If you have a tax problem there are three things that you might believe about the IRS that are not so. I’m here to clear these up for you.
Lie #1: “The IRS wants to take your home”
Distressed taxpayers worry that the IRS will surprise them one day, show up on their doorstep to sell their house and leave their family homeless. That is never the case. The IRS rarely forecloses on a taxpayer’s home to pay back taxes. And by rarely I mean almost never.
Consider this: in 2017 the IRS had more than 14 million delinquent taxpayer accounts in its collections inventory. Of those 14-plus million cases the IRS seized the taxpayer’s assets in only 323 of those cases – or a mere fraction of one percent of the IRS’s pending collections cases. That is not to suggest that the IRS cannot foreclose upon your home. It can. But the IRS does not want to take you home and will do everything that it can to avoid this terrible result.
Selling your home also requires the IRS to refer your case to the Department of Justice to file a lawsuit and an order from the court directing the sale. That is why this rarely happens and only in the most extreme of cases. If you have a sizable debt to the IRS and there is equity in your home then foreclosure is an option that the IRS might consider, but not without giving you every opportunity to avoid losing your home.
Lie #2: “The IRS wants to close your business”
The IRS does not want to close your business or force you to sell the assets that you need to make a living. This is a common misconception that stems from the widely held belief that the IRS will stop at nothing to collect a tax bill.
Closing your business will not help the IRS collect what you owe. The IRS wants you to work and to be profitable so that you can pay them back. Accordingly, the IRS will exclude income producing assets or property that you need to earn a living from collection.
But, as with most things, this is not universally true. There is an important exception to this that is, unfortunately, quite common. If you are running a business that has accumulated significant employment tax deficits – so called trust-fund taxes that you withheld from your employees and failed to pay to the IRS – and the deficits continue to grow even after you’ve been contacted by the IRS about the problem; in that case the IRS might seek a court order to seize your assets and close your business.
The IRS rarely takes this drastic step, but it will if you ignore them and allow your business’ tax problems to grow. If you are working with the IRS and it is clear that you are making a good faith effort to prevent your tax problem from getting worse, the IRS will not take the drastic step of seizing the assets you need to make a living.
Lie #3 “You can just call the IRS and make an offer.”
The IRS doesn’t work that way. The IRS will settle for less than what you owe if you qualify for relief, either due to your financial condition or because of a hardship. But the IRS will not settle your tax debt until it has conducted a thorough review of your finances and the personal considerations that might render you unable to pay your debt. So you can’t pick up the phone and throw out an offer to see what the IRS might accept.
Making a good offer that has a chance to succeed is hard work and they are not casually reviewed or accepted by the IRS. During 2017, the IRS received 62,000 Offers In Compromise and of those only 25,000 were accepted.
Many offers are rejected because the taxpayer doesn’t qualify for an offer or there are a host of procedural issues that can cause the Service to reject an offer. It is important to find someone that can thoroughly review your situation and help you find the solution that is right for you. And if you do qualify for an offer, to present your case to the IRS in the best possible light.
If you are facing tax troubles, you’re not alone. I can help you find the solution that is right for you and get you back on the right track.