Tax Resolution Options
When you’re faced with tax problems with the IRS, you may have a number of tax resolution options available. Depending on the specifics of your situation, such as the amount of your tax liability and financial circumstances, a number of options may be available to you.
It is important to note that, to qualify for any of the tax resolution options, you must be current and compliant with the filing of your required tax returns. Ultimately the IRS may collect your IRS debt by enforced collection by levying bank accounts, garnishing wages, and eventually seizing assets. Before it comes to that, take a look at a brief overview of some of the tax resolutions options that may be available to solve your IRS tax problem:
- Offer in Compromise: This is a partial settlement of your total tax liability. To qualify for this option, there must be an extraordinary reason the IRS should not collect the total amount of tax due. Doubt as to Collectability and Effective Tax Administration are the most common approaches and are based upon income, expenses and assets.
- Installment Agreement: A payment plan with the IRS to make regular and monthly payments to pay off the tax liability owed over a period of time is one of the most common overlooked tax resolution options.
- Bankruptcy: Under some circumstances, tax liability may be discharged in bankruptcy or paid through a bankruptcy plan.
- Innocent Spouse Relief: Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows. In filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise as a result of the joint return even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns. In some cases, however, a spouse can get relief from joint and several liability.
- Injured Spouse: If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.
- Statute of Limitations Review: The IRS has ten years from the date was assessed against you to collect the tax. The statute period does not begin until the taxpayer has filed a tax return thus before exploring any tax resolution options all unfiled tax returns must be filed. A substitute for return (SFR) prepared by the IRS does not count as a filed return. If the statute clock has started and the IRS has not collected within the ten year period (assuming no interruption to the statute period), the tax is no longer collectible and the IRS must release any lien or levy against the taxpayer. A careful review and analysis of your situation and IRS records will allow for a determination on whether the statute has expired.
- Penalty Abatement: A formal request showing a basis in reasonable cause can be made to reduce or eliminate tax penalties and interest on the underlying liability.
- Currently Non-Collectible Status: Under some circumstances, the IRS will agree to forgo collection as the taxpayer cannot pay the tax though the tax is still owed. While this will place a hold on collection activity, it is a temporary hold and the IRS will re-visit ability to pay to see if the economic condition of the taxpayer has improved.
- IRS Tax Appeal: If you disagree with the decision of an IRS office, such as examinations, you may request an appeal of your case.
At Tax Samaritan, We Rescue Troubled Taxpayers
All relevant tax resolution options must be explored in relation to the specific facts and circumstances surrounding your tax problem. The objective is to select the best option that will minimize your risk and result in the lowest tax liability. At times, this can be an iterative process in which a number of options are explored and implemented based on the progress of your IRS case.
Click the button below to request a Tax Resolution Services Quote today to explore your tax resolution options and for a free 30-minute consultation.
Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts) that can assist and represent you with all tax resolution options. If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for all tax resolution options including audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.