IRS New Policies Help Taxpayers Pay Back Tax Debt and Avoid Federal Tax Liens

Due to the worst economic downturn the country has faced since the Great Depression, The Internal Revenue Service has recently announced that they are enacting new policies structured to help people in tax debt (a little late in my opinion but then again better late then never).
Highlights of the new polices:
  • When a taxpayer enters into a streamlined installment agreement the IRS will withdraw their federal tax lien.  The IRS will also withdraw their federal tax lien if a taxpayer is currently participating in a regular Installment Agreement and later converts to a streamlined installment agreement though a direct debit installment agreement and requests a withdrawal of federal tax lien.
  • Currently, small businesses with under $10,000 in unpaid back taxes are able to participate in the IRS's Installment Agreement program, which helps businesses pay their taxes over 24 months as a last ditch alternative to a lien. Under the new policy, small businesses will be able to participate as long as they have less than $25,000 in unpaid tax liabilities. Small businesses that are able to pay down a higher balance to less than $25,000 would also qualify for the program.
  • Middle and lower class taxpayers struggling to make payments are a large population. To help them, the IRS has expanded their Offer In Compromise (OIC) program. Taxpayers with annual incomes of $100,000 or less and tax liabilities of $50,000 or less can participate in this program that allows the IRS and the taxpayer to come to an agreement that settles the tax liability for less than the full amount owed. Currently taxpayers can only participate if they have a tax liability of less than $25,000.
These are definitely some nice features the IRS (at least when compared to the old policies) has put into place; several of my current clients have already benefited from these new changes.  


Offer in Compromise 2010 acceptance rate remains under 25%

Offer in Compromise acceptance rate per the 2010 IRS Data Book remains at under 25%.  In the midst of the second greatest economic downturn in the history of the United States the Internal Revenue Service received over 57,000 Offer in Compromises submitted by taxpayers across the country. Of the 57,000 plus Offers that were submitted only 13,866 were approved.

In a time when the unemployment rate hovers around 9% (The official unemployment index, based on a monthly survey of sample households, counts only people who reported looking for work in the past four weeks. It doesn't account for part-time workers who want to work more hours but can't, given the tight job market. And it doesn't include those who have given up trying to find work. When the underemployed and the discouraged are added to the numbers, the unemployment rate rises to 16.6%) one would think that the IRS would be more lenient in accepting these Offers.


Rather than cutting back on expenses the IRS continues to gouge taxpayers with ridiculous amounts of penalty and interest (penalties up to 50% of the tax plus a never ending amount of daily compounded interest) and offers taxpayers much too little relief.  Forgot about those snake oil commercials you see on television or solicitations you receive from cold calling telemarketers after you had a federal tax lien placed on you, the Offer in Compromise program is only works for the few. 

It is not that Offer in Compromises can not be done but it is very important  to set your expectations low when submitting one.  In my opinion it does not hurt to ask and if you your offer is denied you can always work out another agreement such as a payment plan (installment agreement) or enter into currently not collectible status.

For more information give me a call toll free at 866-947-7209 or 720-340-4065 local or shoot me an email at nick@patriotresolution.com


Difference Between Being Represented by a Tax Attorney vs. an Enrolled Agent or a Certified Public Accountant

With myself being an E.A. or Enrolled Agent one of the most frequent questions I am asked is, "what is the biggest difference between hiring an Enrolled Agent or a tax attorney"?  I decided to put together a post to discuss the advantages and disadvantages each may have over the other, or where one CLEARLY has the advantage when considering who to hire.

Pros-Cons Hiring a Tax Attorney; TRUTH: A non-tax attorney may know about as much as you know about handling Tax Debt-Don't Buy the Hype! 

When I speak of a tax attorney I am not talking about one of these large "tax debt relief" companies such as Tax Masters who employ "attorneys"; just because someone is licensed as an attorney does not mean they have a tax background, let alone a LLM (Masters of Law) which provides an attorney to focus on a specific topic of law, such as tax law. Those three years of law school will not do their tax debt clients much good unless they also acquired knowledge through an LLM in taxation.  A regular attorney does not know more about taxes then anyone else.   A real tax attorney will work for a tax firm, you can tell the difference in a few ways, one being if you are called out of the blue by someone  that says they see a tax lien was filed against you and that they can help-attorneys and law firms and other tax professionals do not cold call people to solicit business, that's what salespeople do (i.e. Omni-Financial, 20/20 tax resolution, Berkshire Capital Partners, Clear Creek Consulting, etc., etc., etc., ).

If you have been accused of a tax felony such as tax evasion- which is distinguished from attempts to use interpretation of tax laws and/or imaginative accounting to reduce the amount of payable tax (i.e. WorldCom, Arthur Anderson, Wesley Snipes, to name a few) then you need a LOCAL tax attorney, as only someone is is licensed in your state can represent you; felony cases are handled at the District and Superior level (i.e not the federal tax court-where non-criminal cases are heard).  

Many attorneys are not even licensed by the tax court (i.e. tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest,administrative costs, worker classification, relief from joint and several liability on a joint return, review of certain collection actions), most attorneys who work for tax debt relief firms are simply attorneys from other fields who are down on their luck and need some money to hold them over until they find something else, I know, I have worked with over 50 different attorneys over the past 10 years in this industry (and yes some of them are still my friends, albeit I wonder for how much longer with posts like these!). 

To recap, the pros and cons of hiring a TRUE TAX Attorney over an Enrolled Agent, as follows:


If the government has served you with court papers stating that they are going to seek CRIMINAL charges, then you better contact a tax attorney as no one else will be able to represent you in District or Superior Court (an Enrolled Agent can represent you in tax court if they are also licensed with the federal tax court, which allows non-attorneys to represent taxpayers before the court after passing the tax court exam).


Cost.  You are more likely to pay to a licensed tax attorney much more than an Enrolled Agent. If you do not need to go to court, there is no need to spend big money for the same service you can get from an Enrolled Agent.   I have also found that attorneys do as little work as possible, just enough to collect a check.  An Enrolled Agent always feels, at least in my case, that they have to earn your business whereas an attorney feels "entitled" to have your business and are use to people kissing their feet not the other way around.

Nicholas Hartney, E.A.