IRS Tax Debt

Owing money to the IRS is very serious, as the IRS is not a typical creditor. As the consequences of not paying a tax debt are more more significant that failing to pay another creditor, securing legal counsel may be critical. Although a lot of advertising regarding IRS debt makes it appear as though receiving a huge discount on the amount owed is a foregone conclusion, the reality is much more complicated.

Large settlements with IRS generally occur where the taxpayer clearly does not have the ability to pay the tax liability in a reasonable time, as evidenced by the taxpayers’ assets and income. If the taxpayer presently has money to pay the IRS—or will likely have it in the future—the IRS will simply not negotiate a lower repayment amount. Only under certain circumstances will payment less than the full obligation be acceptable to the IRS.

The IRS will entertain an “offer in compromise” (“OIC”), which is a small amount than the actual tax obligation due to the federal government, in certain limited situations. The least common situation is where there is a genuine dispute as to the actual amount owed to the IRS. If both sides have reasonable positions, the IRS will entertain a settlement amount that will avoid the need for protracted litigation. Much more frequent, however, are circumstances where the taxpayer simply cannot pay the amount due, either as a matter of income and assets, or some particularized economic hardship. Economic hardships generally mean situations under which payment in full would be unfair or inequitable, such as where the taxpayer is suffering through serious health problems.

In reviewing OICs, the IRS will look to the taxpayer’s income and assets to determine that individual’s “reasonable collection potential” (“RPC”). To calculate a taxpayer’s RPC, the IRS will review the obligor’s cash, investments, available credit, assets, income, living expenses, and outstanding debt. The analysis also considers anticipated future income.

Making sure you properly account for all information that will favor the IRS’s acceptance of your OIC is critical to have the best chance of success. Experienced legal counsel can assist in preparing the best OIC possible. Moreover, legal counsel can also assist in obtaining short term deferrals; negotiating the terms of a long-term payment agreement, which can extend as long as ten years; obtaining releases of IRS tax levies; negotiating releases of IRS liens in order to secure tax-repayment loans; obtaining a tax holiday; requesting interest and penalty abatement; and negotiating an innocent spouse designation, eliminating tax pressure on the designated spouse.

With all of the complicated options for seeking relief from, or resolving completely, your IRS tax debt, obtaining experienced counsel is imperative. If you have a large IRS tax debt, the experienced attorneys at Neumann Law Group can help you decide what course of action to take in order to resolve the problem Contact our office for a free consultation today.

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