Please be aware the answers below are short answers and there are many things to consider when choosing the best option for settling your tax debt.  Pease contact me for an evaluation of your situation.

Can I make my tax debt go away?

Answer: Maybe.  All tax reductions are based on your ability to pay.  We will review your income and expenses, compare them to National and Local Standards, and advise you of your ability to pay.  There are several options to reduce or manage tax debt, call me for an evaluation and we will discuss your options.

What is Currently Not Collectible (CNC) status?

Answer: If the IRS determines you have no ability to pay at the present time and your income is not likely to improve in the near future, they may agree to place your account in not collectible due to hardship status or CNC.  This means the IRS will not take any aggressive collection action against you.  They will not levy bank accounts, paychecks, or other assets. You will receive one notice each year reminding you of the balance due.  Once the debt expires the IRS will cease all collection activity permanently. The IRS reserves the right to remove you from this status if your income improves significantly.

What is Innocent Spouse Relief?

Answer: If there are reasons you should not be held liable for tax debt due to false reporting of income or expenses by your spouse and you either had no knowledge of the error or were in fear of abuse for refusing to sign the tax return, you may be eligible for having the tax debt separated so that only your spouse is liable for the debt.  The rules for this are complex and require careful consideration.  I strongly urge you to contact a tax representative regarding submitting and supporting the request.

How long does it take for tax debt to expire?

Answer: The IRS has ten years from the date the tax was assessed to collect it.  If they cannot collect it in that time, they are required to cease all collection activity permanently.  There are things that can delay the ten-year time frame, these include requests for Innocent Spouse Relief, an Offer-in-Compromise and bankruptcy protection. While accounts have pending action for these requests the ten-year collection period is paused and will resume once the request is accepted or denied.

What are the National and Local Standards and who sets them?

Answer: The IRS uses the Collection Financial Standards collected from surveys by the Bureau of Labor Statistics to set the amounts.  They are based on the buying habits of people across the nation. The IRS uses these as a guide to assure expenses you claim are reasonable.

Are there exceptions to the Collection Financial Standards?

Answer: Yes, if your expenses exceed the standards and you can prove your expenses are necessary for the health, welfare, or production of income to support your family you may be eligible for higher expenses.

What if I can pay some of the debt, but not all of it?

Answer: The IRS is always willing to accept whatever you can afford to pay.  As mentioned above, once your ability to pay is calculated we can often find an equitable resolution to your tax debt, in some cases we can consider a Partial Payment Plan, a Tiered Payment Plan, an Offer-in-Compromise or a status of Currently Not Collectible.  However, if the IRS determines you can pay in full, they will expect you to pay the full balance due.

What is an Offer-in-Compromise?

Answer: An Offer-in-Compromise is a situation where you cannot fully pay your tax debt and you are willing to offer everything you have beyond your basic living expenses.  This includes the equity in your home, retirement accounts and investments.  You are then required to be compliant with your taxes for the next five years.  This means you must pay your taxes as you earn the income and file your taxes by the due date every year for those five years.  If you do not file and pay in a timely manner the tax debt with accumulated penalties and interest will all, come back to you.

What is a Tiered Payment Plan?

Answer: This is a full payment plan that allows you to make smaller payments in the beginning while you get your finances in order and then increase the payments.  You may increase the payment amount two times.

What is a Partial Payment Plan?

Answer: If the IRS agrees you do not have the ability to full pay, but you do have some ability to pay, they will likely agree to a payment plan based on your ability to pay.  Keep in mind, if your income changes, the IRS may review your account and demand more later.

Why are the penalties and interest half of my tax debt?

Answer: In the United States of America, the tax system is voluntary, however there are stiff penalties for failure to comply with the tax laws.  The most common penalties that may be assessed include Failure to File on time, Failure to Pay on time, Significant Underreporting of income and Civil Penalties for Failure to Pay Employment Taxes, filing a Frivolous Tax Return or refusing to pay based on a Frivolous Argument.  The interest compounds daily and is applicable to both the tax debt and the penalties.  If you have a specific question about a penalty, please call and we can discuss your situation.

What is a frivolous tax return or frivolous tax argument?

Answer: You have the right to pay the correct amount of tax and the right to appeal a tax assessment through the IRS and Tax Court however, you are obligated to follow the law.  From an IRS standpoint, the word frivolous means unreasonable and outlandish claim to avoid paying taxes.  Arguments that the government does not have the right to collect taxes or that for religious beliefs or other reasons, you are not required to pay taxes are commonly referred to as frivolous and have been thrown out by courts.  The submission of a claim or argument of this nature will often be penalized with a Civil Penalty of 20% to 75% of the unpaid tax.  The penalty for filing a frivolous tax return in 2019 was $5,000. A frivolous claim that includes fraud can lead to criminal charges against you.

Can Federal Tax Penalties and Interest be written off?

Answer: Interest can never be written off.  If you amend the return and the taxes are reduced the interest will be correspondingly reduced.  Penalties can be abated if you can show the reason for the late pay or late filing was due to an extraordinary event that was beyond your control.  Some examples would include significant illness or death within your family, flood, fire, or natural disaster.  If reliance upon written advice from the IRS caused some of the tax debt, this too may be reason for abatement.

What does it mean to amend a tax return?

Answer: If you find something in your tax return that is incorrect, you may make changes to the return and submit them with an explanation of how it affects the return you previously submitted to the IRS.

What is the Fresh Start Program?

The IRS relaxed the rules regarding which expenses can be considered and how long a payment plan could last when setting up a payment plan or offer in compromise.  It did not replace any of the options mentioned above nor did it add any new option, it just relaxed the rules.

Can I settle my tax debt for pennies on the dollar?

Answer: Maybe.  All options for settling your tax debt depend on your income, assets, and expenses.  The only way to know for certain is to prepare a complete financial analysis and consider your options. Contact me and we will review your situation and discuss your options.

Please be aware the answers above are short answers and there are many things to consider when choosing the best option for settling your tax debt.  Please contact me for an evaluation of your situation.