Tax disputes are quite common in Pennsylvania and throughout the United States. Likewise, tax settlements are also quite common – in fact, most tax disputes are settled rather than litigated. The key is obtaining the best tax settlement possible, but many people and some businesses will settle without knowing they could have gotten a better deal. That is a problem because many of these taxpayers got into their tax situation because of financial problems or mistakes and failure to obtain the best tax settlement delays their ability to get on track.
At Polishan Solfanelli, our tax settlement attorney in Northeastern Pennsylvania prioritizes your interests and works diligently to ensure you get the best tax settlement possible. In some cases, that may mean litigating rather than settling, but when it is possible and most advantageous, we settle. Contact us at (570) 562-4520 to schedule a consult and to get a better idea of whether a favorable settlement is viable in your unique situation.
Settling Tax Disputes in Pennsylvania
Taxpayers who do not address their tax debt can face serious civil penalties. Through fees and interests, your overall costs will increase. When the taxes you owe go unpaid for an extended period of time, the Internal Revenue Service (IRS) can garnish your wages and file liens or levies against your home, vehicles, or other property. So, in the end, not only will you have more to pay in terms of tax debt, but you can also lose your hard-earned assets.
Resolving a tax dispute sooner than later is critical. Fortunately, the IRS offers multiple tax relief options for tax dispute-settling purposes. When settling a disputed tax issue, keep in mind that the IRS considers three important factors:
- Collectibility, which means it will likely settle when there is doubt as to liability or doubt as to collectibility of the full amount of taxes owed because, to do so, would create an economic hardship for the taxpayer in some way;
- Hazards of litigation, which applies to tax appeals and means the IRS may consider settling when it determines that there is a likely probability a court may not uphold the IRS position; and
- Presence of exceptional or unusual circumstances, which may be considered when neither collectibility nor hazards of litigation are justified but, given the exceptional or unusual circumstances, litigation might be detrimental to fostering voluntary compliance by taxpayers, the latter of which is an overall policy goal
These factors can be confusing, and there is a lot of consideration that goes into each one. The important thing to keep in mind is that the IRS is willing to settle and that our tax attorney in Pennsylvania knows what they consider when justifying a tax settlement.
Options in Pennsylvania to Settle IRS Tax Disputes
If you owe a federal tax debt to the IRS, there are several tax relief options to consider to prevent the tax matter from escalating to the litigation stage. Tax relief can help you reduce your overall tax debt and/or pay in installments, making it easier for you to get to the point of tax compliance.
Offer in Compromise
Offers in compromise are popular tax relief options. If the IRS agrees to an offer in compromise, you can settle your tax debt for less than you owe. You offer to pay an amount you can afford and, if the IRS agrees to it and you pay it, the IRS then discharges the remaining amount.
You can pay an offer in compromise as a lump sum or make periodic monthly payments of up to 24 months.
To be eligible for an offer in compromise, you must be up to date with your tax returns and cannot be involved in an active bankruptcy case.
Installment Plan
Under an installment plan, the IRS allows you to pay your full debt in smaller, monthly repayments rather than all at once.
To be eligible, you must be up to date with filing your tax returns. You also need to demonstrate your ability to make the proposed monthly payments. Other qualifiers apply in different economic and tax debt situations.
Not Currently Collectable
The IRS may agree to delay collecting your debt for a certain time by marking your account as “Not Currently Collectible.” To do this, you need to show that you currently can't pay the debt.
This places a hold on the IRS exercising its powers to put a lien over or seize your property, garnish your wages, or place a levy on your bank account.
Statute of Limitations
The IRS must collect taxes, interest, and penalties within 10 years of the date of an assessment. Some taxpayers strategize to wait out this period and resolve their debt by relying on the statute of limitations.
However, this is a risky approach that doesn't always work. In the meantime, the debt is accruing additional penalties and interest which can lead to owing much more money to the IRS.
Other Tax Relief Options Aside from Settlements
Tax relief is available in other forms, too, that can complement or work in lieu of one of the above options. To note, though, these options, too, come with some risks and the need for lots of negotiation.
Bankruptcy
In certain circumstances, income tax debt may be discharged under Chapter 7 and Chapter 13 bankruptcy. For this reason, some taxpayers file for bankruptcy to resolve a federal tax debt.
If you are considering this option, it is essential to seek legal advice as to whether bankruptcy would allow you to do this in your circumstances. Bankruptcy has other long-term financial implications and is a decision that should not be made lightly.
Preventing Federal Liens or Levies
In some cases, the IRS can issue a bank levy, seizing your accounts to repay your tax debt. You may be able to seek release of a levy within 21 days of your bank receiving notice of it by retaining our tax attorney to negotiate with the IRS about resolving your debt.
Release From Wage Garnishments
The IRS has the power to garnish part of your wages and Social Security payments to pay an outstanding tax debt. However, if you are unable to afford your basic living expenses, our attorney can negotiate a reduction or release of the garnishment with the IRS.
Penalty Abatement
Some taxpayers can benefits from penalty abatement through the IRS. This type of relief can be granted when the taxpayer exercises ordinary care and prudence yet still failed to comply with their tax obligations. If approved, a penalty you incurred – for example, for not paying taxes on time or otherwise making a tax filing error – may be waived.
Relief for the Innocent Spouse
Spouses who file joint tax returns can find themselves liable for their spouse or ex-spouse's tax debts. However, if one of the spouses misled the other and hid their tax debt from them, the innocent spouse may be able to claim relief to be released from the tax obligations of their spouse or ex-spouse.
Factors to Consider in Pennsylvania before Settling or Litigating a Tax Dispute
You may not always have the option to settle rather than litigate because, in the end, the IRS holds the power to accept a settlement or not. If it refuses to settle on your terms, then litigation might be necessary. However, when there are viable options between settling and litigating, you want to weigh these options by considering several important factors.
Your True Tax Position
It is important to understand your actual tax position when deciding to litigate the matter, including exactly what you owe and your legal position. An experienced tax attorney can advise you on your position and prospects of success if you take the matter to trial.
Amount in Dispute
Litigation can quickly become costly. The eventual costs of litigation may end up being significantly more than the debt you're disputing with the IRS. You need to consider the amount in dispute against the odds of winning or losing and then factor in the additional costs of litigation. There is always a risk when it comes to litigation, but when you win, it can make a big difference in your financial situation overall.
Time and Effort
It also takes time to finalize a case via litigation, sometimes years. There may be value in negotiating a settlement rather than litigating when you want to move forward with your life or do not have the time to spend on litigation.
Contact a Tax Attorney in Northeastern Pennsylvania Today
When you have tax debt, the IRS is not going to ignore it, and so neither should you. Take action quickly by contacting our tax defense lawyer in Pennsylvania. We will review your case, outline your best tax relief options, and diligently pursue a favorable end to the tax dispute. Contact Polishan Solfanelli today by using the online form or calling us at (570) 562-4520, and we will schedule a consult to get you back on the road to tax compliance.