Tax Resolution Options for Individuals and Businesses

Pay or Not to Pay. That is the ?

Topics

Penalty AbatementsInstallment AgreementsOffer in CompromiseBankruptcyOther Options

Penalty Abatements

Types of Penalty Relief First Time Penalty Abatement Reasonable Cause Administrative Waiver Statutory Exception Penalties eligible for penalty relief include:

Failing to file a tax return Failing to pay on time Failing to deposit certain taxes as required Other penalties as applicable.

First Time Abatement

You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:

You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.

You filed all currently required returns or filed an extension of time to file.

You have paid, or arranged to pay, any tax due. The failure-to-pay penalty will continue to accrue,

until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service's first time penalty abatement policy.

Reasonable Cause Abatement

Fire, casualty, natural disaster or other disturbances Inability to obtain records Death, serious illness, incapacitation or unavoidable

absence of the taxpayer or a member of the taxpayer’s immediate family

Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so

Note: A lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time. However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty.

Facts Establishing Reasonable Cause

What happened and when did it happen? What facts and circumstances prevented you from

filing your return or paying your tax during the period of time you did not file and/or pay your taxes timely?

How did the facts and circumstances affect your ability to file and/or pay your taxes or perform your other day-to-day responsibilities?

Once the facts and circumstances changed, what actions did you take to file and/or pay your taxes?

In the case of a Corporation, Estate or Trust, did the affected person or a member of that individual’s immediate family have sole authority to execute the return or make the deposit or payment?

Administrative Waiver

•This may occur as result of a formal government directive providing penalty relief because of a natural disaster or catastrophic event. 

Statutory Exception

Incorrect Written Advice from IRS If you received incorrect written advice from the IRS, you may

qualify for a statutory exception. If you feel you were assessed a penalty as the result of erroneous written advice you received from IRS, the following items may be needed when requesting penalty relief:

Your written request for advice. The erroneous written advice you relied on that was furnished to

you by the IRS. The report, if any, of tax adjustments identifying the penalty or

addition to tax, and the item(s) relating to the erroneous advice.

Generally, Form 843, Claim for Refund and Request for Abatement should be filed to request penalty relief based on incorrect written advice from IRS. However, you can call the toll-free number provided on the notice you received to determine if the penalty is correct. If the penalty is correct, we may ask you to mail Form 843 and any supporting documentation.

Installment Agreements

  Guarante

ed (IMF Only)

Streamlined

Streamlined (2)

IBTF Express

IBTF Express (2)

IBTF Routine Partial Payment

Amount $10,000 or less

$25,000 or less

$25,001 - $50,000

$10,000 or less

$10,001 - $25,000

Any Amount

Any Amount

Any Amount

Type of Tax

IMF Income

Tax Only

IMF, BMF Income ,

OOB BMF

IMF, OOB Sole

Proprietor

BMF Trust Fund

BMF Trust Fund

BMF Trust Fund

IMF, BMF Income,

BMF OOB

Any

Payment Terms

Full pay in 3 years including accruals

Greater of UBA divided by 72 or full pay

by CSED

Greater of UBA divided by 72 or full pay

by CSED

Full Pay in 24

months including accruals

Full Pay in 24

months including accruals

Full Pay by CSED

Full Pay by CSED

Installment Agreement Table

Table Continued

CIS Required No No No* No No Yes** Yes

Yes, Financial Review every 2 years

Lien Determin

ation Required

No No No No No Yes Yes Yes

TFRP Determin

ationNA No No

No, but protect

ASED***

No, but protect

ASED***Yes Yes, If

applicableYes, If

applicable

DDIA Required No No Yes No Yes No No

Yes if IA default in past 12 months

Table Continued

Extend Collection

StatuteNo No No No No No No

Up to 5 years plus 1 year if

appropriate

Must View Assets No No No No No Yes Yes Yes

Managerial Approval No No No Yes Yes Yes Yes Yes

Reference IRM 5.14.5.3

IRM 5.14.5.2

IRM 5.14.5.2

IRM 5.14.5.4

IRM 5.14.5.4

IRM 5.14.7

IRM 5.14.9

IRM 5.14.2

User Fees for all IAs: Originati on $120 Direct

Debit $52 Low

Income $43

Reinstatement $50

               

Offers in Compromise

Form 656 Offer in CompromiseBooklet 656B for Instructions on Offers in CompromiseTwo Types of Offers: Offer Fee of $186.00 1) Doubt as to Collectability: Cash Offers: Payable in less than 5 months and initial payment of 20% of the amount offered when submitting the offer package. Periodic Payment Offer: Does not exceed 24 months of payments 2) Doubt as to Liability-This type of offer is handled by Examination Division/Audit and does not require the $186.00 Fee.

Offer in Compromise Continued

Other Items of Importance: Read the instructions All tax returns must be filed. For wage earners make

sure you change your tax withholdings so you do not owe in the future.

*For Self Employed, Estimated Tax Payments must be paid for the current year. Otherwise, the offer will be returned. Collection Statute is extended for the time an offer is

being considered to the time the offer is closed plus 6 months.

Once an offer in compromise is accepted, you must remain current with all filing and paying requirements for the next 5 years after acceptance. Otherwise, all liabilities are reinstated.

If an Offer is rejected, you have appeal rights

Bankruptcy

Not all debts are dischargeable in Bankruptcy. Types of Bankruptcy: 1) Chapter 7 Asset 2) Chapter 7 No Asset 3) Chapter 11-Reorganization 4) Chapter 13-Wage EarnersPayroll Tax Debts and Excise Tax Debts cannot be removed by bankruptcy. Also, Fraud based taxes and other debts.*Consult a Bankruptcy Attorney to verify if and which debts are dischargeable with a Bankruptcy.

Bankruptcy Continued

Chapter 7 Bankruptcy is also known as “liquidation,” "straight bankruptcy," or “complete bankruptcy,” is the most commonly filed form of bankruptcy among individuals. Chapter 7 Bankruptcy essentially allows the debtor to make a fresh start.

Businesses that wish to liquidate their assets and discontinue business may also file under Chapter 7 Bankruptcy.

 Chapter 11Reorganization Chapter 11 Bankruptcy primarily applies to commercial

enterprises that wish to continue business operations while repaying creditors through a court-approved reorganization plan.

Chapter 13- is designed for an individual who has a regular source of income, a desire to pay his or her debts, but currently is unable to do so. Chapter 13 Bankruptcy may be preferable to Chapter 7 Bankruptcy because Chapter 13 Bankruptcy usually allows the debtor to keep a valuable asset, such as his or her own house. Under Chapter 13 Bankruptcy the debtor may arrange and propose a plan to the Court. The plan illustrates how the debtor will repay creditors over time, between three and five years. The Court must then approve this plan.

Other Options

Many other options that it is impossible to address each one in detail: Amended Tax Returns Audit Reconsideration Abatement of Interest in special cases Appeals of Different Types for various reasons Assignment for the Benefit of Creditors Collateral Agreements Innocent Spouse Claims Tax Lien: Discharge, Subordination, Withdrawal, nonattachment Currently Not Collectible Payroll Deduction, Payment tracers, refund claims, Seizure and sale of

asset options. Identity Theft Claims Tax Court Filings Taxpayer Advocate

Conclusion

We went over IRS Resolution Options for Businesses and Individuals:

Penalty Abatements: Two types and reasons for requests. Types of Installment Agreements and conditions Offers in Compromise section and compliance Bankruptcy options and seeking Bankruptcy Attorney Questions:Contact information: Martha De la chausseeTelephone Number: 323-344-2294Website: www.advocatetaxgroup.comEmail: atggroup1@yahoo.com