1. Even if you can’t pay the IRS, you must timely file your tax returns. Not doing so is a crime and will result in a heavy penalty if you owe tax: 5% a month for the first five months. Save the proof of delivery of your returns and extensions – those receipts can become very valuable.
2. There are a number of ways to suspend, at least temporarily, the IRS’ main collection tools of liens, levies on bank accounts and wage garnishment. Most of them also suspend the IRS’ ten-year statute of limitations on collection. These include audit reconsideration, IRS appeals, offers in compromise, subordination of liens to allow a sale, bankruptcy, innocent spouse and litigation. Some that do not stop the running of limitations are entering into an installment agreement and currently-not-collectible classification for hardship cases.
3. Sometimes income taxes are dischargeable in bankruptcy, but there are a number of timing tests that need to be considered. Filing bankruptcy prematurely can waive this defense.
4. Offers in Compromise based on Doubt as to Collectability can reduce the amount of a tax debt when the taxpayer’s net worth and income are insufficient to satisfy the tax obligation.
5. Even if an Offer in Compromise is not available, if the remaining statute of limitations period is relatively short (often a few years), the IRS will sometimes agree to a less-than-full-pay installment agreement based on one’s financial ability to pay.
6. Installment agreements and Offer in Compromise agreements require taxpayers to remain in strict compliance with subsequent tax filing and paying requirements, e.g., quarterly estimated payments. The IRS sometimes can terminate OIC arrangements when the taxpayer doesn’t pay 100% of his current year’s tax by April 15, even if she doesn’t have all the information necessary to complete the return by April 15. The IRS keeps all tax refunds during the pendency of these agreements so it is prudent to not overpay estimated taxes or allow paycheck over-withholding.
7. Most legal fees for resolving individuals’ routine IRS cases run between $5,000-15,000 but the biggest factor in the amount of fees is often the diligence employed by the taxpayer in getting the tax professional all the information and documentation needed to apply for relief. Dribbling it in over months drastically increases the amount of time required and duplication of effort.
8. For undisputed IRS debts of less than $10,000, it is usually more cost-effective to represent oneself. You can call the IRS at the number on the latest IRS collection notice and ask for an installment agreement for up to six years without producing any paperwork if the debt is under $25,000.
9. Procrastination, fear and denial are delinquent taxpayers’ biggest obstacles and cause much avoidable suffering. The IRS is slow but they aren’t going away. Picking up the phone is the first step in getting back on the right track.
When you need Houston IRS attorneys for help with a tax matter, contact the Houston Lawyer Referral Service at (713) 237-9429.