Business owners and others with tax problems often get into trouble by trying to avoid their problems or by believing at some level that if they ignore their problems, they will go away. A client of mine came to me a couple of years ago after being injured at his construction job.[1] This severely limited his ability to find gainful employment in his field. The settlement process was taking much longer than anticipated because his company had been dragging its feet. He worried that he wouldn’t have enough money to send to his sick wife and family overseas, let alone enough to rejoin them. On top of this, he owed around $300,000.00 in back taxes and was worried the IRS would notify the State Department to suspend his passport because of this large delinquent tax debt.
When people ignore their tax problems, the problems do not go away. They get worse. On average, a tax liability will double approximately every seven years due to interest and penalties. To obtain the best possible resolution of your tax matter, you should
(1) know your entire tax filing history,
(2) file any delinquent tax returns, and
(3) know your rights and the options that are available to you.
First, you should know your filing history. Did you know that if you have had three consecutive years without failure-to-file, failure-to-pay, and/or failure-to-deposit penalties, you may qualify for the IRS’ First-Time Abatement Program? You also need to have filed all your currently due tax returns and have paid or arranged to pay any tax due (such as by arranging for an installment agreement or an offer-in-compromise). If you meet these requirements, the IRS will, upon request, abate these “first-time” penalties on your tax return.
Second, if you owe taxes to the IRS, you will need to file any delinquent tax returns to qualify for the IRS’ “collection alternatives” programs. However, may people do not know that in some situations, the IRS will not require you to file all your outstanding tax returns. Pursuant to IRS Policy Statement 5-133, IRM 1.2.14.1.18, the IRS has a policy of requiring tax returns for only the past six years if the taxpayer’s failure to file the required tax return or returns was not willful and there are no indications of fraud.
Finally, know your rights and your options. Many taxpayers benefit from the IRS’ streamlined installment agreements which allow you to pay back the amount owed over time regardless of your ability to pay it off sooner. The Internal Revenue Manual provides that individual taxpayers may obtain streamlined agreements for liabilities equal to $50,000 or less. However, the IRS is currently testing expanded criteria for streamlined processing of installment agreements. Under this test program, which is currently scheduled to run through September 30, 2018, taxpayers may obtain streamlined installment agreement for balances up to $100,000.
My client knew he was in a tight spot, so he Googled “Seattle tax attorney” and found our Firm. We were able to get his liability lowered by over 90-percent with an offer-in-compromise. We negotiated a one-time pay-off and helped him get his life back in order. This was all because he took the first step by deciding that he wanted to resolve his tax problem and calling us. We’re here to help people by providing ethical tax expertise. We’d be happy to spend time learning about your situation and determining the best course of action for your tax needs. Please call our office today if you’d like to schedule a free 15-minute consultation.
[1] The name and some identifying characteristics of this client, as well as some of the details of events, have been changed to protect the privacy of the author’s client.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
Latest posts by Robert V. Boeshaar Attorney at Law, LL.M.,PLLC (see all)
- Reduce Your Taxes: How to Identify Taxable and Non-Taxable Income - September 16, 2024
