the IRS will assign a Revenue Officer to resolve the case. One of their first steps is to determine who they feel was responsible for remitting the trust fund taxes to the IRS. What is trust fund tax? This is the income tax, employee share of social security tax and Medicare tax that the employer withholds from the employee’s pay. These funds are to be held in trust until the federal tax deposits are made by the employer to the IRS. Once the Revenue Officer deems a person (or multiple people) responsible for this duty, they can assess what is called the Trust Fund Recovery Penalty. This penalty is assessed to the individual personally which creates a bridge for the IRS to now not only collect based on what equity in assets and income the business has, but also the equity in assets and income the individual has as well. When you’re faced with these issues, it’s important to have a seasoned tax professional on your side that understands how to navigate this while keeping all of your assets protected and ensuring the best outcome possible.
Innocent Spouse Relief
Has your refund been seized for your spouse’s tax balance? Maybe they made an error on your jointly filed tax return. The good news is, the IRS provides a few different pathways to prevent you from being held responsible for your spouse’s tax burden. In order to qualify for Innocent Spouse Relief you must meet all of the following criteria:
1. You filed a joint return.
2. There is an understated tax on the return that is due to items that were inaccurately reported by your spouse (or former spouse).
3. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed).
4. Considering all the facts and circumstances, it would be unfair to hold you liable for the understated tax.
Even when you believe you clearly qualify, the IRS will attempt to prove you don’t. It takes an experienced tax professional to guide you through this process and ensure the IRS sees the reality – that you shouldn’t be held responsible for this debt. If you don’t qualify for Innocent Spouse Relief, there are still other options such as Separation of Liability relief or Equitable Relief which fall under the same umbrella as Innocent Spouse. If you think you may qualify, call our team – we can help get you through this process.
Are you facing a tax balance that you can’t pay in a lump sum? Great news – the IRS offers options to pay your balance back over time through an installment agreement. Our team of Tax Professionals and review your case and work to secure a monthly payment that is manageable for you and your current financial situation.
If the IRS deems you have the “ability to pay” the balance due over time, there are options like the Fresh Start Initiative which allows taxpayers that owe under $50,000 to pay the debt over 72 months. Typically if a client qualifies for this, our team of Tax Professionals will also attempt to secure Penalty Abatements where we can still lower the overall balance.
Or maybe this debt seems like something you’ll never be able to repay in full – there is hope! Another option our team has been able to secure for our clients is called a Partial Pay Installment Agreement. Like it sounds, under this type of resolution, you won’t pay the tax burden in full. This is a financials-based resolution where you must prove to the IRS that you are unable to pay the tax balance due to financial constraints. The monthly payment amount is calculated based on the taxpayer’s monthly disposable income or money that is leftover at the end of each month after the IRS allowable expenses. Our team of Tax Professionals can assist in preparing a financial analysis and attempt to lower the monthly payment as much as possible. Once this payment amount is determined, the length of time you will have to make those payments is dependent on the Collection Statute Expiration Date. This date is when the balance on file with the IRS will expire or be written off the account. That’s right, the balance does not stay on file forever with the IRS. Typically, the IRS has 10 years from the time the balance comes on file to collect the debt, however, there are things that can extend those dates out. Our team has significant experience in negotiating these resolutions with the IRS and can find the best resolution for you!
Do you know if you qualify for these options? Set up a free initial consultation by clicking HERE or give us a call at (918) 747-7000 and ask for a free tax resolution consultation to get yours scheduled today!
At times, the IRS can assess hefty penalties due to circumstances that may have been outside of your control. The IRS also allows some of those penalties to be removed. There are different types of penalty abatements: First Time Penalty Abatement and Reasonable Cause Penalty Abatement. As the first type may suggest, the IRS may allow for removal of penalties due to it being your first issue with them. However, with Reasonable Cause Penalty Abatements, you have to prove to the IRS there was cause for the issue and that the penalties assessed should be removed because of it. In drafting these abatements, it’s important to understand the information the IRS will be looking for. Our team has submitted penalty abatements for thousands of clients and we can do the same for you!
What is a Levy?
A levy is the IRS’ attempt at seizing funds from the taxpayer. This can be done via several different types of levies:
- Wage levy
- Bank Levy
- Accounts Receivable Levy
Wage Levy – In this case, the IRS will seize a portion of your paycheck. This is not a one-time seizure either. The IRS will seize that same portion out of every paycheck each pay period until the balance is satisfied or the levy is released. How much can the IRS seize? That depends on several factors but often times, it’s more than the taxpayer thinks. The IRS will take into consideration the amount of people in your household but will often leave the taxpayer with only a few hundred dollars per paycheck. If you find yourself with a notice of wage levy from the IRS, do not wait any longer – call our team of Tax Professionals. We can help get that levy reduced or released and get you back on track.
Bank Levy – When the IRS issues a bank levy to your bank, the bank must take all of the funds that are in your account at the time the levy was received. The good news is that those funds aren’t just sent directly to the IRS. The bank must hold those funds for 21 days before sending them to the IRS. In that 21 day time frame, it’s our team’s opportunity to attempt to get that levy released. In those 21 days, hardship must be proven to the IRS meaning that if the IRS took these funds, it would create a hardship preventing the taxpayer from paying essential items like rent, utilities, or other necessary living expenses. Our Team of Tax Professionals have a great deal of experience in getting levies released. Call our team today for your free initial consultation!
Accounts Receivable Levy – These levies are specific to business owners where the IRS will issue the levy notice to your customers and demand the customer pay the IRS instead of the business. This can be damaging in a lot of ways. Of course it prevents the business from getting access to revenue but it also can be damaging to the business’ reputation since the IRS is sending notice to the customer directly. Usually, a Revenue Officer is the IRS agent who would issue these levies and they can be a tough opponent to go up against. However, our team has gone up against several Revenue Officers and been able to successfully put our clients in the best spot possible. Has your business gotten behind on taxes? Call our team today so we can put preventative measures in place and protect your business from being levied!
Liens and levies often get confused as they both can be utilized by the IRS to collect the tax debt. Liens typically are filed against property that the taxpayer owns or has claim to. This protects the IRS’ interest in the property by preventing the taxpayer from selling the property without making any payment toward the balance due. If the IRS files a lien, they will issue a Notice of Federal Tax Lien which does come with appeals rights. If the lien was filed incorrectly, our team can file an appeal to prevent it from attaching to the applicable property. A levy is a more active approach to the IRS collecting the balance due. Typically, these are issued to bank’s where the taxpayer has an account and the IRS will seize the full amount in their account. Or, it can be issued to the taxpayer’s employer where the employer has to withhold a certain amount of the employee’s paycheck each payday and remit it to the IRS. Levies are imminent threats to the taxpayer’s income and available funds. However, we can take action against these as well. Our team will gather the necessary information to attempt to prove to the IRS these levies are creating hardship to secure a full or partial release. Have you been issued a lien or levy? Call our team to assist in getting these tax problems resolved.
Get Back on Track
IRS Tax Resolution Roadmap
Meet with us to determine if resolution is the right path and what options might be available.
File power of attorney form and determine if all required returns are on file per IRS guidelines.
Prepare forms that outline all equity in assets and monthly disposable income (MDI) for the three most recent months.
Negotiate to secure resolution-based upon financial analysis.