Having unpaid tax debts that you owe to the federal Internal Revenue Service (IRS) or the State of California Franchise Tax Board (FTB) can be troubling or even financially crippling, if the debt accumulates over several years. Fortunately, California residents who have a significant delinquent balance with the IRS or the FTB have several possible options for repaying or resolving the debts they owe. If you are having a hard time paying back taxes, you may be able to negotiate a tax settlement with the IRS or the FTB to pay the taxes you owe over time or at a lesser amount. However, successfully negotiating a tax debt settlement is no small feat, which is why we recommend consulting a tax-relief attorney with the skill and expertise necessary to mitigate the consequences of overwhelming tax debt. Contact our experienced Los Angeles tax settlement attorneys at ibankruptcyattorneys.com today to discuss your tax settlement options.
Skilled Tax Settlement Representation in Los Angeles
If you owe significant back taxes, you may be wondering how you are going to afford making the necessary payments to the IRS or the California Franchise Tax Board. Unfortunately, the penalties imposed by the IRS for late tax payments can add up quickly, putting you in an even more difficult financial position the longer you wait to resolve the issue. One way to resolve your outstanding tax debts is to negotiate a tax settlement with the IRS or the FTB. Not all tax settlements are accepted by the IRS or the FTB, which is why it pays to have a reputable tax settlement attorney on your side, representing your best interests to the government. At ibankruptcyattorneys.com, our lawyers are familiar with the tax settlement process and we know what it takes to get a settlement approved. We are a team of tax relief experts committed to negotiating on behalf of California taxpayers struggling with overwhelming tax debt. We can advise you on the best solution to your tax debt problems and craft a fair settlement offer that maximizes your chances of obtaining the tax relief you need. Our firm provides a free initial tax-relief consultation, so don’t hesitate to call.
What is a Tax Settlement?
If you have a tax debt that you owe to the IRS or the California Franchise Tax Board and you can’t afford to pay the full amount, you may be wondering if you qualify for a tax settlement. A tax settlement is a viable tax-relief solution for individuals who are unable to pay their tax liability in full. The likelihood of the IRS or FTB accepting your settlement offer depends on a number of factors, including your income, your expenses, your assets and your ability to pay. In dealing with taxpayers who have outstanding federal taxes, the IRS has a number of tools at its disposal to collect on the unpaid taxes, including the following:
Tax lien – A tax lien is similar to a mortgage lien in that it gives the IRS the right to make a legal claim against your home, personal property and financial assets if you fail to pay the taxes you owe. A tax lien secures the government’s interest in your property and if you fail to make arrangements to settle your outstanding tax debts, the government can levy, seize and sell your property to satisfy your tax liability.
Tax levy – A tax levy gives the IRS the legal right to seize your property, garnish your wages, take money from your bank account, or seize and sell your vehicle and other personal property to satisfy an outstanding tax debt.
Solutions for Settling Tax Debts in Los Angeles
If you owe a great deal of debt to the IRS and you can’t pay the debt in full, a tax settlement is a good way to avoid tax liens and tax levies, both of which can have a negative impact on your financial situation and your credit score. The following are some of the tax relief solutions taxpayers in Los Angeles can use to resolve their tax debts with the IRS. The California Franchise Tax Board also offers some of the same tax settlement options for taxpayers facing unpaid state taxes.
Offer in Compromise
If you owe a significant amount in unpaid taxes and you are not able to pay your tax liability in full, you may qualify for an offer in compromise (OIC), which is an agreement that allows financially strapped taxpayers to settle their tax debt for less than the full amount owed. Not everyone qualifies for the offer in compromise program. In fact, there are strict criteria you must meet in order to be eligible for an offer in compromise, and the decision of whether your circumstances warrant an offer in compromise is in the hands of the IRS representative handling your case. The IRS’ decision is based on the following factors:
- Doubt as to liability – This applies to taxpayers who do not believe they owe as much in taxes as the IRS says they do.
- Doubt as to collectability – The IRS must be convinced that it is extremely unlikely that the taxpayer will be able to pay back the full amount owed based on their income, expenses, assets and liabilities.
- Paying the full amount would cause a significant hardship – The IRS must be convinced that paying back the full amount owed would present a significant hardship for the taxpayer.
Generally speaking, the IRS will only approve an offer in compromise if the amount offered represents the most the government can expect to collect from the taxpayer within a reasonable amount of time. You can improve your chances of relieving your tax debt via an offer in compromise by hiring an attorney who understands the parameters of the offer in compromise program and can successfully negotiate with the IRS.
