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That depends on your ability and mental fortitude to deal with the Internal Revenue Service and/or State agent. Most agents are fair. However, sometimes they can be difficult, confusing and frustrating. There are many laws, regulations, procedures, forms, court decisions, etc. that affect how people deal and negotiate with the Internal Revenue Service or State. There is a lot of information to digest to make sure you're not taken advantage of, knowing the options, and avoiding the pitfalls. There are no tricks or magic. Knowledge is power.
These days there is a lot of information available on the internet. As with any endeavor, there are nuances, traps, and tricks to be aware of. Do you have the time and ability to review everything? It can be mind-numbing trying to read through all the extraneous information to find what is important.
Many people are paralyzed by fear of the unknown. The Internal Revenue Service has done a great publicity job by jailing big offenders such as Al Capone, Leona Helmsley, and Wesley Snipes. But, the Internal Revenue Service really doesn't want to put you away, house you, feed you, and give you medical care. They'd rather have you being a contributing taxpayer, not a burden to government. So, don't let fear immobilize you.
The agent's job is to collect the taxes you owe in the quickest manner possible. With the exception of any streamline procedures (your tax debt has to be less than $50,000 to qualify for streamline procedures) they will request complete financial information disclosure from you before they will consider any negotiations. They will expect you to pay the tax immediately with any cash and liquid accounts you have (including IRA's and other retirements accounts, with some exceptions and other options). If that's not enough to pay the tax bill, next they will look at any assets/property you own that can reasonably be sold to generate cash to pay your taxes.
If your liquid accounts and assets don't generate enough to pay the taxes, they will look at your ability to make monthly payments.
However, there are options. Rather than cashing out your liquid accounts or selling off assets you have accumulated over your life, you can request a Streamlined Installment Agreement if you owe less than $50,000 and you can propose to make monthly payments that will pay the tax bill within 6 yrs (72 months). E.g. if you owed $25,000 you would have to pay at least $348 per month.
If you can't make payments under the automatic installment agreement conditions, you can negotiate other payment terms. For that the Internal Revenue Service will require that you make a full financial disclosure and they will closely scrutinize your financial profile. They will take into account all your sources of income (including sources not typically subject to income taxes or otherwise exempt), then dictate what expenses are allowable for you based on their Bureau of Labor Statistics Living Standards. (These Standards are used in Bankruptcy also.) Whatever is left over is what they expect you to pay, nothing less. Some people feel that the Standards are generous, others feel it's stingy. That depends on your life style. This may be an area where you want to seek professional help. There are many traps to avoid, and options you can use that you may not be aware of.
If your tax debt is large and you are in poor financial condition, you may consider an 'Offer in Compromise.' In an Offer in Compromise you can settle tax debt for less than you owe. Pennies on the dollar. It has no relevance to how much you owe. It is based only on how much you can reasonably pay. You'll want professional help on that.
If you had extenuating circumstances, you may qualify for an abatement to reduce penalties and interest.
Think you may need help? Contact us for a free analysis.
Apart from our on-line and direct professional help, you can find a range from $25 to $500 per hour. Obviously the lowest rate is not the best, nor is the highest. Sometimes the old adage 'you get what you pay for' applies. You need to hire a tax professional who can get the job done for you. You want someone with experience. You wouldn't ask your podiatrist to perform your heart surgery.
Sample Professional Fees for Representation:
- $120 to $500 per hour. These fees may vary depending on the nature of the services being performed.
- $ 60+ per hour for para-professional time (usually half the professional's rate).
Depending on who you hire, these fees may run higher.
It's unpleasant to quote hourly fees because people just see the clock ticking every time work is done. You have to look at the value you get in the end and the peace of mind. Here are some typical total costs for projects. These are based on normal circumstances. Any complexities or issues may add to the costs:
- Individual Streamlined Installment Agreement $1,000
- Individual Standard Installment Agreement $1,500
- Business Installment Agreement $2,000
- Individual Offer in Compromise $2,500
- Business Offer in Compromise $3,500
Some processes are often pursued in conjunction with another. Professionals seek to provide the best solution the taxpayer qualifies for.Other types of tax services are impossible to give a ball park estimate on because of the variables in each case. It is best to talk to a professional.
Copyright 2001-2016 Gary W. Lundgren, EA All rights reserved.