Dealing with tax debt can be an overwhelming and stressful experience. It can feel lonely, embarrassing, and crippling. But it doesn’t have to be that way – there are resolution options that can get you back in good standing and restore your piece of mind. Whether you're an individual facing unexpected tax liabilities or a business struggling to meet your tax obligations, understanding your options for tax resolution is crucial. In this comprehensive guide, we'll walk you through some of the tax resolution avenues available to help you regain financial stability and peace of mind if you’re experiencing large tax balances due, failure to file back taxes, penalties, wage garnishments, tax liens and levies, and/or IRS audits.
If you're unable to pay your tax debt in full, installment agreements offer a structured way to settle your debt over time. We'll explore the process of applying for an installment plan, the associated fees, and tips for negotiating favorable terms with the tax authorities.
Partial-Pay Installment Agreements (PPIA)
A Partial Payment Installment Agreement (PPIA) is an arrangement with the Internal Revenue Service (IRS) that allows taxpayers to pay off their tax debt over time in smaller, manageable payments. Unlike a traditional installment agreement where the full tax debt is paid, a PPIA allows taxpayers to settle their debt for less than the total amount owed. It's a form of tax resolution designed to provide relief to individuals or businesses who are unable to pay their entire tax liability. In some cases, the IRS may agree to release federal tax liens upon acceptance of a PPIA. However, the lien release is typically subject to certain conditions and may require the taxpayer to make a certain number of consecutive payments.
Currently Not Collectible (CNC) status, also known as Status 53, is a temporary relief option provided by the Internal Revenue Service (IRS) for individuals who are facing financial hardship and are unable to pay their tax debt. When a taxpayer is placed in CNC status, the IRS temporarily suspends its collection efforts, including levies and wage garnishments, due to the taxpayer's financial situation. To qualify for CNC status, taxpayers must demonstrate that paying their tax debt would cause significant financial hardship. This typically involves providing detailed financial information to the IRS, including income, expenses, assets, and liabilities. While in CNC status, the IRS will not actively pursue collection actions, such as levies, wage garnishments, or bank account seizures. However, interest and penalties may continue to accrue on the outstanding tax debt. The IRS will periodically review the taxpayer's financial situation to determine if their circumstances have improved. If the taxpayer's financial condition improves and they are deemed able to make payments, the IRS may remove the CNC status and resume collection efforts. Failure to file returns or accrual of new tax liabilities could jeopardize the CNC status.
You should also note that CNC status does not eliminate the tax debt. Instead, it provides temporary relief from collection actions while your financial situation is evaluated. Interest and penalties continue to accrue during this period, and you may be required to resume payments once your financial condition improves.
Penalties and interest are assessed for late filings and late payments, and they can significantly inflate your overall tax debt. What the IRS won’t tell you is that there are opportunities to reduce or eliminate penalties, including reasonable cause arguments.
There are several reasons why the IRS or the State could select you for audit – it could be by random selection, or due to discrepancies, inconsistencies or errors on your tax return. Audits can be extremely stressful, time-consuming, and often requires extensive document gathering, analysis and communication. Rule #1 of an audit is to never go at it alone. You are best equipped to receive the most favorable outcome when you are represented by a professional who understands the audit process, knows what documentation the IRS expects, and can anticipate potential issues or red flags that might arise. You’ll want a skilled negotiator on your team who can communicate effectively with IRS agents on your behalf, advocate for your best interests and work to reach a fair resolution, potentially reducing the amount owed or the severity of penalties.
Offer in Compromise
An Offer in Compromise (OIC) is a potential solution for individuals and businesses struggling to pay their tax debt. It’s what most mainstream ads are advertising when they talk about the “Fresh Start Initiative”. Despite it being the most advertised, it’s actually the least available for use. An OIC allows a taxpayer to settle their debt for less than what’s actually owed.
Navigating tax debt can be challenging, but with a clear understanding of your tax resolution options, we can help you take proactive steps towards regaining control of your financial situation. Remember, each case is unique, and seeking professional guidance is essential to achieving the best possible outcome. Our process is unique because as part of helping you resolve your past issues, we’ll work with you to help you minimize future tax problems. Most tax resolution options require you to remain current on all future tax obligations. This means filing all required tax returns and making timely payments for any new tax liabilities that arise during the term of the agreement. We'll offer practical advice on staying organized, meeting filing deadlines, and implementing sound financial practices to prevent recurring tax debt issues. By assessing your situation, exploring the alternatives available to you, and proactively preventing future issues, we can help you to achieve the peace of mind you deserve.