February 28, 2010 - William L. Henry IV
In this informative article, a Denver tax attorney from Robinson & Henry, P.C., Attorneys At Law, discusses four common strategies to solving your tax problems.
Often, clients come to talk to the firm's tax attorneys to discuss IRS back tax problems or payroll tax issues. Here are four common strategies we use to reduce and restructure your IRS back tax liability. (Remember, each case is unique, so these strategies may not fit your unique circumstances--talk to a tax attorney for specific legal advice concerning your situation.)
Strategy 1: Installment Agreement.
A Denver tax attorney from our firm will contact the IRS on your behalf and negotiate a monthly payment for your IRS tax liability. The advantage of an installment agreement is that the IRS will generally stop garnishment of your wages and any future levy of your bank account if you remain current. This disadvantage is that penalties and interest will continue to accrue, so you may not pay back the IRS tax liability.
The Colorado Department of Revenue also has a similar program for installment agreements. However, once a garnishment attaches to your wages, the Colorado Department of Taxation will not lift the levy. After a wage garnishment, only payment in full or bankruptcy will immediately cause the levy to be lifted.
Strategy 2: Penalty Abatement.
The IRS allows taxpayers to request abatement of their penalties. Penalty abatement means that the IRS will allow you to reduce the amount of penalties that you will have to pay back to the IRS. Penalty abatement does not affect the underlying tax liability or interest. A case for penalty abatement is based on showing "reasonable cause" to the IRS. The IRS has legal standards that it follows, so what you think is a reasonable reason for not filing your tax return or pay the tax may not be reasonable to the IRS.
Strategy 3: Offer in Compromise
An offer in compromise is the method the IRS uses to negotiate your tax liability below the amount that the IRS believes you owe. A compromise with the IRS may be reached under any of the follow standards: (1) Doubt as to Liability, (2) Doubt as to Collectability, or (3) Effective Tax Administration. Each standard has specific rules and guidelines that the IRS is using to evaluate your offer. Thus, using a tax attorney that is looking at the same rules, regulations, and law that the IRS is looking at gives you the best chance for your offer to succeed. It is estimated that the IRS accepts only 10-15% of the offers it receives.
Strategy 4: Bankruptcy
Bankruptcy is an option to resolve your tax debts. Depending on the type of tax, your filing history, and the assessment of tax, your tax debt may be dischargeable in bankruptcy. Even if your tax debt is not dischargeable, bankruptcy often allows you to restructure your tax debt to provide relief from garnishments and levies by the IRS or Colorado Department of Revenue. Our tax attorneys work closely with our bankruptcy attorneys to determine if your tax debt is dischargeable.
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