The Denver tax attorneys at Buckingham & McGuire have prepared, submitted and negotiated many successful offer in compromises with the IRS. Call our office to discuss an offer with one of our tax attorneys.

Amending an Offer in Compromise

When an offer in compromise is submitted to the IRS, the IRS may agree that the taxpayer is an offer candidate, but not agree with the original offer in compromise amount.  Thus, can the initial offer in compromise be amended?  Yes, the offer can be amended to reflect a different amount and terms.

This issue is discussed in the video below by John McGuire, a tax attorney at The McGuire Law Firm.

You can contact The McGuire Law Firm to speak with a tax attorney.

IRS Offer in Compromise Resource Page

The article below has been prepared to act as an IRS Offer in Compromise resource page whereby individuals can obtain necessary information regarding an IRS Offer in Compromise.  Please note, this information is not legal advice and should not supplement the advice of a tax attorney or tax professional.

What is an IRS Offer in Compromise?

An offer in compromise allows a taxpayer to settle their tax debt with the Internal Revenue Service for less than the total amount of tax owed.  Generally, the IRS will accept an offer in compromise if the offered amount by the taxpayer is the most the IRS could collect from the taxpayer within a certain period of time.

Offer In Compromise Pre Qualifier Tool

The IRS has an Offer in Compromise Pre Qualifier tool that can be very useful to taxpayers wondering if they would be eligible for an IRS Offer in Compromise.  The pre qualifier tool initially asks the taxpayer questions related to tax return filings, estimated payments and other tax payment & filing issues as well as bankruptcy (click for initial questions).  These issues could dictated whether or not a taxpayer is even eligible to submit an IRS Offer in Compromise.  Thereafter, the Offer in Compromise Pre Qualifier Tool asks financial questions related to income, expenses, assets, asset values and loans.  These financial questions break down a taxpayer’s equity in assets and disposable income which are the major factors considered by the IRS when accepting or rejecting an offer in compromise.

IRS Offer in Compromise Form

Form 656 is the form submitted to the IRS when submitting your offer in compromise.  Form 656 states the taxpayer’s information, the tax types and periods of which the taxpayer is attempting to settle, and perhaps most importantly, the offer in compromise amount and terms for payment.  In addition to Form 656, the taxpayer must submit the proper financial statement.  An individual taxpayer will submit Form 433A OIC, and a business taxpayer will submit Form 433B OIC.  If an individual has ownership interests in a business, the individual would likely need to file Form 433B for such business.

Where To Submit Your IRS Offer in Compromise

Your offer will initially be submitted to one of two offer in compromise units, which are in Memphis, TN and Holtsville, NY.  Where you live, will determine the office where you will file your offer.  The offer in compromise booklet provides the correct address based upon where you live.

What Decisions can the IRS make regarding my Offer?

The IRS can either accept, reject or return your offer.  Acceptance, of course would be preferred!  If the IRS rejects your offer, they may reject the amount, but agree to a larger amount and thus you may still be able to settle your tax debt.  You can also appeal the rejection by filing Form 13711.  The IRS will return an offer if, for example, the taxpayer is out of compliance.  You do not have appeal rights on a returned offer.

What Information is Public?

The IRS does make certain information regarding offers public.  Click, “information” for addresses of IRS offices with information open to public inspection.

Publication 594

IRS Publication 594 discusses the IRS collection process and may be useful to you as you are considering submitting an offer in compromise to the IRS.  Generally, submitting an offer to the IRS acts as a hold on enforcement.

If you have questions regarding the IRS Offer in Compromise process or your ability to settle a tax debt, you can discuss these issues with a tax attorney at The McGuire Law Firm.  A free consultation is provided to all clients.

IRS Offer in Compromise

How Do I Settle My IRS Taxes?

Many individuals and businesses that owe taxes to the Internal Revenue Service will contact my office and ask, “how do I settle my IRS tax debt?”  While most people are aware that they can settle their tax debt with the IRS through an offer in compromise, they do not know what is needed to submit their offer in compromise to the IRS and the process with the IRS offer in compromise unit.  The article and video below have been prepared by a tax attorney in Denver at The McGuire Law Firm to provide information regarding a tax settlement with the Internal Revenue Service.  As always, this article and video below is for informational purposes, and it is recommended you contact your tax attorney or tax professional regarding a tax issue.

