IRS Penalty Abatement
Has the Internal Revenue Service assessed you with penalties?
In the right circumstances, federal tax penalties can be abated if the taxpayer has reasonable cause. We can advise and assist on the applications of these rules and will be an advocate on your behalf..
IRS Tax Payment Arrangements
Have you received a bill from the Internal Revenue Service that you do not think you owe or that you cannot afford to pay?
It may be possible to negotiate an Offer-In-Compromise (see Irs Tax Penalty Relief secton) with the Internal Revenue Service based upon doubt as to liability or financial inability to pay.
In certain circumstances, an installment arrangement may also be possible in full or partial settlement of an amount due to the IRS.
IRS Tax Penalty Relief
Many times, the IRS assesses more than just taxes and interest; it charges penalties as well. Multiple penalties can be assessed in addition to the tax due for failure to file a tax return, failure to pay taxes, failure to properly report a tax liability, fraud, failure to properly report taxpayer information, and participation in a tax shelter. Penalties can be applied to income tax, employment taxes, excise taxes, estate and gift taxes and informational reporting violations.
The most common penalties include:
Failure to file a return: This penalty applies to a taxpayer’s failure to file an income tax return, an estate or gift tax return, an excise tax return, withholding returns, employment tax returns and informational returns.
Failure to pay taxes: This penalty applies to a taxpayer’s failure to pay income taxes, estate or gift taxes, excise taxes, withholding taxes and employment taxes.
Failure to properly report a tax liability: This penalty applies to a taxpayer’s failure to properly report his income tax liability, estate or gift tax liability, excise tax liability, withholding tax liability and employment tax liability. This penalty is also known as the Accuracy-Related Penalty and can range from 20% to 40% of the tax due on the total amount of underreported income.
Fraud penalties apply to any taxpayer’s fraudulent reporting of their tax liability, including: income tax liability, estate or gift tax liability, excise tax liability, withholding tax liability and employment tax liability. Civil fraud penalties can be up to 75% of the total tax due.
Failure to properly report taxpayer information applies to anyone who provides incomplete or incorrect information to the IRS regarding their own tax liability or the tax liability of another.
Tax shelter promoter penalties: This penalty may be applied against any person who organizes (or assists in the organization of) or participates in the sale of any interest in a tax shelter and, in connection therewith, makes (or causes another person to make) a statement with respect to the availability of any tax benefit by reason of participating in the tax shelter that the person knows or has reason to know is false or fraudulent as to any material matter. The amount of the penalty is severe. This penalty is imposed in addition to any other applicable penalty.
IRS Collection Efforts
The IRS is a strong and aggressive debt collector. If a taxpayer owes taxes, the IRS can lien and levy against his income and property until the liability is paid in full. This includes liabilities for income tax, employment taxes, sales and use tax, or excise tax. The IRS can also, in certain circumstances, seize taxpayer-owned property and apply it to the satisfaction of the outstanding liability. Such action can damage an individual or business by causing loss of assets and income as well as by hurting the taxpayer’s credit, reputation and ability to meet your other financial obligations.
We can help you avoid the damaging effects of IRS liens, levies and seizures. If the IRS is threatening to lien, levy on or seize your property, contact us right away so that we can work with you to suspend IRS collection activity while we explore with you ways to manage your debt to the IRS. Such options may include entering into an:
Offer in Compromise for Doubt as to Liability;
Offer in Compromise for Doubt as to Ability to Pay; or
Innocent Spouse relief.
IRS Tax Liens
The IRS can place a federal tax lien on the property of any taxpayer who owes unpaid taxes. The tax lien publicly secures the IRS’s interest in the property as a creditor and will, generally, not be removed until the entire tax liability is satisfied. Having a tax lien can make it difficult for you to borrow against the property and may, in some instances, impair your ability to sell the property with a clean title. The placement of a tax lien can affect your credit and make it more difficult for you to pay your tax debt as well as your other debts.
Contact us if the IRS has notified you that it plans to place a lien against your property. We can work with you to resolve your debt to the IRS while assisting in minimizing the effects of IRS collection activity.
IRS Tax Levies
When a taxpayer owes unpaid taxes, the IRS can levy against the taxpayer’s property, including bank accounts, investments, personal property and wages until the tax is paid in full.
IRS Offers In Compromise
Sometimes, a taxpayer’s unpaid tax debt becomes too large for the taxpayer to pay in full. This will not, however, stop the IRS from attempting to collect on the entire debt.
One way to try to resolve this is by making an Offer in Compromise. Essentially, an Offer in Compromise allows the taxpayer and the IRS an opportunity to settle the outstanding tax liability on terms that require the taxpayer to pay less than he actually owes. IRS collection activity, including placement of levies and liens, is usually frozen while the Offer in Compromise is being negotiated. Collection activity usually remains frozen so long as the taxpayer remains in compliance with the agreed to terms of the Offer.
The Offer in Compromise program is available to individuals and businesses who qualify for the program. The IRS will usually agree to an Offer in Compromise when it is clear that the taxpayer cannot pay the entire tax liability, even if given several years to do so. To obtain this relief, the taxpayer must make a thorough and extensive disclosure of his financial situation to the IRS. Once the IRS is satisfied that the taxpayer does not and will not have the funds or ability to pay the entire tax liability, it is usually willing to negotiate satisfaction of the liability by payment of a lesser amount. Additionally, the IRS occasionally agrees to reduce a taxpayer’s tax debt when the taxpayer can prove that he or she is not responsible for some or all of the tax due.
When a taxpayer owes more taxes than he can afford to pay immediately, the IRS is often willing to allow the taxpayer to enter into an Installment Agreement for the payment of the taxes. By entering into an Installment Agreement, the taxpayer agrees to pay the entire tax liability in monthly installments over a period of five years or less. Installment Agreements are available to individual taxpayers as well as businesses.
Generally, the IRS will conduct a thorough examination of the taxpayer’s financial situation to determine how much he can afford to pay each month until the entire tax liability is paid. IRS collection activity, including levies and liens, are usually frozen while the Installment Agreement is being negotiated and while the taxpayer remains in compliance with the accepted Agreement terms.
IRS Collection Due-Process Hearings
The IRS is a notoriously aggressive debt collector with many collection tools available, including the ability to lien and levy on a taxpayer’s property. One way to attempt to stop IRS collection activity is to request a Collection Due Process (“CDP”) Hearing. Collection activity is usually frozen while the CDP hearing is pending.
A CDP hearing provides the taxpayer with an opportunity to have his case reviewed by an IRS Appeals Officer. At the hearing, the taxpayer has an opportunity to establish why the IRS should stop collection activity against him. The taxpayer can propose alternative collection methods such as an Offer in Compromise or Installment Agreement instead of federal tax liens and/or levies. In situations where the IRS has already rejected a proposed Offer in Compromise or Installment Agreement, the taxpayer can use the CDP hearing to request reconsideration. In some cases, the taxpayer can argue that the amount of the tax liability is incorrect or that he is not responsible for the entire amount.
When a taxpayer owes a tax liability that has gone unpaid for a long time despite several demands for payment, the IRS can force the taxpayer to pay the debt by seizing his bank accounts. The IRS can seize individual and business bank accounts. Seized bank accounts can be used to satisfy liabilities for: income tax, employment tax, trust fund recovery penalties, excise tax and estate and gift tax. If the IRS is threatening to seize your bank account, contact us to discuss your rights and options.