Nevada taxpayers who have IRS tax debt can use IRS tax settlement options to settle that debt often for a fraction of the total amount owed. The IRS has been give authority by the federal government to collect taxes and if necessary, initiate a variety of aggressive debt collection tactics such as wage garnishments or tax levies to force Nevada taxpayers to pay their tax debt.
Nevada taxpayers who have been harassed by the IRS can get help. The IRS may be willing to negotiate with taxpayers to avoid declaring debt currently not collectible or increasing the debt collection time period with an installment agreement. Contact a tax professional such as an enrolled agent, tax attorney or certified public accountant for help.
Offer in Compromise
Offer in Compromise or OIC is one of the most popular IRS tax settlement options available. Offer in Compromise allows the Nevada taxpayer to make an offer to the IRS. The IRS can choose to accept or deny the OIC offer. If the IRS accepts the offer, and the Nevada taxpayer meets the requirements of the OIC offer, the tax debt is considered settled. The IRS frequently will accept much less than the full amount of tax debt owed. Unfortunately, penalties and interest will continue to accumulate while the IRS is considering the Offer in Compromise.
The IRS currently accepts approximate 25% of the first time OIC offers it receives. More offers are accepted after negotiations or a more formal appeal is made by the Nevada taxpayer. Offer in Compromise is not a simple process and the IRS requests a large amount of financial information from the taxpayer. If the taxpayer’s offer is denied, the IRS can use the information they have gathered to continue their debt collection efforts.
Qualifying for Offer in Compromise
Requesting an Offer in Compromise will not be enough to ensure it is accepted. The IRS has certain criteria Nevada taxpayers must meet:
- Doubt as to Liability- Nevada taxpayers must prove the amount of tax liability they have been charged may be incorrect. If the IRS agrees they may be willing to accept an Offer in Compromise. The IRS does not frequently use this condition to grant an OIC.
- Doubt as to Collectibility- Under this condition the IRS doubts their ability to collect the outstanding tax debt. Unlike the first condition, the amount of liability is not in question, only the ability of the Internal Revenue Service to collect the tax debt.
- Effective Tax Administration- Nevada taxpayers who believe they will experience “an economic hardship which is unfair and inequitable” if they pay their federal tax debt may qualify for an Offer in Compromise. The elderly and handicapped most frequently meet this condition.
Nevada taxpayers applying for an OIC must also complete the following:
- Nevada taxpayers must pay all of their future IRS debt on or before the federal tax deadline for the next five years.
- All OIC requirements must be completed by the Nevada taxpayer.
- Nevada taxpayers must complete and submit all of their Internal Revenue Service tax returns by the federal tax deadline.
Nevada taxpayers also can use an installment agreement to pay their federal tax debt. Installment agreements allow the Nevada taxpayer to pay all of their tax debt with monthly installment payments. Nevada taxpayers with $25,000 or less in tax debt generally are able to qualify for an installment agreement which will allow them to pay their debt within 60 months. Nevada taxpayers with more than $25,000 in tax debt should consult with a tax professional that has experience negotiating an installment agreement. Interest and penalties continue to accrue until the full amount of tax debt is paid. It is always less expensive to make tax payments lump sums payment.
The Internal Revenue Service can terminate an installment agreement (IA) for any of the following reasons:
- The Nevada taxpayer does not pay their monthly tax payments.
- The Nevada taxpayer fails to file their tax returns.
- The Nevada taxpayer pays less than the agreed upon monthly payment amount. The IRS may give first time violators a grace period of 30-60 days.
- The Nevada taxpayer’s financial condition improves.
- False or inaccurate tax information was provided to the IRS by the Nevada taxpayer during the installment agreement application process.
Nevada taxpayers who are applying for an installment agreement must meet the following requirements:
- All self-employed Nevada taxpayers must file quarterly tax returns and make quarterly federal tax payments.
- Nevada taxpayers must file all federal tax returns.
- Nevada taxpayers must pay their tax debt for the five years before the tax liability which can not be paid.
- Nevada taxpayers can not have made another IA with the IRS within the last five years.
- The IRS will review the Nevada taxpayer’s financial situation every two years.
Partial Payment Installment Agreement
Nevada taxpayers who can not pay all of their tax debt with an installment agreement may qualify for a partial payment installment agreement or PPIA. Under the partial payment installment agreement, the Nevada taxpayer may be able to pay their tax debt with partial monthly payments. If the IRS agrees to the terms of the PPIA, any debt which is not paid will be forgiven.
Nevada taxpayers may prefer a PPIA over Offer in Compromise because it can be less time consuming and complicated. Unfortunately, penalties and interest continue to accumulate under the PPIA, but the IRS will stop their debt collection actions against the taxpayer. The IRS will review all partial payment installment agreements every two years to determine if the plan can be terminated or revised. If the PPIA is revised, the Nevada taxpayer may have to increase the amount of their monthly payments. It is always less expensive to pay all tax debt at one time.
Currently Not Collectible
The IRS may consider debt they can not collect as “currently not collectible”. The IRS will discontinue debt collection efforts against Nevada taxpayers who have their debt reclassified as currently not collectible. Each year the IRS will send written notification to the Nevada taxpayer outlining how much debt they owe. This notification is not considered a bill. If the IRS fails to collect on tax debt within ten years the collection time will expire and the debt will be forgiven.
Nevada taxpayers may be assessed tax penalties for a variety of reasons including: failing to file federal tax returns, making a request for a false refund or not reporting tax data correctly (either mistakenly or fraudulently). If the Nevada taxpayer can provide a valid reason for the error, the IRS may be willing to lower or abate the penalty. Valid reasons could include: incorrect advice from a tax professional, failing physical or mental health, personal duress, or disasters. Some penalties may not be dismissed or lowered.