Owing taxes to the Internal Revenue Service can be a scary and confusing situation for individuals and businesses. A Denver tax attorney at The McGuire Law Firm can work with both business and individual taxpayers to resolve their tax debts and issues with the IRS. The full and complete resolution of a tax debt will depend upon the taxpayer’s financial circumstances, status within IRS Collections and other issues. The good news is, taxpayer’s do have rights and options when it comes to resolving their tax issues and liabilities with the Internal Revenue Service. We do recommend that any taxpayer having trouble resolving their tax situation with the IRS contact a tax attorney or tax professional. Below are some common options used by a Denver tax attorney at The McGuire Law Firm to resolve a tax liability and other issues to consider.
Offer in Compromise (Tax Settlement)
An offer in compromise is an agreement with the Internal Revenue Service to pay less than the full amount of your tax debt. Many taxpayers ask us what we think they can settle their debt for. The answer to this question is, “it depends.” While this may sound like a typical answer from an attorney, it is completely true because the amount a taxpayer will offer to the IRS through an offer in compromise is based upon the taxpayer’s ability to pay and not necessarily the amount of tax due. For example, we settled a taxpayer’s total debt of $750,000+ for approximately $10,000 in one situation, and in another situation we settled a taxpayer’s debt of $145,000 for approximately $81,000. Therefore, the amount you owe in taxes is not a direct correlation to the amount you offer to resolve the tax liability through an offer in compromise.
The offer amount is calculated via an equation and the two most important figures in this equation are the taxpayer’s equity in assets and the taxpayer’s disposable income. Once all of the offer in compromise forms, financial statements and other documents are compiled, the offer is submitted to one of the Internal Revenue Service Offer in Compromise Units. Usually, it takes anywhere from 6-12 months (or longer) for an offer examiner to issue a determination regarding the offer in compromise that has been submitted.
Not every taxpayer may be able to settle their tax debt through an offer in compromise. The IRS does allow taxpayers to satisfy their tax liabilities through an installment agreement whereby the taxpayer makes an agreed upon monthly payment. The amount of the monthly payment may depend upon how much tax is owed, how much the taxpayer can afford on a monthly basis, the remaining time on the IRS collection statute and other factors. Once an installment agreement has been established, the good news is, all collection action by the IRS stops given the taxpayer complies with the agreement and the amount of the failure to pay penalty is reduced by half.