If you have received a collection notice from the IRS or Comptroller of Maryland to collect past due taxes, or if you owe past due federal or state taxes, you have options. Are you tired of receiving harassing collection letters or phones calls? Are you ready for a fresh start?
If you answer yes to either of those questions, it is time to start exploring your options.
Offer in Compromise
An Offer in Compromise (OIC) can substantially reduce the amount of individual or business tax you owe. An Offer in Compromise is an agreement reached between the IRS and/or Comptroller of Maryland and the taxpayer, where the IRS or Comptroller settles for less than the full amount owed.
Offer in Compromise to the IRS
In determining whether to accept an Offer in Compromise, the IRS bases its decision on whether the taxpayer’s offer is equal to or greater than the reasonable collection potential (RCP). The IRS may accept an Offer in Compromise based on a doubt as to your liability for the tax, a doubt as to collectibility of the tax, or effective tax administration. The IRS will not accept an Offer in Compromise if the taxpayer can afford to pay the taxes owed. But, if you cannot afford to pay the back taxes, an Offer in Compromise is a great way to get a much needed fresh start.
Offer in Compromise to the Comptroller of Maryland
The Comptroller of Maryland looks at the taxpayer’s available resources, considers the resources in light of the circumstances, and arrives at an equitable resolution of the tax liability by considering a reduction or abatement of the tax amount due. Although the Offer in Compromise is not an appeal of tax liability, it can provide taxpayers much needed relief if they cannot afford to pay their past due taxes.
Installment Agreements for Taxes Owed
An installment agreement allows taxpayers to establish a payment plan with the IRS, where they pay their taxes owed over an extended period of time. The Comptroller of Maryland offers an individual payment agreement, which allows taxpayers to set up a payment agreement for outstanding tax bills.
Currently Not Collectible Status
If the IRS determines a taxpayer is unable to pay both their outstanding tax liabilities and reasonable living expenses, it can place the taxpayer’s account into Currently Not Collectible (CNC) status. Currently Not Collectible status temporarily pauses the collection process. Harassing collection letters and phone calls stop.
Innocent Spouse Relief
Innocent Spouse Relief provides relief from a joint tax liability and usually applies to taxpayers who were previously married. You can claim innocent spouse relief if your spouse or former spouse improperly reported or omitted items on your joint filed tax return. To qualify for innocent spouse relief, you must establish:
- You did not know or have reason to know of the understatement of tax,
- Considering all the circumstances, it would be unfair for the IRS to hold you responsible, and
- You and your spouse did not transfer property to one another as part of a fraudulent scheme to defraud the government or another party.
If you do not qualify for innocent spouse relief, you may still get relief from a joint tax liability either through Separation of Liability Relief or Equitable Relief. Different time limits and conditions apply, depending on the relief requested.
Injured Spouse Relief
Injured Spouse Relief can help protect your share of a refund on a joint tax refund if it was or is expected to be applied to a past due debt of your spouse. Past due debts can include federal taxes, state income taxes, unemployment compensation, child support, or alimony payments. If the IRS applies your refund to one of these past due debts — known as an offset — and you are not legally responsible, you may be entitled to receive your share of the tax refund.
Tax Lien / Levy Relief
A tax lien occurs when the government files a legal claim against your property when you have failed to pay a tax debt. The lien protects the government’s interest in all your property for the amount of the past due taxes. Property affected includes real estate, personal property, and financial assets.
A tax levy occurs when the government actually takes your property and, if it is not cash, sells it to pay your tax debt. The government can levy any type of real or personal property that you own or have an interest in.
Taxpayers can obtain relief from liens and levies under certain circumstances.
When you disagree with the results of an IRS audit of your tax return or a tax return filed on your behalf by the IRS, you can request an audit reconsideration. An audit reconsideration is the process used by the IRS to help taxpayers request a reconsideration of the results of their audit. An audit reconsideration can be requested only in certain circumstances, such as when you:
- Missed the appointment for your audit,
- Moved and did not receive the IRS correspondence regarding your audit and/or tax return the IRS filed on your behalf,
- Have additional information to present to the IRS that would change the results of your completed audit, or
- Disagree with the outcome of your audit.
Maryland License Holds for Past Due Taxes
If you owe past-due Maryland individual or business tax liabilities, the Comptroller of Maryland may cause the Motor Vehicle Administration (MVA) to hold the renewal of your driver’s license or vehicle registration until you have satisfied, at least partially, your outstanding tax liabilities. In addition, the Comptroller can place holds on the renewal of your business or professional licenses.
Affected taxes include: sales and use tax, admissions and amusement tax, corporate income tax, individual income tax, withholding tax, pass-through entity tax, alcohol tax, tobacco tax, and motor fuel and motor carrier taxes.
Passport Denials / Revocations for Unpaid Taxes
If you owe seriously delinquent taxes, you could be putting your passport in jeopardy. The IRS is required to notify the State Department when a taxpayer is certified as owing a seriously delinquent tax debt. Following notification, the State Department is required to deny taxpayers either their passport or renewal of their passport. Under some circumstances, when taxpayers are seriously delinquent, the State Department may even revoke their currently held passports.
The IRS considers taxpayers seriously delinquent if they owe more than $51,000 in back taxes, penalties, and interest, and the IRS has either: filed a Notice of Federal Tax Lien and the period to challenge it has expired, or; issued a levy.
If you are facing any of these IRS or Comptroller of Maryland tax collection matters, you have options. And you do not have to navigate complex tax issues alone. Jim Liang will:
✓ Seek to stop further collection activity
✓ Reverse prior enforcement action, where possible
✓ Recommend ways to reduce your tax liabilities, if overstated, or negotiate a collection alternative with tax authorities
To learn how Jim can help resolve your tax collection matter, contact the Law Office of Jim Liang for a free consultation today.