Settlement of Outstanding Tax Liability

We have helped many clients settle their tax liability by negotiating on behalf of the client with the IRS or state tax agency for a payment plan that allows either an installment payment arrangement, a payment of some fraction of the tax debt, or a combination of the two. Also we have negotiated a Hardship Deferral under which a taxpayer without assets or income pays no tax as long as the hardship continues.

Problem to be Solved

Clients have outstanding tax liabilities that they cannot pay in full. This can take the form of being unable to pay any amount of the tax liability, to being able to pay only a fraction of the tax liability, or being able to pay the tax liability but only over period of time.

The client needs:

• someone to properly evaluate the alternatives for settling the tax liability within the programs tax law allows, and

• negotiate with and demonstrate to the IRS that the client qualifies for the settlement program best suited for the client.

How We Can Help

Installment Agreements. For clients who will have the assets and future income to pay to pay the tax liability, but cannot pay the tax debt immediately, we can negotiate an Installment Payment agreement with the IRS or state tax authorities that allow such an arrangement. Under this arrangement a client will make monthly payments with the amount determined by the taxpayer's income and the amount of the outstanding tax debt.

Offers in Compromise. For clients who cannot pay the full amount of the tax within a reasonable amount of time, we can negotiate with the IRS (or a state tax agency that allows an OIC) an Offer in Compromise agreement. The standards for qualifying for this are quite high, so clients who have the assets and/or income to fully pay their tax liability should not consider this as an available option. The key to success in having the IRS accept an Offer in Compromise is understanding the law sufficiently so that a taxpayer includes only the required amount of income and assets, and excludes all allowable expenses. Moreover, a taxpayer must be aware of other requirements such as being current in filing all tax returns.

Hardship Deferrals. For clients who are unable to pay any amount on their tax liability, we can negotiate with the IRS for their acceptance of a Hardship Deferral. Once a Hardship Deferral has been successfully negotiated, no payments are required so long as the inability to make any monthly payments continues. Generally this is not a long term solution as the IRS periodically reviews the account to see if the taxpayer can make month payments. If the taxpayer's financial condition changes such that minimal monthly payments can be made, the IRS will expect payments to be made.

Note: An attorney's advice can be quite valuable in determining whether to seek any kind of settlement agreement and in applying for an agreement. The application process for an agreement requires the taxpayer to submit a substantial amount of information and documentation, and this information must be accurate as it is signed under penalties of perjury. Moreover, incomplete applications are routinely returned without being considered any further. Applications submitted with willfully false information can lead to a criminal investigation.