Effective Tax Administration Offer Attorneys in St. Louis Helping Clients Avoid Financial Hardship
Being in debt is never pleasant, but owing the IRS can be even more nerve-wracking. If you don’t pay your tax debts, there can be significant penalties, such as fines, fees, liens, and seizure of assets. However, many people aren’t aware that there are some allowances within the Internal Revenue Code that can help taxpayers settle their tax debts for less. An effective tax administration offer is one of these options.
If paying your tax debt would mean that you couldn’t afford to pay your bills, speak with a tax lawyer about whether you may be able to file an effective tax administration offer. At the Law Firm of Lance R. Drury, P.C., we know that facing a huge tax debt can cause a great deal of stress. We’re here to help you navigate this challenge and ensure you’re aware of all of your options.
What Is an Offer in Compromise?
An offer in compromise is a path that the IRS allows for taxpayers to lower their tax debts. It is usually a last resort after other avenues, such as ensuring your tax filings were correct and applying for a payment plan, have been exhausted. When you file an offer in compromise, you are basically offering to settle your tax debt with the IRS for less than the full amount. There are three types:
- Doubt as to collectibility
- Doubt as to liability
- Effective tax administration
A doubt as to liability offer centers on the argument that you are either not responsible for the debt at all or that the amount of the debt is in dispute. A doubt as to collectibility offer is used when someone does not have the funds or assets to be able to pay the debt so there is a low likelihood of the IRS being able to collect the funds.
How Does an Effective Tax Administration Offer Work?
The main differences between an effective tax administration offer and the other two types of offers in compromise is that the effective tax administration offer doesn’t dispute the debt and the taxpayer can technically afford to pay it. However, paying the debt would cause the taxpayer undue financial hardship.
For example, if the taxpayer has enough equity in their home that they could sell the property to pay the debt but this would then leave them homeless, this could be undue hardship. In general, your circumstances might qualify as undue financial hardship if paying the debt in full would leave you unable to pay your basic living expenses.
How Do You Prove That Paying the Debt Would Cause Undue Hardship?
When you submit an effective tax administration offer, you will have to provide supporting documents as evidence for your claim that paying the debt in full would result in
undue financial hardship. Your attorney can help you complete a financial statement that details your assets and liabilities as well as your income and living expenses. You may need to provide proof of your income, such as W-2s or tax returns, and proof of expenses, such as the past month’s statements for all bills.
You’ll also need to show that the comparison between your income and your expenses doesn’t allow for full repayment of the debt without hardship. How you prove this depends on your circumstances, and a tax lawyer will help you through it. In some cases, you may be able to provide a written statement explaining your circumstances.
How Do I File an Effective Tax Administration Offer?
To file an effective tax administration offer, you need to review your case with an attorney. They can help you understand if you’re eligible for an effective tax administration offer and let you know about any other options that may be a better fit. Once you have determined that you’re eligible to file an effective tax administration offer, you will need to gather all the paperwork and documentation to submit with your filing. This could include pay stubs, bill statements, and bank statements. You will then need to fill out IRS Form 656-B, which is the offer in compromise form.
Once you have your paperwork filled out, you will need to discuss what offer amount you will be submitting with your attorney. For an effective tax administration offer, the amount should be something that you are able to afford without causing undue financial hardship, but be careful about going too low. While the offer only needs to be more than $0, the IRS also doesn’t have to accept it. The chances of getting your offer accepted are higher if the offer is reasonable compared to the full debt amount.
How Can a Tax Lawyer Help Me?
Any time you’re dealing with the IRS, it’s always helpful to have a tax attorney representing you. They are familiar with the tax codes and how the IRS operates and can help guide you through a very complex system. Working with attorneys for resolving IRS tax issues can also provide some peace of mind that you are handling the paperwork correctly and have everything you need as you go through the offer in compromise process.
If you owe the IRS money, it’s important to take care of it as soon as possible to avoid further financial repercussions, such as seizures or tax liens. Call an off of The Law Firm of Lance R. Drury, P.C. today to speak with a member of our team to schedule your free consultation. We can outline your options and explain how our firm can help you overcome this challenge and get a fresh start.
Ste. Genevieve, (573)-883-3056; St. Louis, (314)-260-6120; Nashville, (615)-733-8168; and San Antonio, (726)-202-1300.