Everyone has heard the old cliché, “There are two things in life we all must do – pay taxes and die.” Not paying taxes can have dire consequences. Just look what happened to the notorious gangster, Al Capone. He was prosecuted for filing false income tax returns and spent the rest of his life in federal prison – not for all of his crimes, but for failure to pay income tax.
Not all underpayment of taxes leads to prison. Sometimes, people just make honest mistakes. Whether underpayment of taxes is intentional or a mistake, the individual is more than likely going to hear from that dreaded federal agency, the Internal Revenue Service (IRS).
The IRS is the most powerful bill collector in the US. That’s why, when people receive a letter in the mail from the IRS, most, if not all, go into panic mode. Although this is a natural reaction, the IRS is not as bad as people fear. Yes, they do have extraordinary collection powers – but let’s analyze these powers. They can:
1. File federal tax liens against you, which ties up your property if you try to dispose of it either by sale or otherwise. It also makes it difficult to borrow money.
2. Levy and seize your assets, cars, boats, bank accounts, etc. Unlike other creditors, they can even seize and sell your homestead. State homestead exemptions do not apply to the IRS because federal law is superior to state law.
3. Garnish your wages, social security and other sources of income.
Even though the IRS has all of these powers, there are remedies that attorneys, as your tax representative, can utilize to help you resolve your tax problem. When contacted by the IRS, YOU SHOULD NOT IGNORE THEM! That only leads to them exercising the powers enumerated above. If you have a federal tax problem, you should contact Bailey & Galyen immediately.
When you owe the IRS and they attempt to collect, there are three things Bailey & Galyen can do to help you resolve the problem:
1. Obviously, you can pay the amount of taxes, interest and penalties they say you owe, and they will go away.
2. Your attorney can negotiate with the IRS to obtain an “installment agreement”. This is an agreement between you and the IRS whereby you agree to pay, and they agree to accept, a certain amount of money per month until the amount owed is paid off or the statute of limitations bars them from further collection. How much you pay per month depends on your financial condition. The advantage of this agreement is that as long as you make your payments on time, they will not do any further collection activity.
3. Alternatively, your attorney can try to negotiate an “offer in compromise”. This is a situation where the amount of taxes you owe are so high, and your income and assets are so low, that you will never be able to pay off the amount of taxes you owe. An offer in compromise is much more difficult to obtain than an installment agreement because it is an agreement to allow you to pay less than you actually owe. Like the installment agreement, if an offer in compromise is accepted by the IRS, no further collection activity will take place.
Both the offer in compromise and the installment agreement require you to remain current on all taxes in the future. If not, then the agreement or offer will be voided, and the IRS will be free to begin collection activity again.
Bailey & Galyen can help you avoid the concerns you have in dealing with the IRS. We have been dealing with IRS tax issues for over 48 years. We know how it works and how to obtain the maximum benefits for our clients. Please contact us, and we will be happy to assist you.