Do you or your business owe back taxes to the Internal Revenue Service?
Have you received a Notice of Intent to Levy your bank accounts or tax refunds based on back taxes?
Do you have an IRS tax lien against your home or business assets?
Many of us have heard the tax man knocking and it is not a pleasant sound. We don’t want the IRS to remove money from our bank accounts; we don’t want our wages garnished; perhaps most of all, we don’t want a tax lien in place that could put our homes in jeopardy. These consequences appear ominous and in many cases overwhelming but there are programs designed to assist taxpayers in distress.
Traditionally, the IRS followed a policy to offer debt settlements, known as the Offer in Compromise, in which a few qualifying individuals or businesses could settle a tax debt, in full, for a lesser sum than the total amount owed. This policy was instituted in order to provide tax relief to taxpayers with seeming insurmountable tax arrears. It also presented a means by which the government could provide tax incentives to the taxpayer, even if such settlement meant the government would get less than the total amount owed. Similar to amnesty programs, the government believes that without a willingness to accept reduced payments to settle tax debts, it would actually receive less tax revenue than if the IRS maintained a hardline policy.
This debt reduction program was traditionally offered to a relatively narrow group of taxpayers; however, the IRS announced on May 21, 2012 that it has dramatically liberalized its Offer in Compromise program to help financially challenged taxpayers who cannot pay their tax debt in full. The IRS is now willing to assist taxpayers by reducing IRS tax debt and, in some cases, eliminating IRS tax debt altogether. Negotiation of an Offer in Compromise largely takes place in connection with penalties for late payment and non-payment of income taxes. These penalties often make up a large portion of the total IRS debt owed and are often the first part of the debt the IRS is willing to compromise on; therefore, depending on a taxpayer’s financial condition, the compromised lesser amount can be just a fraction of the total IRS debt owed including interest and penalties. The Offer in Compromise can be a lump sum or payable in installments over a period of up to 24 months.
This is a unique opportunity for those struggling financially to escape overwhelming and ever-expanding tax debts and get a fresh start without filing for bankruptcy. Because of the intricacies and pitfalls involved in filing an Offer in Compromise, it is recommended that candidates use an income tax attorney who is experienced in dealing with the IRS and specifically with the Offer in Compromise. Disclaimer: The above information is NOT legal advice and is for educational purposes only. You should always consult with an attorney directly to discuss the specific details of your case.
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