Tax Problems and Tax Resolution Firms

Many tax resolution companies promise taxpayers a few cents on the dollar as tax relief in order to solve their tax problems. Some can provide genuine tax help. Others are unable to deliver on the promise because they do not, at the outset, disclose to the taxpayer true and honest diagnostics of the tax resolution that fits them.

There are typically three ways to resolve your collection problems.

The first is the installment agreement. It means that you must pay all the taxes you owe, plus penalty and interest. The IRS will not abate interest unless it is their fault. Penalties are sometimes waived under certain circumstances such as natural disaster or catastrophic illness.

The second way to reach a tax resolution to your tax debt is an offer in compromise. This is what everyone hopes to accomplish and it is the carrot given to taxpayers by some companies in order to secure their fees. Offer in compromise is driven by both income and expenses and net assets. If your income and expenses allow you to pass the IRS test and if you have low or no net assets you may qualify for an offer in compromise.

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The third way to get the tax help that you need is through declaring you as currently not collectible. Currently not collectible may be just as good as an offer in compromise to older persons who do not anticipate any increase in their income.

Again, to get tax relief and pay a few cents on the dollar, as it has been claimed, two conditions have to be met. The first is that your income has to be low enough to show the IRS that you can only pay very little toward your debt. The second condition is that you must prove to the IRS that you have no net assets to put on the table. Net assets means whatever you own less the mortgage on this asset.

We should stress again that offer in compromise, which is the IRS vehicle to get reduced taxes, is not a slam dunk. It is a lengthy process. We must submit your cash flow and your assets and liabilities. We must prove through documentation that what we say is true. You must realize that the majority of the offers are rejected.

The offers are usually rejected because of two reasons. One aspect of the process is that an offer is very serious and requires thorough documentation. The second relates to the practitioner herself or himself. She must practically do the same calculation and secure the records that the IRS examiners do, so that he or she may have reasonable assurance that you will pass the scrutiny of the IRS. So, beware of people who may say you qualify without asking you about your income and expenses and your assets and liabilities. Without the answer to these two questions, no one, I mean no one, can tell you if you qualify for tax relief or not.

Net assets and cash flow are the criteria to removing your IRS levy and garnishment and reaching a successful tax resolution that solves your tax problem. Promises won’t do.

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