Despite appearances, the IRS is not completely heartless. Some of my clients hold tax debt into the millions of dollars, some in the thousands. If a person no longer generates the financial incomes that created that level of tax debt, creative solutions could be available to them. One solution is called an “Offer in Compromise.”
An “offer in compromise” is a very specific kind of opportunity the IRS gives to certain individuals (and businesses). It is designed to help beleaguered tax payers mitigate their tax debt obligation when under financial distress — allowing persons facing certain circumstances to pay a portion of their debt in full satisfaction. These agreements are attained through an application process.
Offers in compromise generally have two options for payment structure. One involves a down payment toward the total liability, an interim negotiation, assessment, and approval to reduce the overall debt amount, then, an installment agreement to satisfy the remaining balance. In the second structure, a delinquent tax payer sends in a down payment with the offer in compromise request, while rendering equal monthly payment amounts during the interim negotiation, assessment, and approval process to reduce the total debt amount.
If the offer in compromise payment plan is ultimately rejected, the monies payed will be applied to the overall debt. At which time, a delinquent tax payer usually re-applies for an offer in compromise with an alternate payment plan that might satisfy IRS sensibilities.
If the offer is accepted, the entire amount agreed upon must be paid within the specified time period.
For example, an individual tax payer with 100K in tax debt may no longer have the ability to pay, due to a life-threatening medical condition, associated medical expenses, and permanent loss of income. In these circumstances, if a tax payer is forced to divert huge portions of what little cash-flow they have to the IRS, they might actually become homeless, or die.
The person in this circumstance could propose an offer in compromise to pay a grand total of 25K to the IRS, in installments, over 24 months — instead of the 100K. The IRS may assess that, because this person is at retirement age, on a fixed retirement income, and paying for weekly treatments of a medical condition that will be with them until they die, the deal is feasible.
When it comes to businesses, some trust fund scenarios also require offers in compromise. Scenarios are usually employer situations where an employer has failed to properly collect or remit taxes that they are mandated to withhold from their employees and turn over to the government or state.
Employers are mandated to withhold federal taxes, state taxes and social security from employee paychecks. Holding these monies in “trust,” they’ve made a promise to remit these monies to the government. However, all too often, when a company is facing cash-flow problems, and cannot pay its bills, or make payroll on time, temptation to access these earmarked funds wins out. And that’s when these businesses lose.
If a struggling company of 20 employees (or more) does this repetitively, the case quickly escalates into trust fund fraud. Over time, this violation can result in a tax debt totaling millions of dollars. Thus, when the company completely fails, lays off its employees, and closes its doors, the tax liability is still due. Owners and officers of the company may face criminal, punitive repercussions, along with the heap of debt.
If you are carrying a considerable amount of tax liability, facing liens, levies, or garnishments commensurate to your previous financial life and not your current, get professional tax resolution assistance. When prepared and proposed correctly, winning an “offer in compromise” can help you address tax debt resolution reasonably and fairly. Partner with one of the best tax resolution companies in your area. We specialize in tax settlement services.
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Secure your financial future with legal tax solutions that work for you. Contact us today!
Secure your financial future with legal tax solutions that work for you. Contact us today!