An offer in compromise is based more off of a taxpayer’s ability to pay as opposed the taxpayer’s total debt.  Thus, first and foremost, a taxpayer looking to submit an offer in compromise to the IRS must complete a financial statement.  An individual will complete Form 433A OIC and a business will complete Form 433B OIC.  An individual with an interest in closely held businesses should likely complete both Forms 433A OIC and 433B OIC.  These forms are financial statements that help calculate the taxpayer’s reasonable collection potential, which is determined by equity in assets and disposable income.  Of course, if a taxpayer does have special or extenuating circumstances, these issues can be presented to the IRS as a reason for the taxpayer to not pay their full collection potential.  Upon completing the necessary financial statements, the taxpayer should be able to calculate their offer amount.

Upon completing the offer amount, Form 656 should be completed, which states the taxpayer’s information, the tax debts of which the taxpayer is attempting to settle and the offer terms.  The offer terms will include the offer amount and over what time period the taxpayer will make such payments.  Further, the offer terms can dictate the payment that must be submitted with the offer and whether payments need to be made as the IRS is reviewing the offer.

The taxpayer will submit Form 656 and the necessary financial statements and attachments to the appropriate IRS Offer in Compromise Unit.  Currently, there are 2 units whereby a taxpayer would initially submit their offer in Holtsville, NY and Memphis, TN.  Upon submitting the offer, the taxpayer will receive verification of receipt.  Thereafter, likely in 4-8 months, the taxpayer will receive contact from the offer unit and an offer examiner.  More information or documents could be requested, or the offer could be accepted, rejected or returned.  If the offer is rejected, the taxpayer does have appeal rights and can appeal such rejection.  If you have questions related the settlement of an IRS tax debt, speak with a Denver tax attorney at The McGuire Law Firm through a free consultation.  Please enjoy the video below, and hopefully, you have found this information useful.

Call The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver, Colorado or Golden, Colorado.

Denver IRS Tax Resolutions

If you owe taxes to the IRS or are having another dispute, there are IRS tax resolutions available to you.  The article below has been prepared by a Denver tax attorney at The McGuire Law Firm to discuss common resolutions to IRS tax issues, and a video has been prepared as well.

Many people and businesses may owe taxes to the IRS and need to resolve such debts.  Common resolutions to a tax liability would be an installment agreement, a partial payment installment agreement, an offer in compromise or having the liability placed in a non-collectible status.  Each of these resolution is discussed in more detail below.

Installment Agreement

An installment agreement is an agreement with the IRS whereby a taxpayer and the IRS agree to the taxpayer making a monthly payment on or before a certain day of each month, which will resolve the total tax debt.  Depending upon the amount of tax owed and the amount the taxpayer is willing to pay, an installment agreement may be formalized without financial disclosure.  However, after the liability exceeds a specific amount and/or the taxpayer is requesting to pay an amount less than what the IRS would want, the taxpayer would need to disclose their current financial circumstances to the IRS.  An individual would complete Form 433A and a business would complete Form 433B.  An installment agreement can be formalized with a revenue officer or through automated collections if a revenue officer is not assigned to the file.

Important facts to keep in mind regarding an installment agreement are:

1) Penalty and interest continue to accrue while you are making payments.

2) The failure to pay penalty is cut in half to .25% per month.

3) The failure to timely make a payment or make a payment in full will default the agreement.

4) The accrual of an additional tax or failure to timely file a tax return will default the agreement.

5) The IRS can still file a notice of federal tax lien.

Partial Payment Installment Agreement

A partial payment installment agreement is similar to an installment agreement except that if the taxpayer continues to make the agreements as agreed upon for the remainder of the collection statute, the tax debt will not be paid in full.  For example, say Jeff owes the IRS $175,000 and there is 5 years remaining on the IRS collection statute.  Jeff completes Form 433A and has monthly disposable income of $1,500.  Thus, if Jeff paid $1,500 per month to the IRS for 60 months, payments would only total $90,000.  The above facts apply to a partial payment installment agreement, and in addition, the IRS can and generally does request an updated financial statement from the taxpayer every 24 months.  If the updated financial statement shows an additional ability to pay, the IRS can and generally will request that the monthly payment be increased.

