Georgia residents who have federal tax debt may have several options to eliminate or reduce the amount of back taxes they owe. The Internal Revenue Service (IRS) has been given the authority by the United States federal government to create tax settlement options which allow Georgia taxpayers to settle their tax debt for a fraction of the total amount owed.
Qualifying for a tax settlement plan may help stop the aggressive collection efforts of the IRS including: wage garnishment, repossessions and bank account levies. The IRS may accept a settlement option if doing so will allow the Georgia taxpayer to meet their current and future tax liabilities.
Georgia residents who are considering an IRS tax settlement option need to contact a tax professional such as an enrolled tax agent, tax attorney or certified public accountant who can review all the available tax settlement options.
Offer in Compromise
Offer in Compromise is one of the most popular IRS tax settlement options available for Georgia taxpayers. An Offer in Compromise or OIC allows the Georgia taxpayer to propose an amount to the Internal Revenue Service to settle their federal tax debt. If the IRS considers the proposed amount reasonable, they will accept the offer. If all the requirements outlined in the OIC agreement are met, then the Georgia taxpayer’s debt is considered settled. Many times the Internal Revenue Service accepts much less than the full amount of tax debt owed.
Approximately 80% of first time OIC offers are declined, but the Internal Revenue Service may be willing to continue negotiations with the Georgia taxpayer to identify an amount which is agreeable to both parties. Offer in Compromise can be time consuming, expensive and complicated. The Internal Revenue Service will need a substantial amount of financial data to process the agreement and if the OIC is denied, they can use this information to continue the debt collection process.
Qualifying for Offer in Compromise
Not all Georgia taxpayers with federal tax debt will be able to qualify for an OIC. Offer in Compromise is accepted by the IRS for the following reasons:
- Doubt as to Liability- Under this condition the IRS has some doubt as to the accuracy of the amount of tax debt which has been assessed against the Georgia taxpayer. This condition is not frequently met.
- Doubt as to Collectibility- If the Internal Revenue Service does not believe they will be able to collect the tax debt now or in the immediate future, they may be willing to accept an Offer in Compromise. This condition differs from the first because the amount of debt is not in question, only the ability of the Internal Revenue Service to collect the debt.
- Effective Tax Administration- Under certain conditions, a Georgia taxpayer may experience an “an economic hardship which is unfair and inequitable” if they pay their federal tax debt. The IRS may be willing to accept an OIC offer under these circumstances. This is most frequently the case with the elderly and the handicapped.
Georgia taxpayers applying for an Offer in Compromise must also complete the following:
- Georgia taxpayers will have to pay all of their future tax debt before or on the federal tax deadline for the next five years
- All the Offer in Compromise requirements must be completed
- Georgia taxpayers must fill out and complete all of their IRS tax returns by the tax deadline
Georgia taxpayers who do not want to use or do not qualify for an Offer in Compromise, may be able to use an installment agreement (IA) to repay IRS debt. Under an installment agreement, Georgia taxpayers can pay the total amount of tax debt in monthly installment payments. Georgia taxpayers who owe less than $25,000 can generally get an installment agreement to repay their debt over a 60 month period. Georgia taxpayers who owe more than $25,000 may want to contact a tax professional to help negotiate a payment plan. Penalties and interest will continue to accrue for the entire duration of the installment period. It is always less expensive to pay IRS tax debt in one lump sum payment.
The Internal Revenue Service can terminate an installment agreement if:
- Georgia taxpayers fail to meet the requirements of the IA (not paying the monthly tax payments or not filing tax returns).
- Georgia taxpayers fail to make the full payment amount. The Internal Revenue Service may give Georgia taxpayers a grace period of 30-60 days for the first violation before terminating the installment agreement.
- If a Georgia taxpayer’s financial condition improves the IRS can terminate the installment agreement. A review of the installment agreement will be done every two years by the IRS.
- If Georgia taxpayers provide false or inaccurate tax information during the installment agreement application process the IA can be terminated.
Georgia taxpayers who are considering an installment agreement must meet the following requirements:
- All self-employed Georgia taxpayers must file quarterly federal tax returns and make quarterly estimated tax payments.
- Georgia taxpayers must file all federal tax returns.
- Georgia taxpayers must pay their tax debt for the five years before the tax liability which can not be paid.
- Georgia taxpayers can not have made another installment agreement with the IRS with in the last five years.
Partial Payment Installment Agreement
Georgia taxpayers who are unable to pay all of their IRS taxes may be able to settle their taxes under a partial payment installment agreement. Partial payment installment agreements or PPIA allow Georgia taxpayers to pay their federal back taxes in partial monthly payments. The PPIA differs from the installment agreement because not all of the debt is paid and the debt which is not paid is considered forgiven by the IRS.
Partial payment installment agreements may be less expensive, less complicated and less time consuming than an Offer in Compromise. The PPIA will also stop the IRS from trying to collect taxes. Unfortunately, penalties and interest will continue to accrue on the outstanding tax debt. Every 2 years the IRS will review the PPIA and determine if the taxpayer’s financial condition has improved, if it has, the IRS can increase the PPIA payments or terminate the PPIA entirely. It is always less expensive to pay federal tax debt as soon as possible.
Currently Not Collectible
If the Internal Revenue Service determines they will not be able to collect a tax debt, they may decide to change a Georgia’s tax status to currently not collectible. Currently not collectible status will stop the Internal Revenue Service debt collection efforts including wage garnishments and tax levies. Every year the Internal Revenue Service will send notice of the tax debt (not considered a bill). If the tax status is currently not collectible for over ten years and the IRS does not attempt to collect the tax, the statute of limitations will expire and the debt will be forgiven.
Penalties may be assessed for a variety of reasons including: failure to file a tax return, claiming a false refund, or reporting false tax information. If a Georgia taxpayer has a valid reason, the IRS may be willing to reduce or abate the penalty. Reasons for penalty abatement may include: personal duress, disasters, false advice from a tax professional or failing physical health. There may be penalties which will not be abated.