What is an offer in compromise?  An offer in compromise (oic) allows a taxpayer to settle their tax debt for less than the full amount owed. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. Not everyone qualifies for an offer in compromise and the requirements to get a successful offer are more stringent than other collections options. There are three types of Offer in Compromise and professional assistance with an application is highly recommended.

The IRS (or State) placed a levy on my bank account what can I do?

You typically have 10 days to contact the agency that levied your account. If you owe or have delinquent returns, you may want the help pf a professional to negotiate the filing of the returns or establishment of a payment plan in order to secure the release of the levy on your bank account. If you fail to release the levy within 10 days the government will retain the funds from the account and it will be extremely hard to recover in a timely fashion.

What is an installment agreement?

An installment agreement is a monthly payment plan to eliminate your tax debt.  If your employer has received an order for garnishment of your wages or your bank accounts have been levied or facing imminent levy, do not hesitate to take action.  The IRS (or State) can and will freeze you bank accounts and garnish.  You must act within 10 days, if not the funds are sent to the IRS (or State).  Once the money is withdrawn, it will be hard to get the funds back.  By entering into an installment agreement, you can stop this.

What is currently non collectable? When a taxpayer does not have any ability to pay anything because of economic hardship, the IRS may place the taxpayer in currently non collectable (CNC) status. Interest and penalties will continue to accumulate, but the taxpayer will not face the prospect of collection.  If the taxpayer has suddenly become unemployed or is on a fixed income, the IRS usually enables the taxpayer to enter into CNC status.

What is a CDP appeal?  A CDP appeal stands for collection due process appeal.  If you tried to resolve your collections issue and the IRS treated you unfairly, you can request an appeals hearing.  The appeals officer is supposed to be neutral and make a determination concerning collections actions.

Can taxes be discharged in bankruptcy?  Some taxes can be discharged in bankruptcy under chapter 7 and chapter 13.  However, the due date for filing the original return must have been at least 3 years ago.  The return for the tax year must have been filed at least 2 years before the bankruptcy filing.  Collections actions by the IRS must have commenced at least 240 days before the petition is filed.  Payroll taxes or tax liabilities that are the result of fraud are not eligible for discharge in bankruptcy.

My spouse filed a fraudulent return or filed without my permission, what can I do?

You can file for innocent spouse relief. When filing a joint return the IRS (or State) holds both taxpayers as jointly liable. Unfortunately there are situations in which one spouse has undertaken fraudulent activity without the knowledge of the innocent spouse. An innocent spouse can be granted release from liability if they did not have knowledge of the other spouse’s behavior and did not materially benefit.

When is it time to file a Tax Court Petition?

When the taxpayer receives a 90 day notice of determination to file a tax court petition, the taxpayer must file a petition within that time period to preserve their rights. The United States Tax Court will place the taxpayer on its calendar and arrange a date to appear before the court.  Before the actual court date the IRS appeals office will attempt to contact the taxpayer to facilitate settlement. The appeals officer is supposed to remain neutral and can resolve the case before trial. The taxpayer or their representative can also contact IRS counsel to negotiate a settlement.  If settlement cannot be reached, the taxpayer has the opportunity to have their day in tax court, present evidence and prove the IRS was incorrect.

A taxpayer can also file a dispute in the Federal District Court, but they must first pay the proposed liability in full in order to exercise this option. The District Court option has the advantage of selecting to have a jury trial as opposed the Tax Court which only has a bench trial (where the Judge alone decides).

What if the IRS (or State) owes me money?

If you are entitled to a refund you must file a claim for your refund within 3 years of the filing deadline or two years after paying a tax liability.  There are many reasons for requesting a refund claim.

  • You or your tax preparer made an error on your return and you should have received a larger refund or you paid more taxes than you were required to pay.
  • The IRS made an error in its assessment/audit.
  • You never filed a tax return and the IRS filed a substitute return
  • For taxpayers who used an ITIN number and now have a valid social security number, you may be eligible to receive tax credits retroactively.