With the recent changes made to the IRS offer in compromise, generally if an individual would qualify for a partial payment installment agreement, they could likely qualify for the offer in compromise program and settle their tax debt.

Offer in Compromise

An Offer in Compromise can be considered a tax settlement.  The taxpayer proposes to pay an amount to the IRS that is less than the total amount of tax due in full satisfaction of the debt.  From the above example, Jeff may offer the IRS $18,000 to settle his $175,000 debt.  The offer amount is based off of the taxpayer’s ability to pay, which is determined by the taxpayer’s equity in assets and disposable income.  The taxpayer will complete the appropriate financial statement and Form 656.  The offer is submitted to the IRS Offer in Compromise Unit, and an examiner is assigned.  Usually it take anywhere from 6 to 12 months to receive a determination from the offer unit.  The offer could be accepted, rejected but a higher amount proposed, rejected because the IRS states you can full pay the debt or returned.  If the offer is returned, the taxpayer has no appeal rights.  If the offer is rejected, the taxpayer can provide additional information for consideration and has appeals rights with the IRS appeal office.

Some important facts regarding an offer are:

1) Penalty and interest continue to accrue while the offer is being reviewed

2) There is an automatic hold on IRS enforcement while the offer is being reviewed

3) The IRS collection statute is tolled (not running) while the offer is being reviewed

Currently Non-Collectible Status

Currently Non-Collectible Status is when the IRS agrees not to collect from a taxpayer because based off of the taxpayer’s equity in assets and disposable income, the taxpayer cannot pay.  Generally, if a taxpayer can be placed into non-collectible status, they could qualify for the offer in compromise program and thus may want to consider an offer to resolve their IRS debt.

There are other resolution options as well such as bankruptcy, IRS penalty abatements, innocent spouse relief and equitable relief options.  A tax attorney can analyze your current circumstances and assist you with your options.  You can speak with a Denver tax attorney by contacting the McGuire Law Firm and scheduling a free consultation.

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Denver IRS Tax Settlement

As a tax attorney, I have worked with many individuals and businesses that owe taxes to the IRS and they always ask, how much can I settle my tax debt for?  A tax settlement, which is also called an offer in compromise with the IRS is an agreement whereby a taxpayer pays an amount to the IRS that is less than the full amount of the tax debt to satisfy the tax liability in full.  Below are some common questions I am asked and answers to such questions.  Further, please watch the video below regarding an IRS tax settlement.

1) How much can I settle my tax debt for?  It depends.  A tax settlement or offer in compromise amount is based off of your ability to pay, not necessarily how much tax you owe.

2) How is my tax settlement calculated?  In calculating a taxpayer’s tax settlement amount, you look at equity in assets and disposable income.  Equity in assets would be any equity in any asset such as house, car, jewelry, retirement accounts etc.  Some assets can receive a discount when calculating the equity.  For example, you can lower the fair market value of your retirement accounts by 30% when calculating the equity in such account(s).  Disposable income is calculated by taking the taxpayer’s total income less allowable expenses.  I state allowable because the IRS states amounts for certain expenses that they will allow a taxpayer to claim.

3) What is the tax settlement equation?  The equation if stated mathematically would be: Equity in assets + Disposable income x 12 or 24.

4) How long does it take to settle my taxes?  Once you submit your tax settlement proposal (offer in compromise) to the IRS it will generally take 6-12 months to receive a determination.  Generally, an individual with W2 income will receive a determination quicker than an individual that has business interests or a business that is attempting to settle their tax debts.

5) Where do I submit my tax settlement?  Initially your offer in compromise will be submitted to Holtsville, NY or Memphis, TN depending upon where you live.

6) What are the payment terms of my tax settlement?  You can submit a cash offer whereby you pay 20% down when submitting the settlement proposal and then pay the remaining amount (if accepted) in 5 or fewer payment and you propose the date(s) for payment.  Or, you can submit a proposal whereby you make payments evenly over 24 months.  The first payment is submitted with the offer and each month while the offer proposal is being reviewed you continue to make payments.  Thus, if you offered $24,000, you would make a $1,000 payment each month until directed otherwise.

7) What are the other conditions of the tax settlement?  Generally, the IRS will keep your tax refund for the year in which the offer is accepted.  Further, you must  timely file and pay all taxes for generally a 5 year period or the offer can default.

