Dmitry Vaysburg, CPA, MBA

Whenever possible, once tax relief has been negotiated, the entire debt should be paid in full. There are benefits to doing so:

• Avoid any future accretion of interest and fees
• ecreases the future amount necessary to pay
• Avoid any future enforcement actions by the IRS
• Levy and lien removal
• Collection proceedings ceases

For those whose circumstances, low income, or high debt prohibit full payment, there are other payment options. Affordable short and long-term payment plans can often be negotiated with the IRS. There are five main types of Installment Agreements (payment plans) the IRS will agree to:

1. Guaranteed Installment Agreements
2. Streamlined Installment Agreements
3. In-Business Trust Fund Agreements
4. Long-Term Installment Agreements
5. Installment Agreements on Specified Balance Due Accounts

Our specialists will do everything they can to make arrangements that will pay off the debt as soon as possible without becoming financial burden to the taxpayer.

There is a program to .provide delinquent taxpayers with a fresh start toward future compliance with the tax laws.. It is the Offer in Compromise (OIC) program. It is a negotiated agreement between the IRS and the taxpayer to settle for a tax liability payment that is less than the total amount owed. The amount varies with an average settlement 12 cents on the dollar, which is an 88% reduction in tax debt.

The Freedom tax attorneys have extensive expertise with Section 7122 of the Tax Code was just created in 1992 to allow for OIC. They are skilled in the following areas:

• Planning
• Preparing
• Negotiating

A Offer in Compromise can be successfully negotiated in the following circumstances:

• Doubt of collectibility-the taxpayer is unable to pay the full price
• Doubt as to liability-the tax debt is challenged by the taxpayer
• Effective tax administration-they accept partial payment

To have an Offer in Compromise accepted the taxpayer holds the burden of proof that they are unable to pay the full amount, they do not owe the tax, or they can only pay part of the debt. There are strict guidelines that the IRS uses to evaluate a taxpayers financial eligibility. The IRS uses the following information:

• Income-anything that provides income, not jut primary wage earning job
• Expenses-living, housing, transportation
• Assets-any equity that is available is also included

Once an Offer in Compromise is submitted, the IRS Restructuring Act prohibits the IRS from collecting a tax liability by levy while the offer processed. This hold on further action extends 30 days following rejection of an offer to allow for the appeal of an OIC. The time of non-collection is often enough time for our clients to avoid any IRS collection actions because it gives the taxpayer additional time to secure funds to make payment and stop the IRS from seizing assets.

Sometimes when all options are exhausted for tax debt relief, bankruptcy will be used as a last resort. There are several types of income taxes that can be discharged with bankruptcy, but there a severe constraints.

There are two types of bankruptcy available:

• Chapter 7-this type of bankruptcy liquidates assets and wipes out all financial obligations. Some debts are non-dischargeable and cannot be included. Types of debt that are non-dischargeable and will not be included are taxes like payroll taxes and child support arrears. Some assets can be protected from dischargeable types of debt. Some assets will fall under a non-exempt status and will be liquidated to pay the delinquent tax debt and other outstanding obligations.
• Chapter 13-this type of bankruptcy is more about reorganizing. Debts are restructured and assets are protected. This type can stop home foreclosure and vehicle repossession. It will halt interest and penalties from accruing throughout the repayment period, which is usually 3-5 years.

Criteria that must be met for a tax liability to qualify for discharge under Chapter 7 of the Bankruptcy code:

• Tax is for a year for which a tax return is due more than 3 years prior to the bankruptcy filing
• Tax returns were filed more than two years prior to the bankruptcy filing
• The tax liability was assessed more than 240 days prior to filing of the bankruptcy petition
• The liability is not due on Trust Fund Tax
• The taxpayer did not attempt to evade or defeat the tax, nor was the tax liability due to a fraudulent tax return
• The tax was not assessable at the time of the filing of the bankruptcy petition
• The tax was unsecured

All of the above criteria must be met to qualify for tax debt relief from bankruptcy.

There is a Stature of Limitations on how long IRS has to collect a delinquent tax liability. It is 10 years. The 10-year period begins on the date the tax is assessed and the required notice is sent. There are instances when the Statue of Limitations can be extended or amended:

• A pending Offer in Compromise
• Tax Court proceedings
• Taxpayer signs a waiver
• Miscellaneous other instances

In the event the 10-year Statue of Limitation period is approaching our tax specialists can discuss your options for tax debt relief, including the possibility of allowing the tax liability to expire. If you believe that it has been longer than 10 years, you may be completely free of your tax liability. We can help you find out.

Tax liability abatement (eliminating) and adjustment (reducing or altering) are options for tax debt relief. These types of tax liability can be abated or adjusted:

• Tax
• Penalty
• Interest

Commonly adjustment/abatement is a means for reducing or deferring a tax liability. It is used in combination with other tax relief methods to resolve the tax delinquency.

"Innocent Spouse" determination is one of the many basis for abating taxes and assessed tax penalties. Innocent Spouse relief is used in the following circumstances:

• Joint-filers (usually married couples) when one spouse was unaware of the activity which created a tax liability
• Joint-filers who are currently separated
• A spouse who should not be held liable and does not meet the two preceding criteria

In all of the Innocent Spouse adjustments, the IRS.s goal is to have the person who created the tax liability be responsible for payment and provide relief to the spouse who was unaware or not at fault for the creation of a tax liability.

Other basis for abatement and adjustment:

• Investigation proves tax, interest, and/or penalties is not owed
• Appeal proves tax, interest, and/or penalties is not owed
• Employer collected taxes, but did not pay them to IRS