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Common Questions About How to Resolve a Back-Tax Liability

At M&M Financial we’ve been helping struggling taxpayers resolve their back tax debts since 2005.  Each new client over the years has brought a new set of challenges, which is one of the things we love about our jobs at M&M.  Although the basics of fixing a back-tax problem remains basic for us, each business and each person has a different set of circumstances.  As we resolve one client’s tax debt and send them on their way with less stress and a fresh outlook, another client comes to us with a new tax debt and new hurdles.

Although many things change over time, we’ve heard a lot of the same questions from our new clients.  A few common new client questions we come across are listed below.

Will the IRS make a settlement?

Unfortunately, the IRS doesn’t make deals with a handshake.  But in some cases, the IRS will accept an Offer in Compromise (OIC), which is a settlement for less than the amount actually owed.  Typically, individual taxpayers have a better chance at getting an OIC accepted than a business that owes employment tax.  The OIC is a long and tedious process taking up to two years to complete and involving a lot of paperwork.  The Offer calculation has many components and can get very confusing.  If you want to know if you qualify for the IRS OIC, contact M&M today for a free, confidential consultation.

When will the IRS remove penalties and interest?

Many of M&M’s clients are worried about penalties and interest.  To maximize our client’s chances of successful penalty abatement, we need to focus on the total resolution process.  Although penalty abatement is an important part of the resolution process according to the M&M System, it is not the first step.  At M&M we take a few very important steps before requesting the removal of penalties for our clients.

The first step is helping our clients achieve current tax compliance.  If you continue to accrue new tax debts, that means the problem that caused the IRS to assess penalties in the first place is not fixed.  The problem needs to be addressed before the IRS will give your penalty abatement request a serious look.

Another key step in the M&M Tax Resolution System that comes before the request for abatement of penalties is the request to the IRS for a formal resolution.  We know that a formal request for resolution provides our clients with the protection they need from bank account and A/R levies.  When you wake up to a zero balance in your bank account on payday, the questions about penalty relief take a back seat.  At M&M, we know better than to put the cart in front of the horse.  Compliance and protection first, abatement of penalties next.

Unfortunately, the IRS doesn’t remove interest unless they are at fault.  And, interest will continue to accrue on your tax debt as long as there is a balance due, even if you enter into a formal Installment Agreement.  Interest is the IRS equivalent of the interest rate on a loan, and it can fluctuate.

My business owes the tax, why do I have to give the IRS my personal information?

The simple answer is because as the owner of the business you make the financial decisions for the business.  The IRS wants to make sure the owners of a business are not lining their own pockets while the business struggles and accrues tax debts.  Analyzing personal financial information is how the IRS determines whether or not this is the case.

If your business owes 941 employment tax, there is the Trust Fund Recover Penalty (TFRP) to consider.  The TFRP is the portion of the employment tax debt that the IRS can assess to the Responsible Individuals of the delinquent business. This means that the IRS is able to collect a large portion of the employment tax from two separate sources, the business and the Responsible Individual(s).  At M&M, we aim to construct the business monthly Installment Agreement in a way that allows the business to pay its own tax debt so that the IRS does not require a simultaneous monthly payment from the individual owner’s.  Contact us today to find out more about how we can help you resolve your payroll tax debt.

Why do I have to give the IRS my spouse’s personal information?

The IRS uses your complete household to determine your ability to pay monthly.  If the tax liability is only yours and there are other income contributors in your household, the IRS will determine your percentage of the total household income and then apply that same percentage to the total household expenses in order to determine your ability to pay monthly, separate from other household income earners.  If your spouse is not responsible for the tax debt, submitting his or her financial information will not cause the IRS to hold them responsible for the tax debt.

 Do you have more questions?  Contact us for answers.



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