John McGuire is a tax attorney in Denver, Colorado and has successfully submitted many tax debts for his clients.  The video below further discusses a tax settlement.  If you owes taxes to the IRS, call The McGuire Law Firm to speak with a Denver tax attorney through a free consultation.

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Denver Tax Lawyer Discusses Offer in Compromise Calculation

How much can I settle my IRS tax debt for?  I have heard, and answered this question many many times.  Of course, this is a common question for an individual or a business owner that owes taxes to the IRS.  My answer is always, “it depends.”  This is because the amount that the IRS will accept for an offer in compromise to resolve a tax debt is based up an equation related to a taxpayers ability to pay and not necessarily the total amount of the taxes owed to the IRS.  The IRS calculates an offer in compromise based upon a taxpayer’s reasonable collection potential which correlates to a taxpayer’s equity in assets and disposable income.  In regards to equity in assets this includes all assets from your home, car, retirement account, jewelry and anything and everything you own.  You may be able to receive a deduction in the fair market value of an asset for certain assets.  In calculating disposable income, the IRS will look at total income and your expenses, but they have established allowable expenses for items such as food, clothing, housing, utilities, transportation and other expenses.

The video below has been prepared by a Denver tax lawyer to provide additional information regarding the calculation of an IRS offer in compromise.  If you have a tax debt to the IRS and are questioning your ability to settle such debt, speak with a Denver tax lawyer at The McGuire Law Firm through a free consultation.

Denver IRS Offer in Compromise

The vast majority of individuals know that they can settle a tax debt with the IRS through an offer in compromise.  As a tax attorney, almost every individual and business that has owed taxes to the IRS has asked me questions related to an offer in compromise.  The article and video below should provide comprehensive information regarding an offer in compromise.

What is an Offer in Compromise?

An offer in compromise is an agreement with the IRS where an individual or business taxpayer offers to pay an amount to the IRS that is less than the total amount of taxes owed to satisfy their liability.  Many people would call this a tax settlement or an accord and satisfaction with the IRS, and it pretty much is.

What is the Offer in Compromise Equation or How Much do I have to Pay the IRS?

I am always asked, “how much do you think it will take to settle my taxes with the IRS?”  Many people have the misconception that there is a percentage that can be offered to the IRS to settle their liability or that the IRS will automatically accept.  The truth is, the amount the IRS will accept to settle the tax debt is based upon each taxpayer’s ability to pay and what the IRS considers to be a taxpayer’s reasonable collection potential (RCP).  A taxpayer’s RCP is determined by their equity in assets and their disposable income, and then general equation for an offer in compromise would look like:  Equity in Assets + Disposable Income X 12 (or 24).  Please note that prior to May of 2012, the IRS would multiply disposable income by 48 or 60, which often created situations whereby the IRS would accept an offer, but the taxpayer without assistance had no way to satisfy the debt within the time period the IRS wanted payment.

Equity in Assets:

Equity in assets would be calculated by taking the fair market value of the taxpayer’s assets from their home, car, bank accounts, retirement accounts, stock, gun collections, jewelry, art and all other assets (including business interests) less any liability associated with the asset such as mortgage or car loan.  It is important to know that the taxpayer is allowed an exemption for certain assets and a reduction in the fair market value of certain assets.  For example, a taxpayer is allowed approximately a $3,450 exemption for each personal vehicle, up to two vehicles.  Thus, if a taxpayer had a 2010 Ford F150 with a fair market value of $20,000 and a car loan of $10,000 the equity in such vehicle that would be included within the taxpayer’s offer would be $6,550.  This would be calculated: $20,000 (Fair Market Value) less $10,000 (car loan) less the $3,450 exemption.  If the car loan exceeded the fair market value of the vehicle, then no equity would be included from such vehicle in the offer amount.  An example of a reduction of the fair market value would be that generally, the IRS will allow a 20% reduction in the fair market value of a taxpayer’s primary residence when calculating the equity in such property.  Thus, if a taxpayer owned a house with a fair market value of $300,000 and a mortgage of $200,000, the amount of equity from such property included in the offer amount would be $40,000.  This would be calculated: $300,000 (fair market value) multiplied by .8 less $200,000 mortgage= $40,000.  You could also multiply $300,000 by 20%= $60,000 and then subtract such amount from the fair market value of the property.

