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Tax Defense Network, Inc. Frequently Asked Questions |
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 Help! I filed my tax returns but did not have the money to pay. Do I have options?
The IRS relies on taxpayers to be voluntarily compliant. They allow each citizen to report their income freely and voluntarily and to calculate their tax liability and file their taxes on time. You've done your part by filing on time, and the IRS has programs and services available for taxpayers that owe but can't afford to pay.
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What is an Offer in Compromise? |
According to the IRS, an Offer in Compromise (OIC) is an agreement between the IRS and the taxpayer that settles the taxpayer's tax liabilities for less than the full amount owed. The Internal Revenue Service has the authority to settle or compromise federal tax liabilities by accepting less than full payment under certain circumstances. These circumstances are:
Doubt as to Liability - The IRS may accept an offer in compromise when doubt exists that the amount of tax owed is correct. The taxpayer needs to explain why they believe that they do not owe the tax debt amount. Financial inability to pay will not be considered under this basis alone.
Doubt as to Collectibility - Under this basis, there is doubt that the amount of tax owed can ever be paid back in full. In order to successfully negotiate this type of offer in compromise, the taxpayer must demonstrate that through complete and thorough financial statements and supporting documentation, there are insufficient assets and income to pay the full amount of tax owed.
Effective Tax Administration - There is no doubt that the tax owed is correct and there are sufficient assets and income to pay the entire liability. However, the taxpayer believes that, due to exceptional circumstances, it would be unfair and inequitable to require full payment of the tax.
The primary determinant on "doubt as to collectibility" is based on a taxpayer's personal financial profile, including income, expenses, and assets. The IRS sets strict guidelines for income, allowable expenses (categorized as: Living, Housing, Transport), and available equity in owned assets.
If the Offer in Compromise is accepted, payment can be made via one of three options:
- Cash (within up to 90 days of acceptance)
- Short-term deferred payment plan (payable within 24 months of acceptance)
- A long-term deferred payment plan (payable over the remaining time left on the collections statute).
If the OIC is accepted, the taxpayer must remain in compliance with all filing and payment obligations, including staying current with quarterly estimated tax payments, and not incurring any new tax debt for five years or until the offer amount is paid. Failure to abide by these terms may result in the default of the OIC and the reinstatement of the original tax liability.
The Internal Revenue Service typically takes approximately six to twelve months depending on caseloads. During this time, all further collection activities are suspended.
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Does Penalty Abatement get my penalties and interest waived from my tax account? |
Penalties can be abated if you have "reasonable cause" for not being compliant with the IRS. "Reasonable cause" relief will only be granted when the taxpayer exercises ordinary business care and prudence in determining their tax obligations but still failed to comply with these obligations. They may include:
- Death of a family member
- Serious health problem
- Bad or erroneous financial advice
- Flood, hurricane, fire or other natural disaster
- Theft of funds, including embezzlement
- Lost or destroyed records
- Divorce that caused extreme stress and deteriorated your financial condition
- Unemployed for an extended period of time
- On a fixed income or retired
- Caring for another person and the financial strain this is placing on you
Your application for a penalty abatement will be reviewed by a revenue officer and it is entirely up to the discretion of this officer to make the final decision.
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How do I stop the IRS from garnishing my wages, levying my bank account, or
seizing my assets? |
| You must respond promptly to any notice you may receive from the IRS. The IRS will not garnish wages, levy your bank account, or seize assets without providing "ample" warning. The next step is to stay in compliance with the IRS, get up-to-date on tax filings and payments, and the IRS will have no need to garnish your wages or levy your bank account.
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What are the documents that the IRS will need to review my case? |
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The Internal Revenue Service requires paycheck stubs, bank statements, utility bills, mortgage or rent payments and investment documents; this will vary on a case-by-case basis.
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I heard the Internal Revenue Service can put you in jail for not filing tax returns, is
that true? |
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Intentionally not filing tax returns is illegal, a felony, and subject to criminal and civil penalties. A false return detected by the IRS goes to the Criminal Investigation Division and can result in a punishment of one year in jail and a $25,000 fine. |
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