The US Treasury Department (IRS) is authorized to settle your taxes for what can be pennies on the dollar. While the amount of a settlement offer is not directly related to the amount of the tax that is due, it is often based on your financial resources. Other grounds for settlement, besides your ability to pay the tax, are available in special circumstances. There are situations in which an individual with a large amount of assets can successfully settle an outstanding tax debt for much less than the balance due, even if the taxpayer has the money to pay the tax. To see more information on reasons for making an offer to the IRS click here.

INSTALLMENT PAYMENT AGREEMENTS

One of the most common ways to stop IRS enforced collection activities is to enter into an installment payment agreement. Such an agreement is based on a taxpayers financial resources and need not necessarily pay the entire tax within a reasonable amount of time. Under some circumstances, the IRS will stop collecting a tax debt if we prove that your income is below average living expenses for a person living in your area. This is based upon the Bureau of Labor Statistics analysis of income and living expenses conducted on a county by county basis nationwide.

PENALTY FORGIVENESS

While not common, at times the IRS will write off penalties that have been assessed. If you made an "honest mistake" or if circumstances beyond your control made it difficult or impossible to prepare and file a correct tax return, penalty can be reduced or eliminated. The "abatement" of penalty must be for good cause and must be requested before it will be authorized.

PAYROLL TAXES

The government considers Payroll Withholding Tax to be a special type of obligation for an employer. Payroll taxes withheld from an employee's pay check are considered to be a "Trust Fund" held by you for the government. Even if your business is a corporation, the person or persons responsible for payment of these taxes, or even those who have authority to sign company checks, can be specially assessed for these tax liabilities.

UNFILED TAX RETURNS

In most cases, individuals are required to file tax returns if they earn a certain minimum level of income. The minimum amount required before a return must be filed depends on a number of factors. However, almost everyone that is regularly employed must file tax returns with the IRS. The failure to file tax returns when they are due is a federal misdemeanor and can lead to a fine or jail sentence or both. Even if no criminal penalty is assessed, often the civil penalty can be quite high.

If required tax returns are not filed when due, the IRS may assess a tax based upon income shown in their records. As you can imagine, a non-filing taxpayer is not give many breaks in calculating tax due. Usually, the IRS computes the tax by assuming the taxpayer is single (or if married then as married filing single) with one exemption, using standard deductions and with no dependants. A good accountant may be able to improve this situation by preparing and helping to file a tax return for years in which the government has determined the tax by their Substitute for Return process. While the IRS is not required to accept a late filed return under all conditions when it has taken the trouble to assess by this process, they usually will allow you to correct their records if you do so within a reasonable period of time.

It is not an absolute defense to criminal prosecution to file your returns before the IRS catches on that you have not done so. However, IRS will often look the other way if a taxpayer comes forward with a carefully prepared return and files it before the IRS demands the filing. It costs the government a substantial sum to initiate criminal prosecution. Taking steps to correct the problem before government action is required will almost always improve the situation.

TAX LIENS

The IRS has many tools available to it for the collection of past due tax obligations. One of the most powerful is the Federal Tax Lien. The lien will attach to all of your property, of any kind and wherever it is located if it is filed correctly by the IRS. The lien can be filed without court approval and need only the signature of authorized IRS personnel. Once filed, a tax lien can make transfer of property difficult or even impossible without full payment of all tax due.

While the tax lien can cause many problems for a taxpayer, there are many things a lawyer can do to assist in removal of the lien or in coming to an agreement with the government about how the lien will be treated.

THE COLLECTION PROCESS

Most legislation passed by congress regarding the collection of tax has been aimed at limiting the taxpayer's rights and increasing the power of the IRS to obtain payment of outstanding tax debt. However, in the last 10 years, congress has found a great deal of political capital in restraining the IRS with additional rules and requirements that must be fulfilled before enforced collection can take place. This has been good news for the taxpayer and the government is even required to give you notice of some of these rights before acts are taken to disrupt your life.

While an individual taxpayer can take almost any of the available steps to protect assets and limit collection activity, it is recommended that taxpayers contact a tax professional as soon as possible after thee first contact by an IRS collection officer. We do not recommend providing any information to the IRS or talking with any government employee about your tax problems. If you do so, you may cause damage even tax lawyers can not repair.

BANKRUPTCY AND TAX

DISCHARGING TAXES AND REMOVING TAX LIENS Certain types of tax obligations, such as income taxes, may be discharged under specific circumstances. Many required factors must be met before any tax can be discharged under Chapter 7 or Chapter 13. In Chapter 7, the minimum requirements for discharging federal or state income taxes are: (1) it has been over 3 years since the returns were last DUE (including extensions), (2) the returns were timely filed or it has been at least 2 years since the returns were filed, (3) there was no fraud involved or attempts to evade the tax, AND, (4) the taxes were not assessed within the last 240 days.

Tax Liens that have already been recorded against your property may also be removed under certain circumstances. Your attorney may be able to assist you in accomplishing that nifty feat! Generally, liens that have attached to specific property will survive a bankruptcy. What does that mean? It means that the lien will stay against your property regardless of your discharge of the underlying debt. So, when you ultimately sell that property, if there is extra money available, the lien will be paid first from those proceeds unless you have the lien removed.