Seven Solutions to Overwhelming Tax Debt
If you owe a substantial debt to federal, state or local taxing authorities, you have real options for dealing with the problem. The Law Office of William F. Kunofsky in Dallas offers sound legal guidance and experienced representation from an accountant-attorney who possesses a thorough understanding of state and federal tax law, debt relief and the bankruptcy process.
The right lawyer can advise you in pursuing the appropriate solution to your tax debt:
1. Pay in Full Immediately
If you agree the debt is owed and you have assets, the least expensive method of repaying the tax debt is simply to pay in full. This method avoids increased penalties and interest for failing to pay the tax. Paying in full may be the only realistic option when the overall liability is relatively small. It can cost more in the long run to fight the IRS over a tax debt. An experienced tax lawyer can advise you as to whether or not making payment in full is the best course of action.
2. Make Payments Over Time
This method is usually called an installment agreement. The advantage of an installment agreement is that the Internal Revenue Service will frequently agree to allow the Taxpayer to repay over time. A small administrative fee is charged by the IRS when it accepts an installment agreement. Interest and penalties will be added to the balance. A lien may be filed by the Internal Revenue Service. The payments are applied to older liabilities first. The IRS is free to renegotiate if income changes. The disadvantage of this method is that the payments may be wasted when considered with the results obtained in bankruptcy.
3. Settlement Based Upon Doubt as to Collectability
The taxpayer may propose paying less than is owed because the taxpayer does not have the resources to repay the taxes. This is commonly called an “Offer in Compromise.” An offer in compromise may be accepted if the IRS or other tax agency determines the full tax debt can not be paid by the taxpayer.
Frequently, you will see a reference or advertisement to settle your IRS liability for "pennies on the dollar." Don’t be misled. A settlement that requires you to pay 99 percent of the tax debt could still be described as "pennies on the dollar." I will work to minimize your overall liability through an appropriately-structured, well-supported and well-thought-out offer in compromise.
An offer in compromise requires disclosure of the financial assets and future income of the taxpayer. The offer must be at least the amount the IRS can collect on its own initiative. An offer is very time consuming and there are many factors to consider that may extend the time the Internal Revenue Service or other taxing authority has to collect the taxes, commonly called the statute of limitations for collection.
The IRS normally has 10 years to collect the tax after it is assessed. Not all offers are accepted. Most are rejected. The offer must be at least the minimum shown in the offer in compromise worksheets. A successful offer will result in a contract between the taxpayer and the taxing authority that when completed resolves the debt and liens. We will try to determine if this is the right solution.
4. Settlement Based Upon Doubt as to Liability
The taxpayer may propose paying less than is claimed to be owed because there is doubt that the liability is correct. The basis of the offer in compromise is doubt as to liability. This is a fairly rare method. Normally, the IRS will audit the offer to determine if the settlement has merit.
5. File for Bankruptcy under Chapter 7
The requirements to discharge the tax liability in a Chapter 7 bankruptcy are that the debtor file a Chapter 7 and obtain a discharge from the U.S. Bankruptcy Court. The taxes must be more than three years old at the time of filing the bankruptcy plus any extensions of time, the taxes must have been filed for two years prior to the filing of the bankruptcy, and any additional tax must be assessed for more than 240 days. Additionally, the taxes can not be secured under a properly filed federal tax lien. Additionally, the tax liability must be a dischargeable tax and not incurred by fraud or evasion.
6. Seek Bankruptcy Protection Under Chapter 11 or Chapter 13
These are ways to restructure your tax debt in a court supervised repayment plan. If the taxes have aged sufficiently they may be partially or fully dischargeable in a Chapter 11 or Chapter 13 bankruptcy. This is an excellent method of handling unpaid taxes as well as late mortgage payments, medical bills, and unpaid credit card debt. These bankruptcies must be evaluated by an experienced attorney to determine if the taxpayer can benefit.
Rarely will there only be tax debt. Usually, tax debt is the tip of the iceberg. The entire financial picture should be considered. Failure to consider the entire financial situation may result in the loss of property to other creditors, lawsuits, and pressure from creditors not being paid.
7. Contact the Law Office of William F. Kunofsky
Call my office in Dallas today at 214.369.1040 to schedule an initial consultation with to discuss your tax repayment problem. We will work together to examine your financial situation and decide which option may be best for your situation.
Just seven solutions for paying taxes? Consider, time lapsed is important in the bankruptcy options. Consider, did the IRS file liens? Consider, when was the tax return filed? Can we improve your options? Carefully paying attention to the details may allow improvement of how these options work out for you. Sometimes the combinations of choices seem like chess. What legal moves can be made on your behalf to provide the best result? Call for an appointment. You will be glad you did.