Disposable Income:

Disposable Income is calculated by taking the taxpayer’s total household income less the taxpayer’s allowable expenses.  I state “allowable” expenses because the IRS may not allow all of the taxpayer’s expenses and the IRS has established national standards for allowable expenses that will provide an amount that the IRS will allow the taxpayer to use or claim as an expense.  Items such as food, clothing, housing, utilities and transportation have an allowable standard that is all the taxpayer will be allowed to claim as an expense.  For example, a single taxpayer living in Denver, Colorado may be allowed $1,250 for housing and utilities.  If the taxpayer was actually paying $1,750 for housing and utilities, the taxpayer would only be able to claim $1,250 as an expense when calculating disposable and essentially the excess $500 would be considered disposable income by the IRS.

Now that we know the offer equation and have a better understanding of how the IRS will view equity in assets and disposable income, lets provide an example.  Assume Jeffrey owes the IRS $123,000.  Jeffrey has total equity in assets after exemptions and reductions in fair market value of $12,000.  Jeffrey has monthly disposable income of $1,500 after all allowable expenses are deducted from his monthly income.  Jeffrey’s offer amount would be $30,000 ($12,000 + $1,500 x 12) or $48,000 ($12,000 + $1,500 x 24).

What Terms of Payment Plan Will the IRS Allow for my Offer in Compromise?

When preparing your offer in compromise you must select one of two options for payments to the IRS.  Option one is considered a cash offer whereby you pay 20% of the offer amount when submitting the offer, and the remaining offer amount is paid over five or fewer payments within a certain time period of the IRS accepting the offer.  Generally, the IRS will want the remaining 80% of the offer within 3-6 months of acceptance.  When offering to pay under such terms, the taxpayer’s disposable income is only multiplied by 12 as opposed to 24, which could be a very big advantage to the taxpayer.  If you were offing $20,000 to settle the liability, you would make a payment of $4,000 when submitting the offer and the remaining $16,000 would be payable upon acceptance within a reasonable time frame.  Option two allows the taxpayer to pay their offer amount over 24 months.  The taxpayer’s disposable income is multiplied by 24.  If a taxpayers was proposing an offer amount of $24,000 the taxpayer would make a payment of $1,000 when submitting the offer and would continue to make $1,000 per month payments to the IRS until a determination or final agreement had been reached.  If a taxpayer’s offer in compromise is not accepted, the payments are applied to the total liability.

How do I Prepare and Submit an Offer in Compromise to the IRS?

You must complete the appropriate financial statement(s) and Form 656.  If you are attempting to resolve an individual liability, such as a 1040 debt, you would complete Form 433A OIC.  If the individual attempting to resolve their 1040 debt owns a business, they will likely request that you complete Form 433B, which is a business financial collection statement.  A business attempting to resolve its debt with the IRS would prepare and submit Form 433B OIC.  After completing the necessary financial statements, it is imperative that you include all of the required attachments, which will be dictated by your circumstances, but might include, bank statements, pay stubs, most current statements for retirement accounts and verification of other items as stated on the statement.  Form 656 states the taxpayer’s information, the periods of tax that are included within the offer, the reason for the offer, offer amount and terms.  Once all statements and forms have been compiled, your offer will be submitted to an IRS Offer in Compromise Unit.  There are two main offer units, one in Holtsville, NY and the other in Memphis, TN.  The 656 Instructions will state which unit you should forward your offer too, which is determined by where you live.  Further, these instructions will provide for the current application fee, which must be enclosed when the offer is submitted.

What is the Procedure with the IRS Offer Unit?

Within two to four weeks of submitting your offer, you should receive a notice from the offer unit that the offer has been received and generally this notice will state that you will be contacted within 90 days.  Don’t hold your breath though!  Often the only contact I receive in 90 days is another notice stating that we will be contacted within another 90 days.  Upon receipt, the offer unit will check to make sure the offer can be processed.  Generally, this means they will check for the correct payments and forms, and may check to ensure the taxpayer is current and compliant with all tax obligations.  If the taxpayer is not current & compliant, the offer will likely be returned, and the taxpayer will not have appeal rights.  Thereafter, the offer will be forwarded to an offer examiner who at some point in time will contact the taxpayer or the taxpayer’s Power of Attorney.  The examiner may or may not request additional information and could issue an immediate determination of which must go through their manager for review and final acceptance.  It is fairly typical for the examiner to request additional information, updated information and/or have some questions.

