Awards & Recognition
There are many reasons as to why people may incur significant amounts of tax debt. In some cases the loss of a job or a severe injury may have created significant tax liabilities. In other instances misunderstanding one’s status as a 1099 independent contractor may result in significant amounts of tax liability being discovered. In still other instances, a failure to report or disclose certain foreign accounts or income may lead to back taxes, fines and other penalties. For most people facing significant amounts of tax debts, their chief goal is to reduce the amount that they owe and to come back into compliance.
Depending on your particularized circumstances, an experienced IRS tax debt attorney or CPA of the Tax Law Offices of David W. Klasing may recommend a number of strategies to reduce the amount you owe and mitigate the potential consequences of correcting your tax debt. Processes and strategies we may recommend include:
- Paying your back taxes over time via an installment agreement
- In rare circumstances, making an offer in compromise
- Applying for Innocent Spouse relief
- Filing Chapter 7, Chapter 13 or Chapter 11 bankruptcy
In some circumstances, simply paying your back taxes over time via an installment agreement may be the most appropriate solution. However in other circumstances other measures may present a greater likelihood of relieving your tax debt problems.
Offer-in-compromise may allow you to settle your tax debt
An offer-in-compromise is a contract that is made between the taxpayer and the IRS in regards to an unpaid tax debt. Under the terms of an offer-in-compromise agreement the taxpayer will, for less than the full amount owed, offer to pay a contractually defined amount to settle the assessed tax debt and any associated penalties and penalties and interest.
However, to increase the likelihood that your offer-in-compromise will be accepted it must be based on the same criteria that the IRS will use to analyze it. That is, the IRS is more likely to accept an offer-in-compromise when the taxpayer is unlikely to be able to make the payment in full and when the amount offered approximates the taxpayer’s collection potential. Depending on the facts and circumstances, the IRS may consider an offer-in-compromise to be more desirable than an uncollectable debt or a protracted repayment plan.
If and once an offer-in-compromise is accepted, neither the taxpayer nor the IRS may reopen the matter except for if it is discovered that the taxpayer falsified their records, a mutual mistake was committed or if other legal grounds to void a contract are present.
Innocent spouse relief or separation of liability may resolve tax debt inequities
For current spouses or spouses that are currently going through a divorce or dissolution of marriage, innocent spouse relief may correct marital tax liability inequities. That is, if a couple is heading into divorce court, the less financially dominant spouse may develop a suspicion that their soon-to-be ex-spouse was cheating or otherwise being less than fully forthcoming on the couple’s joint tax return. In situations like these, an IRS tax debt attorney can help guide you about the facts such as the innocent spouse would have two main reasons for filing for innocent spouse relief. First, he or she would be protected against potential criminal prosecution for the tax crimes committed by their soon to be ex-spouse. Second, any tax debt that may arise due to a criminal investigation or civil action will be allocated to only the spouse responsible for the tax problem.
For former spouses who have already separated or divorced, separation of liability may lead to a more equitable division of the marital tax debt. Under this form of relief the actual percentage of the tax debt will be apportioned to the spouse who is responsible. To illustrate, if 90% of the unpaid tax debt was due to gambling winnings and 10% was attributable to income from investments, the appropriate percentage of the tax debt would be assigned to the spouse responsible for each.
However, qualifying for innocent spouse status or separation of liability is often a difficult process. Furthermore, there are a multitude of consequences to consider in a scenario like this. Therefore, no legal strategy should be put into action before obtaining experienced criminal tax advice.
Tax-motivated bankruptcy may offer a way out of tax debt
In some circumstances a tax-motivated bankruptcy can wipe away your tax debt or provide you with the opportunity to establish a payment plan to repay your debts. However, this is an extremely complex area of the law and you should seek the advice of an experience IRS tax debt attorney prior to taking any action. However the benefits of bankruptcy can include:
- The automatic stay will prohibit the IRS from undertaking new collection efforts from the day the bankruptcy is filed.
- Eligible debts including tax debts and other liabilities can be discharged or wiped away.
- Chapter 13 plans can permit a taxpayer to establish a payment plan to pay off the tax debt
However, before you can even consider filing for bankruptcy due to a tax debt you must be able to show that returns have been filed for the last four tax returns. If any returns are outstanding and delinquent, we can prepare them for you. Furthermore we work to ensure that all liabilities are included in your bankruptcy filings as the legal consequences can be severe if debts are not included and a bankruptcy discharge is granted.
Tax Attorneys provide strategic solutions to tax debt
The foregoing solutions present only a few of the legal options that may be able to mitigate your tax liability issues. As an experienced IRS tax debt attorney, David W. Klasing, can provide essential insight and guidance regarding an array of thoroughly considered strategies to handle tax debts due to past tax problems. To schedule a reduced rate tax consultation, call The Tax Law Offices of David W. Klasing at 800-681-1295.
