Tax Controversy Lawyer Blog

The Internal Revenue Service (IRS) and to some extent the South Carolina Department of Revenue (SCDOR) understand that times are tough and people are having a hard time making ends meet. If you owe back taxes and are flat broke after you pay for necessities, then you may be able to get the IRS off your back until you get back on your feet.

The IRS has the ability to place your account in Currently Not Collectible (CNC) status. If they do then you will no longer receive threatening letters or phone calls about your past due taxes and YOU DO NOT HAVE TO MAKE ANY PAYMENTS. The IRS will not issue bank levies or wage garnishments while your account is in CNC status. However, the IRS will typically file a Federal Tax Lien to protect its interest in the past due taxes. In addition, you will continue to receive letters from time-to-time that inform you of your current balance. Interest and penalties continue to accrue while your account is in Currently Not Collectible status.

Currently Not Collectible status is temporary in nature and your case may be reviewed every two years or so to make sure you still qualify. If your situation improves and the IRS feels like you can afford to make payments, they will take your account out of CNC status and will request some type of payments, typically an Installment Agreement.

As for the South Carolina Department of Revenue (SCDOR), they have an administrative position that if you, or anyone in your household, is receiving a paycheck -- and get this -- even unemployment checks are considered paychecks -- then you will not qualify for Currently Not Collectible status. So if your unemployment has run out and no one in your household has a job, then you can get some relief with the South Carolina Department of Revenue. If not tough luck, you better be ready to cough up some money each month or face wage garnishments and bank levies.

Continue reading "Currently Not Collectible (CNC): The Times are Tough Collection Defense" »

Once the shock has worn off from being audited by the IRS or finding that the IRS wants to collect those back taxes you have not paid, you will want to know what your options are to resolve the tax debts. There are a number of tax solutions that a taxpayer may avail himself or herself of to finally get a good night's sleep. One such tax solution, the Installment Agreement, is key to paying down and eventually eliminating the tax debt. And, while it may not cause all memories of your dealings with the IRS to fade into oblivion, it sure will help.

The Installment Agreement is an agreement entered into between the IRS and the taxpayer to pay down the IRS-assessed liability, i.e., your tax debt, over time. If you qualify for an Installment Agreement, the IRS will establish a payment plan where the taxpayer agrees to make monthly payments and in return the IRS will not issue bank levies or wage garnishments. The Installment Agreement payments are usually applied toward the oldest debt first, and once that debt is paid the payments are applied to the next oldest debt and so on and so forth until all the tax debts are paid or are uncollectible.

Careful attention must be paid to structuring the Installment Agreement, because sometimes the IRS allows an Installment Agreement with a small monthly payment for the first year and after that the new payment amount is bumped up to a payment that many taxpayers cannot afford. I call these "teaser" Installment Agreements. This scenario typically applies to taxpayers with significant credit card or other unsecured debts. The IRS does this to allow taxpayers time to reduce these "non-allowable" expenses and otherwise get their finances in order so that they can afford to make heftier payments down the line. This is not to say that this practice does not have its benefits. Taxpayers just need to be aware of the "teaser" Installment Agreement.

While not perfect, the Installment Agreement can be extremely helpful in permitting the IRS to collect what it will, and still allowing the taxpayer to get a solid 8 hours of sleep...OK, maybe 6 at the very least...

Continue reading "Counting Sheep? Consider an Installment Agreement" »