The examiner will eventually issue a determination in writing.  This determination has four potential outcomes.  One, the offer could be returned, which generally only occurs when the taxpayer is not in compliance or has not made one of the appropriate payments.  Two, the offer could be accepted as proposed.  Three, the offer examiner may state that the offer cannot be accepted at the amount proposed (is actually rejected), but if the taxpayer increases their offer amount to a specific figure, they will recommend acceptance.  Four, the offer is rejected because the examiner feels the taxpayer has the ability to satisfy the tax liability in full.

Outcome one is bad as you have no appeal rights with the IRS Appeals Office and your only real option is to resubmit another offer.  Outcome two is wonderful- your offer has been accepted and you can settle your tax debt!  Outcome three may be great or maybe not great as it will depend upon how much the examiner has requested you increase your offer amount too.  Outcome four, may be disappointing but is not the end of the road.  If your offer is rejected under outcomes three or four above, you can still provide additional information to the examiner for reconsideration and often I have seen a successful outcome with the examiner after an initial rejection.  Even if the examiner and offer unit will not change their initial position and rejection determination, you have the right to request an appeal of their decision with the IRS Appeals Office.  Again, I have submitted and negotiated offers that were initially rejected, but later accepted through an appeal.  Thus, if you offer is initially rejected, do not lose hope!

Other Important Issues & Considerations Regarding an Offer

When considering whether or not to submit an offer to the IRS, you should know that although, there is a stay of enforcement while the offer is being reviewed, penalty and interest will continue to accrue, and the collection statute is tolled (is not running).  Thus, I would only recommend submitting an offer of which has at least a realistic possibility of being accepted, if not better.

If your offer is accepted, recently the IRS has been releasing the federal tax liens within 30 days of the offer amount being paid.  However, in addition to paying the offer amount that you have agreed to pay, you must also remain current and compliant for generally a five year period following acceptance of the offer.  Thus, the failure to timely pay taxes or file a return could cause the offer to default.  If the offer defaulted, you would be responsible for the unpaid debt, along with penalty and interest.

If you are questioning your ability to settle your tax liability with an offer in compromise, please consider speaking with a tax attorney at The McGuire Law Firm.  A free consultation is offered to all potential clients, and a reasonable fee may be worth having an experienced tax attorney prepare the documents and negotiate with the IRS.

Denver IRS Offer in Compromise

Offer in Compromise Payment Options Video by Denver Tax Attorney

If you are looking to settle your tax debt with the IRS through an offer in compromise, you will have options regarding the payment terms.  The video below has been prepared by a Denver tax attorney at The McGuire Law Firm to provide information regarding your payment options.

 

The McGuire Law Firm has law offices in Denver and Golden Colorado, and offers a free consultation to all potential clients.

Denver Tax Lawyer Discusses Issues Regarding Offer in Compromise Equation

A Denver tax lawyer at The McGuire Law Firm can assist taxpayers in resolving their debts and potentially settling their tax debt with the IRS through an offer in compromise.  The video below provides general information regarding the offer in compromise equation and certain deductions and exemptions taxpayers may be able to receive when calculating their equity in assets.

 

Contact The McGuire Law Firm to schedule a consultation with a tax attorney in Denver or Golden, Colorado.

IRS Debt Relief by Denver Tax Attorney

What is IRS debt relief?  I have heard many people and/or companies refer to IRS help or IRS representation as IRS debt relief when an individual or a business owes taxes to the Internal Revenue Service.  I think that “IRS debt relief” focuses on resolving an outstanding tax debt to the IRS and/or lowering an outstanding tax debt to the IRS.  Thus, below I will provide some situations and examples for clarification based upon my subjective definition and understanding of the term.

I feel that a successful offer in compromise, which many people refer to as a tax settlement would definitely constitute IRS debt relief.  First and foremost, you are resolving the IRS tax debt, and paying a lesser amount than the total tax due to resolve the debt.

