Have Tax Problems?
Do you have tax problems?
Are you trying to settle with the IRS?
Do you need tax relief?
At Hood CPAs we gladly provide tax relief and IRS tax settlement services for great clients like you.
Offer in Compromise
Many people wonder – can I settle my tax debt with the IRS? The answer is yes! One option is through an offer in compromise. Through this resolution, 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 isn’t so willing to settle on tax debts. They want to try and get as much money out of the taxpayer as quickly as possible to satisfy not just the tax burden but also the penalties and interest associated with it. When filing an offer in compromise, the IRS will assign a specific agent called an Offer Specialist to review the offer and make a determination if it should be accepted or rejected.
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These agents have been with the IRS for several years if not decades and all they do every single day is review offers. It is their job to determine whether the taxpayer has the ability to pay the back tax balance. They have a specific formula in making this determination by looking at the taxpayer’s equity in assets as well as their monthly disposable income. It’s in those 2 details where the strategy of a seasoned tax professional comes in. Despite some cases having a seemingly clear inability to pay, the Offer Specialist will do anything to show that they do in fact have the ability to pay – even if it’s not in a lump sum, maybe they have the ability to pay overtime through an installment agreement. It’s up to the tax professional that has knowledge of the tax code and the bounds the Offer Specialist has to stay within to prove the taxpayer cannot satisfy this burden. Once accepted, the taxpayer pays the agreed upon offer amount and the remaining balance is wiped from the slate as well as any liens that may have been previously filed. So long as the taxpayer remains in compliance (file on time and pay on time) for the following 5 years after acceptance, that debt will remain off the account. However, if the taxpayer slips up – forgets to file one year or has an additional balance they pay late, they risk having the full amount of those balances come back onto their account.
Revenue Officers can be the most aggressive agents of the IRS. Although a Revenue Officer could be assigned 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. A Revenue Officer is typically a local agent that can show up at your home or office at any point to attempt to collect on the balance due. This can be shocking and sometimes embarrassing when they show up in these public settings. With a tax professional on power of attorney, the taxpayer isn’t the point of contact anymore and the Revenue Officer must funnel communication through that representative. As mentioned earlier, these agents are aggressive. If you miss one deadline or communication from the Revenue Officer, they could wipe out your bank account. They could send levy notices to your customers as well requiring them to remit payments to the IRS instead of your business. Although Revenue Officers can be scary and intimidating, it requires a tax professional who understands the bounds they have to stay within and knows the tax code just as well to provide the taxpayer with protection and a solution on the tax burden that doesn’t leave them bankrupt.
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. 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:
- You filed a joint return.
- There is an understated tax on the return that is due to items that were inaccurately reported by your spouse (or former spouse).
- 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).
- Taking into account 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.
You may not be able to pay your tax balance in full in one lump sum and that’s okay! There are options to pay your balance over time and our team can help set one up that is best suited for your financial situation. The IRS offers a program called a Fresh Start Initiative which allows taxpayers that owe under $50,000 to pay the debt over 72 months.
There is also another type of installment agreement 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 determined based on the taxpayer’s monthly disposable income or money that is leftover at the end of each month after the IRS allowable expenses. Once this payment amount is determined, the length of time your will have to make those payments is dependent on the Collection Statute Expiration Date. This date is when the balance on file will expire or be written off the IRS account. 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!
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!
Lien vs. Levy
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.