New Hampshire taxpayers who have outstanding IRS tax debt may be able to settle their debt for a fraction of the full amount owed by using an IRS tax settlement option. The Internal Revenue Service or IRS has the ability not only to collect federal tax debt, but to use a variety of very aggressive debt collection tools against New Hampshire taxpayers. Collection methods can include: wage garnishment, property repossession and bank account levies.
All New Hampshire taxpayers who have become the target of aggressive tax collection efforts or who have outstanding tax debt can contact a tax professional for help.
Offer in Compromise
Offer in Compromise or OIC is one of the most popular tax settlement options used by taxpayers. OIC allows New Hampshire taxpayers to make an offer to the Internal Revenue Service to settle their federal tax debt. The IRS can either accept or reject the offer. If the IRS accepts the Offer in Compromise and the taxpayer meets all of the requirements, the tax outlined in the OIC will be considered settled.
Currently the IRS accepts approximately 20% of first time OIC offers but more may be accepted after negotiations or on appeal. New Hampshire taxpayers whose OIC is denied will not have any legal authority to pursue legal action against the IRS. The IRS has the sole authority to accept or deny all OIC offers.
Offer in Compromise, if accepted, will stop all IRS collection actions against the taxpayer and stop penalties and interest from accruing. Offer in Compromise can be difficult and time consuming. The IRS will need detailed financial information from the New Hampshire taxpayer. If the OIC is denied, this information can be used by the IRS to continue their debt collection efforts. New Hampshire taxpayers who are considering Offer in Compromise should contact a tax professional to determine if OIC is the best option for them to settle their IRS tax debt.
Qualifying for Offer in Compromise
The IRS will not accept all OIC offers. To qualify for an Offer in Compromise, New Hampshire taxpayers must meet one of the following conditions:
- Doubt as to Liability- If there is some question about the amount of tax liability which has been assessed against the taxpayer the IRS may accept an Offer in Compromise. Doubt as to liability can occur if the IRS administrator misapplied the tax laws, made an error in calculation or if the taxpayer has produced additional tax information. This condition is not frequently met.
- Doubt as to Collectibility- Under this condition the amount of tax debt is not in question only the ability of the IRS to collect the debt before the statutory period ends for collection. The IRS also may accept an OIC under this condition if they believe the cost to collect the tax debt may be too high.
- Effective Tax Administration- The IRS may accept an OIC if they believe New Hampshire taxpayers who pay their federal tax debt may experience a hardship which is inequitable or unfair. The elderly and handicapped frequently qualify under this condition.
New Hampshire taxpayers must also complete the following:
- New Hampshire taxpayers must pay their federal taxes before the federal tax deadline for the next 5 years.
- New Hampshire taxpayers must meet all of the agreed upon requirements outlined in the OIC.
- New Hampshire taxpayers must submit their federal tax returns on or before the federal tax deadline.
Installment agreements are the most popular tax settlement option used by taxpayers. The installment agreement allows New Hampshire taxpayers to pay all of their tax debt in monthly installment payments. The time allowed to pay the IRS tax debt will vary based on the amount of debt the taxpayer owes.
New Hampshire taxpayers who owe $25,000 or less can either contact a tax professional or the IRS directly to discuss their payment options. Taxpayers who owe more than $25,000 should contact a tax professional who can help them negotiate the installment agreement. Penalties and interest will continue to accrue until the full amount of the tax debt is paid, but collection efforts will cease after the IRS accepts the installment agreement. It will always be less expensive for New Hampshire taxpayers to pay all of their tax debt in one lump sum payment and avoid an installment agreement if possible.
The Internal Revenue Service can terminate an Installment agreement for a variety of reasons including:
- The taxpayer fails to make the full installment agreement payment each month. First time violators may be granted a 30-60 day grace period.
- Federal tax returns are not submitted each year by the federal tax deadline.
- A New Hampshire taxpayer’s financial condition substantially improves.
- The taxpayer provides false or incorrect information to the IRS on the installment agreement application.
- Self-employed New Hampshire taxpayers fail to submit their federal tax returns each quarter or fail to make their estimated tax payments.
- Taxpayers fail to pay all of their IRS tax payments for the 5 years before the Internal Revenue Service tax debt which can not be paid.
- Taxpayers have had another installment agreement within the last five years.
Partial Payment Installment Agreement
New Hampshire taxpayers who do not meet the requirements of OIC or who can not make the monthly payments for the installment agreement may be able to qualify for a partial payment installment agreement (PPIA). PPIA allows taxpayers to pay only part of the tax debt in partial monthly installment payments. The IRS will forgive the tax debt which is not outlined in the PPIA.
Interest and penalties will continue to accrue until all the tax debt is paid under the PPIA, but the IRS will stop their debt collection efforts against New Hampshire taxpayers. Every two years the IRS will review the financial condition of the New Hampshire taxpayer to determine if their finances have substantially improved. If they have, the IRS has the authority to increase the PPIA tax payments amount or to cancel the PPIA.
Currently Not Collectible
If the IRS determines a New Hampshire taxpayer can not pay their IRS tax debt either through an installment agreement or another IRS tax settlement option, they may change the tax status to currently not collectible.
If the IRS determines a taxpayer’s debt is currently not collectible they will cease all collection actions against the taxpayer. Penalties and interest will continue to accumulate on all outstanding tax debt. The IRS will send a letter to the New Hampshire taxpayer each year outlining the amount of outstanding tax debt. This letter is not considered a tax bill. The IRS has 10 years to collect the debt or the statute of limitations will expire and the debt will be forgiven.
The IRS will charge New Hampshire taxpayers penalties for a variety of tax violations including: filing a late tax return, failing to file a return, submitting false tax information or requesting a false refund. There may be valid reasons for violating a tax law and if the New Hampshire taxpayer can prove they have a valid reason, the IRS may be willing to abate or lower their tax penalties. New Hampshire taxpayers who have had penalties assessed against them can contact a tax professional such as an enrolled agent, tax attorney or certified public accountant for help.
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