Tax Brake with Robert G. Nath, Esq.

And that means almost Everyone. The agency audits over 1 million tax returns every year. It collects and inputs over 2 billion pieces of paper. It pursues 10 million people who owe over $100 billion in taxes, and tries to find five to ten million "non-filers."

The good news is: you CAN face this agency--as an equal--and often win. You have so many rights and opportunities to fight the IRS that it is sad when many of these are forfeited through ignorance or inaction. In this and another article, we'll explore the options.

WHEN YOU OWE TAXES

Owe back taxes but can't pay? You've got lots of options. You can ask for a 60-day extension of time almost automatically. If you need more time, you may have to give a financial statement, but the IRS gives longer term installment agreements all the time. The usual time is up to three years, but many last longer. If you're still not able to pay, think about an "offer in compromise." That's a procedure where the IRS permanently forgives part of your tax bill because it concludes you'll never be able to pay the whole thing.

To get an installment agreement or an offer in compromise, you must give the IRS detailed financial information. The agency will expect you to pay the maximum you can for an installment agreement. For an offer in compromise, be prepared to pay the net equity in your assets. That result takes some negotiation, but the IRS has clear forms and instructions on how to prepare installment agreement requests and offers. In fact, agents at any local office will walk you through the "offer in compromise" process if you ask.

Think about using some of these options in combination. Maybe you can pay down your bill and compromise the rest, or pay the rest over installments.

You can also use bankruptcy very effectively to fight a tax bill. Many people believe taxes are never dischargeable in bankruptcy--a tragic myth. But bankruptcy is strong medicine. Do not try this "experiment" at home. Instead, call an experienced bankruptcy attorney who is familiar with the way taxes work in bankruptcy.

Next week, we'll explore some additional general issues.

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