The California Franchise Tax Board also has an offer in compromise program allowing California taxpayers to offer a lesser amount for payment of undisputed tax liabilities. Before applying for an OIC with the FTB, you must have explored other payment options, such as setting up a payment plan, filed all necessary income tax returns and agreed with the amount the FTB says you owe. According to the FTB, your eligibility for the state OIC program is based on:
- Your ability to pay the amount of state taxes owed
- Your current and future income
- The value of your assets
- Your current and future expenses
- The potential for your circumstances to change
- Whether your offer is in the best interest of the state
Currently Not Collectible (Hardship)
Many California taxpayers are struggling to pay their tax debts because of a temporary financial hardship, such as job loss, illness or divorce. If the IRS determines that you are unable to pay any of your tax liability due to a financial hardship, the IRS may report your account as currently not collectible and temporarily delay collection until your financial situation improves. Before approving your request to temporarily delay collection, the IRS may require you to provide proof of your financial status, including information about your monthly income and your assets and expenses. Keep in mind that just because your tax debt is “currently not collectible” does not mean the debt goes away, it simply means the IRS has determined that you are not able to pay the debt at this time. Currently not collectible status lasts until the IRS reevaluates your finances, and interest and penalties will continue to accrue during that time, thus increasing the total tax debt you will owe when you pay the full amount.
For many people, a monthly payment plan is the easiest way to pay off large tax debts over time, rather than paying in full upfront. A long-term payment plan or installment agreement may be available to taxpayers who have tax debts that are too large to pay in one lump sum and therefore need more time to pay their debts in full. Usually, the IRS will allow you to pay via an installment plan if your tax liability is $50,000 or less in combined tax, interest and penalties, and you have filed all necessary tax returns. If the IRS agrees to an installment plan, your monthly payments will equal your total tax liability, including interest and penalties, divided by 36 months. One of the biggest advantages of setting up a payment plan to repay your tax debts is that the IRS will not file a federal tax lien or issue a tax levy during this time, so long as you comply with the terms of the agreement.
The California Franchise Tax Board also allows taxpayers to apply for an installment agreement, giving taxpayers three to five years to pay off the balance they owe on their state taxes. To be eligible for an installment agreement, the total amount you owe must be less than $25,000, you must have filed all your income tax returns for the previous five years, and you must be able to pay the total amount due in 60 months or less.
Relief Through Bankruptcy
Filing for bankruptcy is another way debtors in California can relieve some of their debts and get their financial situation back on solid footing. While most priority tax debts are not dischargeable in bankruptcy, unsecured debts like credit card debt, personal loans and medical debts are dischargeable. If you can discharge some of the other debts that are overwhelming you, it may free up some cash to pay your outstanding tax debts. Furthermore, the automatic stay that goes into effect when you file a petition for bankruptcy puts an immediate stop to collection attempts by the IRS and state tax agencies for the duration of the bankruptcy process. For many California residents who are behind on their taxes, the automatic stay gives them the breathing room they need to come up with a solution to repay their tax liability.
How a Tax Settlement Attorney Can Help
Most people know that the IRS can be very difficult to deal with, especially if you owe them money. The IRS is an extremely powerful federal agency and it has a great deal of power when it comes to collecting delinquent taxes, including tax liens and tax levies, but that doesn’t mean attempting to settle your tax debts with the IRS is a lost cause. Going up against the IRS in tax debt matters can be extremely intimidating though, which is why we highly recommend hiring a tax settlement attorney who has experience representing California taxpayers in dealings with the IRS and the California Franchise Tax Board. When you hire our tax settlement attorneys at ibankruptcyattorneys.com to represent your case, we will contact the IRS or the FTB on your behalf and do our best to ensure that whatever decision is reached is in your best interest. Dealing with tax debt problems quickly and directly is important if you want to avoid suffering the negative consequences of unpaid taxes, so don’t hesitate to contact our Los Angeles tax settlement firm. You can rest assured that we will work tirelessly to negotiate a tax settlement that best suits your needs.
Schedule a Free Consultation with Our Tax Settlement Attorneys
Dealing with the IRS or state tax agencies can be intimidating and stressful, and every tax debt case is different, which can make it difficult for taxpayers to know which tax relief solution is right for them. A good tax settlement attorney will work to not only minimize the taxes you owe, but also to reduce your stress and discomfort by taking the burden of dealing with the IRS or the FTB off your plate. If you are facing undue hardship as a result of crippling tax obligations, interest and penalties, you may be able to reduce this significant burden by requesting tax relief, which we can communicate to the IRS or the FTB on your behalf. To schedule a free consultation with our Los Angeles tax settlement attorneys, call our firm today. We regularly assist California taxpayers facing significant tax obligations and we can help you navigate the process of requesting relief from the IRS or the FTB.