Formalizing an installment agreement with the IRS could be considered IRS debt relief.  An installment agreement with the Internal Revenue Service is an agreement whereby the taxpayer agrees to make a certain monthly payment to the IRS to resolve the outstanding debt.  Thus an installment agreement is IRS debt relief given that the tax debt will be resolved if the taxpayer complies with the agreement thus be relieved of the tax liability.  In terms of IRS collection action, I feel that an installment agreement acts as IRS debt relief because there is a hold on any enforcement action such as an IRS bank levy or IRS wage garnishment when a taxpayer is on an installment agreement and is in compliance with the agreement.  However, I am not sure I would consider an installment agreement IRS debt relief in the context of lowering the overall tax debt or paying a lesser amount of tax.  When a taxpayer is on an installment agreement, it is assumed the entire tax liability will be paid and penalty and interest continue to accrue on the tax debt until the debt is paid in full.  Thus, there is not much tax savings when the tax debt is resolved through an installment agreement.

Formalizing a partial payment installment agreement (PPIA) with the IRS could be considered IRS debt relief for the same reasons as stated above and could also be considered IRS debt relief in respect to saving money.  A partial payment installment agreement is established when based off of the taxpayer’s current financial circumstances they could make a monthly payment, but given the amount of the tax debt, the amount of the monthly payment and the remaining collection statute the tax debt would not be satisfied if the taxpayer made the monthly payments for the remainder of the collection statute.  For example, we will assume that Jeff owes $43,000 to the IRS and the IRS has 50 months remaining to collect on the debt.  Based off of Jeff’s 433A (financial statement) Jeff can only pay $250 per month to the IRS.  Thus, if Jeff were to pay $250 per month for 50 months, Jeff would have only paid $12,500 of the $43,000 tax debt, and of course, penalty and interest would continue to accrue on the debt until paid.  Thus, Jeff’s ability to pay is not an amount that will satisfy the current liability.  Thus a partial payment installment agreement can be considered IRS debt relief due to the fact it is a resolution to the tax matter and it may be a tax savings because the total amount of the tax debt is not paid.  My only concern with this type of relief is, typically, the IRS can and will request an updated financial statement every two years and if your ability to pay has increased, then so will your monthly payments.  Thus, your obligation to the IRS may increase and you may not save money on the tax bill, and may end up spending more because of the penalty and interest that (or is) has been accruing.  Moreover, given the current regulations regarding an offer in compromise, I generally find that most taxpayers that would qualify for a partial payment installment agreement would also qualify for an offer in compromise and thus should likely submit an offer in compromise.  I feel that an offer in compromise is typically a much better resolution to an IRS debt than a partial payment installment agreement because of the finality to the tax problem and debt.  With an offer in compromise, you pay the agreed upon amount, stay in compliance and the tax debt has been resolved.  Whereas, with a partial payment installment agreement the IRS can come back every two years and if your ability to pay has increased, the IRS will request more money be paid, and you may end up satisfying the entire tax debt, and paying a large amount of penalty and interest.

A successful abatement of tax penalties should constitute IRS debt relief because you are lowering the overall liability when the IRS agrees to waive all or a portion of the tax penalty.  However, unless the tax penalties make up all of the debt, the penalty abatement alone will not completely resolve the tax debt and you likely will need to pay the remaining tax and interest due via a lump sum or installments.  Thus, the penalty abatement can save you money, but likely will not resolve the entire problem.  If the taxpayer is not a candidate for an offer in compromise, I feel a good resolution can be to satisfy the tax debt through installment payments while working towards the abatement or waiver of the penalties.  Thus, you are resolving the debt by making payments and hopefully lowering the tax debt with a successful penalty abatement.

IRS debt relief may come in other forms as well, such as innocent or injured spouse relief, successful protest of the trust fund recovery penalty, successful outcome in US Tax Court and via other means.  A Denver tax attorney at The McGuire Law Firm can discuss your options regarding resolving your IRS tax debts or IRS problems.

Contact The McGuire Law Firm to schedule your free consultation with a Denver tax attorney.  The McGuire Law Firm currently has offices in Denver, Colorado and Golden, Colorado.

Denver Tax Attorney IRS Tax Attorney Denver Call 720-833-7705 or email John@jmtaxlaw.com