Articles Posted in Offer In Compromise

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Tax issues surround our daily lives, whether it is tax on your income or sales taxes you owe for your business. However, there are times in your life, whether its a sickness, divorce, death in the family, business problems, or just being busy,  that you overlook that there are income or sales taxes to pay. Therefore, it is always good to look back and try to determine if there are tax issues in your past that needs to be resolved now by creating a tax payment plan or filing an offer in compromise. Whatever the issue, a tax debt is never eliminated quickly. For instance, New York State typically has 20 years to collect on taxes that you owe to them. When a tax debt increases with time (due to penalties and interest for not paying on time), your financial well being only worsens and the tax problem only becomes more difficult to resolve. Its best to act quickly and to monitor your tax health. In general terns, the Internal Revenue Service has 10 years to collect the tax once they make an assessment, so this is both a Federal and State tax law issue.

The Issue of Unpaid Taxes and example of lack of contact

At my office about five times a year, I receive a call from a person who use to live in New York State, and then moved out of state many years ago. They call and tell me that there bank account was frozen by New York State, and the monies taken for unpaid taxes. Often, there taxes can relate to tax years ten to eighteen years ago, and involve a business tax debt (often sales taxes). The enforcement arm (i.e. collections department) of the New York State Tax Department does not spend time trying to contact the errant taxpayer, they just take the asset to satisfy the tax debt, so it comes as a surprise (emotional and financial) to the taxpayer that they have an issue. For these people, while they were troubled that their business failed, and leave the state, it only becomes worse to ignore the unpaid taxes since with penalty and interest I have seen tax debts of $20,000 grow to a few hundred thousand dollars. Therefore, it is important to stay in touch with the tax authorities, and provide them with current mailing addresses, so you are not blind sighted by a tax levy (where they take your assets). For the person who simply does not know if they have a tax issue lurking in there past, they can always call the state that they resided in, or the IRS, and ask if they owe any taxes, and also review there own credit report to see if that shows any tax debts.

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When a person owes substantial tax liabilities to the IRS, he or she may feel paralyzed with worry. However, the IRS has an Offer In Compromise program that could allow the individual to settle the tax debt for less than is owed or, in some rare situations, eliminate the debt completely.

Essentially, the IRS Offer In Compromise program is for individuals who cannot afford to pay the tax liabilities that they owe and doing so would create a financial hardship.

To determine whether an individual qualifies for an Offer In Compromise, the IRS evaluates the person’s ability to pay, income, expenses and asset equity. On its website, the IRS cautions that other payment options should be explored before an offer is submitted.

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Is the upcoming tax season drawing up a sense of fear and anxiety within you over your unpaid taxes? Do you feel overwhelmed and at a loss over how you will ever be able to pay the back taxes you owe? Are you expecting your tax debt problems to only get worse with the upcoming tax deadline?

If you answered “yes” to any of these questions, you can now breathe a sigh of relief because we are here to help.

Our firm of skilled tax attorneys knows how to work with the IRS to:

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When taxpayers prepare their annual income tax return, they must include all taxable income generated for the tax year they are filing. This holds true, unless the income is excluded by a specific provision of the Internal Revenue code. Section 104 (a) (2) states a way in which income generated from damages can be excluded from gross income.

To be eligible for exclusion under the Internal Revenue Code, the income must have been received due to personal physical injuries or physical sickness. The damages are not excluded if they are punitive damages or have no physical component.

If damages are received by a taxpayer due to a settlement agreement, the nature of the claim will determine whether they can be excluded or not. If the settlement does not explicitly state the nature of the claim, the court will look at all facts and circumstances to determine the nature of the claim.

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The Internal Revenue Service Partial Payment Installment Agreement option was created on January 17, 2005 as an option to the Offer in Compromise to pay off tax debts. In a partial payment installment agreement, taxpayers enter into an installment agreement that can result in a partial payment of their tax liability over the lifetime of the collection statute.

Previously, taxpayers who had tax liabilities could not enter into an agreement with the IRS unless they could pay the liability in full. This meant that taxpayers who were unable to pay in full had limited options to pay off their tax debt. This new payment program became possible through the passage of the American Jobs Creation Act of 2004. This statute amends the tax code to allow the IRS to enter into installment agreement for both full as well as partial payment for the taxes owed.

To set up the partial payment installment agreement program, you will need to know the total amount owed to the IRS in unpaid taxes. This amount will be the original tax due, as well as penalties and interest. An experienced New York tax attorney can help you find the correct amount that you owe the IRS. The calculation of the actual installment payment will be based upon IRS collection financial standards in 2013. After the terms of the partial pay installment agreement are fulfilled, the remaining tax debt will be forgiven.

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Many people in New York City and beyond have faced financial difficulties in recent years. Those financial difficulties have made it hard for some people to pay off their tax debt. That appears to be the case for one man.

New Yorkers are likely familiar with Anna Wintour. Wintour is the editor of Vogue and in the running to become President Obama’s ambassador to Great Britain. Despite her success, her long-term boyfriend, J. Shelby Bryan, is facing problems with the Internal Revenue Service. Reports indicate that he owes the IRS more than $1.2 million.

Bryan was worth millions at one time. However, like so many people, he suffered setbacks as a result of the recession. It appears an unusual set of circumstances put him in this predicament.

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For some taxpayers it is legitimately impossible to pay the full tax liability owed to the IRS or, if they did so, paying the full liability would create extreme financial hardship. The IRS allows these taxpayers to settle tax debt for less than the full amount owed, but only if an installment agreement or other method would not work. An Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service that settles the tax liability for less.

In order to be able to apply for an Offer in Compromise, the taxpayer must meet a certain set of requirements. The taxpayer must be current with filing all of their Individual Income Tax Forms (Form 1040), as well as any payments owed to the federal government. Taxpayers who are in an open bankruptcy proceeding unfortunately are not eligible to apply.

You can find step-by-step instructions and submit an Offer in Compromise through the IRS form, Form 656-B. The booklet explains the documents that are needed such as;

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When it comes to an IRS tax debt settlement, one of the best available options is to appeal for an Offer in Compromise. This is an agreement between your tax attorney and the IRS where you will pay a lesser amount than what you actually owe.

The purpose of an Offer in Compromise is to convince the IRS that it is not worth their time to forcibly take money from you (i.e. levy) when you have no funds to give anyway. Your alternative is a lesser one-time payment or a more flexible payment scheme.

Requisite Criteria for Consideration of an Offer in Compromise

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Taxes are the duty of every responsible citizen. However, there are times when people fall behind on their due taxes because of various reasons. There are some who are faced with an emergency medical issue, death in the family, divorce, economic hardships, job loss or plain tax evasion among many reasons.

Whatever the reason, an outstanding tax balance is never excused that immediately. It can definitely add to anyone’s worries. When tax debt piles up, your financial situation only worsens because penalties and interest will increase your total liabilities.

The Gravity of Unpaid Taxes

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