Financially-distressed taxpayers often find themselves unequipped to navigate the turbulent seas of Internal Revenue Service (IRS) debt. A dark cloud of apprehension and economic uncertainty takes over them as they try to steer through the unknown territory of tax law, IRS audit and collection procedures. To ignore the problem by sticking their head in the sand would only aggravate matters. A tax attorney is almost indispensable to weather the tax debt tempest by safeguarding them against IRS intimidation and error and guiding them to the safe harbor of IRS tax help.
To tackle their tax debt, taxpayers should seek the counsel of and request a free consultation from a skilled and seasoned tax professional. Tax lawyers assist individuals and businesses find solutions to their federal and state tax problem. They offer a wide array of tax services, including the following:
1. Representation before the taxing authorities
Tax attorneys may file a collection appeal on behalf of a business or individual to prevent the IRS from levying or seizing the latter's property. They represent taxpayers before the IRS and state taxing agencies throughout the country.
2. Bankruptcy consultation
Bankruptcy filing is a form of IRS tax relief, enabling taxpayers to wipe out or reduce their back taxes. Tax lawyers can help clients discharge their taxes in bankruptcy.
3. Installment agreements
The IRS allows delinquent taxpayers to request an installment agreement by completing IRS form 9465. It is a relatively simple process: First, taxpayers must report their outstanding debt to the IRS. Secondly, they must state on form 9465 the day they would like to make the monthly payment and the amount they can afford to pay. The IRS then issues its decision within 30 days.
A recent program known as the partial-payment installment agreement makes it possible for taxpayers to have a portion of their debt extinguished after fulfilling the terms of an installment agreement, in which they make steady monthly payments to the IRS. It is recommended that tax debtors solicit the assistance of a tax professional to guide them through this process.
4. IRS audit representation
A tax expert may represent a taxpayer before the IRS and petition the latter for an audit reconsideration.
5. Tax lien assistance
Tax lawyers can obtain the removal, withdrawal, subordination or discharge of a tax lien. Subordination will enable taxpayers to borrow funds against their assets to pay off the tax lien. Tax attorneys will ensure that the taxing authorities have complied with all legal requirements in the filing of the tax lien. They can also appeal a tax lien filing if defects come to light during the tax lien process.
6. Protection against IRS property seizures
Tax lawyers can negotiate the release of bank and wage garnishments and IRS tax levies. At the very least, they can obtain a modification of any IRS or state wage garnishment to a much more reasonable amount.
7. Offer in Compromise
Under certain circumstances, the IRS allows taxpayers to settle their debt for a reduced sum of money. They can apply for an Offer in Compromise by submitting form 656 (OIC) and form 433-A (Collection Information Statement). In order for the IRS to grant an Offer in Compromise, a tax debtor must establish one of the following grounds:
- Doubt as to the correctness of the tax;
- Doubt as to whether he or she will be able to pay the tax liability in full; or
- Payment of the tax would be unfair or impose a considerable economic hardship.
An Offer in Compromise will be accepted by the IRS when there is little chance that the outstanding debt can be collected in its entirety, and the proposed settlement is a fair representation of the collection potential.
8. Interest and penalty abatement
A tax attorney may negotiate a waiver or abatement of IRS tax penalties.
9. Application for a hardship deferment
The IRS allows debtors who are unable to pay off their present tax liability to request placement on uncollectable status. If, upon the taxpayer's submission of form 433-F, the IRS finds the applicant to be eligible for a hardship deferment, it will cease all collection activities for at least one year.
10. Back tax relief
Taxpayers who can prove that payment of their outstanding debt in full or of a large sum to the IRS would inflict an economic hardship on them may qualify for an IRS Payment Plan. The IRS will usually approve a payment arrangement for back taxes and cease collection action on the debt. To qualify for an IRS Payment Plan, tax debtors must owe at least $25,000.
In addition to consulting a tax lawyer, taxpayers should avail themselves of two programs offered by the IRS:
1. Low Income Taxpayer Clinic (LITC)
Low-income tax debtors may visit an LITC, which will represent them at no cost or for a very small fee before the IRS in appeals, collection, and appeals matters. The clinics can also assist clients rectify account errors and respond to IRS correspondence. The client must provide his or her tax id to the LITC, since all statements or tax documents addressed to the IRS must contain the taxpayer's TIN (tax identification number).
2. Taxpayer Advocate Service
Taxpayers with unresolved IRS issues or experiencing a severe hardship due to application of the tax regulations should consider contacting the Taxpayer Advocate Service, offered by the IRS.