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There are two primary methods for negotiating tax debt with the IRS. Those methods are an Offer in Compromise and an Installment Agreement. Generally, an Offer and Compromise is more favorable for the taxpayer, however, the disclosure requirements are greater and the duration to negotiate and finalize an amicable agreement with the IRS is a more prolonged process. Sadek & Cooper Law Offices is experienced in handling the below listed agreements with the IRS. Our attorneys can negotiate with the IRS on your behalf and seek a resolution to your tax concerns. To schedule a free and confidential consultation call our law firm at (215)-545-0008.
What Is An Offer In Compromise?
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service (IRS) that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through an Installment Agreement. That is, the IRS’s decision regarding the acceptance of an offer in compromise Is often based on the collectability of the unpaid tax debt. The factors that can affect the decision to accept an offer in compromise are:
- Doubt as to collectability — Doubt as to the collectability of a tax debt exists when it appears that the taxpayer could never pay the full amount of tax liability owed within the remainder of the statutory period for collection. In circumstances like these, the IRS may forgive some or all of the tax debt. However, the doubts as to collectability must be proven through evidence.
- Doubt as to liability – In other circumstances the taxpayer may claim that he or she was not actually liable for the tax owed. Essentially, the taxpayer must show that a legitimate doubt exists regarding the amount of assessed tax liability. A taxpayer may believe that there is a doubt as to the liability when the examiner failed to follow the law, the examiner did not examine all evidence submitted by the taxpayer, or new evidence would change the determination.
- Effective tax administration — There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
IRS Installment Agreements
For those who cannot resolve their tax debt through an offer in compromise, an installment agreement can allow a taxpayer to devise a reasonable payment plan option. Installment agreements allow for the full payment of the tax debt in smaller, more manageable amounts.
There are different types of Installment Agreements, which allow you to pay IRS taxes over a series of monthly payments if you cannot pay in full. The most common types of tax installment Agreements handled by Sadek & Cooper Law Offices are:
- Guaranteed installment agreement — This is the most straightforward form of an installment agreement. This form of an installment agreement is reserved for taxpayers owing $10,000.00 or less in unpaid taxes.
- Streamlined installment agreement – This form of an installment plan is intended for taxpayers that have tax debt of $25,000.00 or less. It is deemed a streamlined filing because it does not require a comprehensive financial disclosure.
- Financially verified installment agreement – Taxpayers who owe greater than $25,000.00 or who are unable to make the minimum monthly payment on a Streamlined Installment Agreement may consider this form of agreement.
- Installment agreement over $100,000.00 – A tax debt to the IRS that is greater than $100,000.00 requires a longer-term installment agreement. In certain circumstances, the IRS will mandate the sale of at least some assets to satisfy debt some of your debt as a precondition to an offer.
- Partial payment installment agreement — If you are truly unable to pay off your taxes, you can look to apply for a Partial Payment Installment Agreement which will require you to pay less than you owe in full over time, as part of your debt falls of each period due to the Statue of Limitations. This is rarely accepted and requires full financial disclosures.
The above captures the main types of available installment agreements. While rare, in certain circumstances a petition for innocent spouse relief may also relieve tax liability. Innocent tax liability is a form of relief that can protect a spouse who played no part in tax mistakes or fraud from back taxes, penalties, and other punishment.
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The attorneys of the Sadek & Cooper Law Offices can negotiate with the IRS on behalf of individuals and businesses. To schedule a free and confidential consultation, call the Sadek & Cooper Law Offices at (215)-545-0008.