Wage garnishment by the IRS can be a daunting experience. At DiLucci CPA Firm in Texas, we understand the stress and confusion that can come with such IRS actions. Our approach is rooted in fostering transparent, communicative relationships with our clients, guiding them through these challenging times with a blend of professional experience and personalized attention.
The Possibility of Negotiating with the IRS
The short answer is yes, you can negotiate with the IRS, but it can sometimes be complicated. The IRS offers several options for taxpayers to resolve their debts. Understanding these options is crucial for those who owe taxes but need help paying in full. Here’s a detailed explanation of each option:
- Installment Agreement: An installment agreement allows taxpayers to pay their debt over time through monthly payments. There are several types of installment agreements:
- Short-Term Payment Plan: For those who can pay their debt in 120 days or less. No setup fee is required.
- Long-Term Payment Plan (Installment Agreement): Suitable for larger debts or when more time is needed. Can be set up as a direct debit from a bank account. Fees may apply, but they are reduced for low-income taxpayers.
- Offer in Compromise (OIC): An OIC allows taxpayers to settle their tax debt for less than the total amount owed. It’s an option for those who cannot pay their entire tax liability, or doing so would create financial hardship. The IRS considers:
- Ability to Pay: Review of income, expenses, and asset equity.
- Income: Both current and potential future income.
- Expenses: Necessary living expenses are considered.
- Asset Equity: Value of property and other assets.
- The process requires thorough documentation and often the assistance of a tax professional. There is a non-refundable fee to apply.
- Currently Not Collectible (CNC) Status: If a taxpayer can prove that paying the tax debt would result in financial hardship, the IRS may place the account in CNC status. This temporarily stops collections.
- Penalty Abatement: Taxpayers who fail to file or pay on time may be subject to penalties. The IRS may relieve these penalties if the taxpayer can prove reasonable cause for failing to file or pay. This doesn’t eliminate the debt but can reduce the overall amount owed.
- Partial Payment Installment Agreement (PPIA): A PPIA allows taxpayers to make smaller monthly payments towards the tax debt like a regular installment agreement. This agreement considers the taxpayer’s ability to pay and may result in part of the tax debt being forgiven.
- Taxpayer Advocate Service: For those facing significant hardship or specific issues with the IRS, the Taxpayer Advocate Service can assist.
- Bankruptcy: In some cases, bankruptcy may be considered a last resort. Certain tax debts may be dischargeable under Chapter 7 or 13 bankruptcy. However, strict criteria exist, and not all tax debts are eligible.
What to Expect During IRS Negotiations
- Initial Assessment: The IRS will first assess your tax liability and the reasons behind your inability to pay. This assessment includes a review of your filed tax returns, any additional tax assessments, and the total amount owed, including penalties and interest.
- Notification: The IRS typically notifies you of your tax debt through a letter outlining your rights as a taxpayer and the need to address the outstanding balance.
- Response Time: It’s crucial to respond promptly to IRS communications. Failure to do so may result in escalated collection efforts, such as liens or levies.
- Options Presentation: The IRS will present various options based on your specific situation, such as an installment agreement, offer in compromise, or currently not collectible status.
- Negotiation Process: During negotiations, you or your representative will communicate with the IRS to find a mutually agreeable solution.
- Agreement and Compliance: Once an agreement is reached, the IRS will formalize it. Compliance with the terms of this agreement is crucial to avoid future issues.
Preparation and Documentation
- Comprehensive Financial Analysis: Prepare a detailed analysis of your financial situation, including income, expenses, assets, and liabilities.
- Documentation Gathering: Collect all relevant financial documents, such as pay stubs, bank statements, bills, and any records of assets or debts. These documents provide evidence to support your negotiation claims.
- Tax Record Review: Ensure that all your tax returns are filed and up to date. The IRS will not negotiate if there are outstanding tax returns.
- Understanding Your Rights: Familiarize yourself with your rights as a taxpayer, including the right to representation and the right to appeal the IRS’s decisions.
- Proposal Development: Based on your financial assessment, develop a proposal that realistically reflects what you can pay.
Your Partner in Resolving Tax Issues
Wage garnishment by the IRS is not an inescapable fate. Finding a resolution that works for you through informed decisions and strategic negotiations is possible. At DiLucci CPA Firm, we’re dedicated to helping our clients understand these challenges. We focus on building long-term relationships, understanding your needs, and delivering services that add value to your life and business. To speak with a lawyer in Texas, call (972) 444-9934 or contact us online to schedule a consultation to help guide you through your Tax, Accounting, or IRS matter.