Help Me Help You: Agreements & Offers
In my line of work, I often come across clients who are eager to explore the possibility of resolving their tax issues with the IRS. They’ve heard stories about programs like the Fresh Start program or settling their debts for pennies on the dollar. It’s natural to want to save money, but it’s crucial to understand that the IRS is primarily focused on collecting taxes, not settling them. So, when clients ask me about settling with the IRS, I often say, “Help me help you.”
The reality is that not everyone qualifies for an Offer in Compromise, which is essentially the IRS’s version of a “settlement.” To be eligible for this, the IRS needs to believe that they won’t be able to collect the full amount you owe. In many cases, pursuing an offer in compromise might end up costing you more than a more pragmatic, long-term agreement. So, it’s essential to be cautious about buying into the idea of quick, money-saving solutions, keeping in mind that the IRS’s penalties and interest rates can be incredibly high and are non-negotiable.
Navigating IRS Negotiations For Long-Term Solutions
In our negotiations, we aim to structure agreements that allow businesses to continue their operations while potentially paying less than the total amount owed. The penalties and interest components of IRS debt can be brutal, and they’re not something you can easily get rid of. However, with careful negotiation and a focus on your business’s financial health, we can create agreements that help you navigate rough times while ensuring that your tax liabilities don’t become overwhelming.
Fortunately, the IRS offers a wide variety of agreements that can be tailored to different business situations – but they don’t always publicize these options. For instance, in my practice in Colorado, I’ve worked with clients in the cannabis industry who experience significant fluctuations in their income due to grow seasons. Similar challenges arise for those in the farming industry. In these cases, the IRS can establish what are known as cyclical agreements, where tax payments vary based on the season. This flexibility allows these businesses to stay compliant with their tax obligations, even with fluctuating incomes.
Taking this example to another industry, you might note that contractors dealing with retention accounts face another unique set of challenges. The funds they hold may not be readily available for paying off IRS debts because they’re earmarked for specific projects. In such cases, we can negotiate graduated agreements that align with their cash flow, ensuring they can meet their tax obligations when they receive payment on their contracts.
The key takeaway is that there are numerous ways to structure agreements with the IRS, and the IRS doesn’t always reveal these options readily. That’s where a tax attorney or negotiator like myself comes in handy. We can navigate the complexities of IRS negotiations, ensuring that your business can continue its operations while addressing its tax liabilities.
The Consequences Of Defaulting On An IRS Agreement
Defaulting on an IRS agreement is never a favorable outcome. We put considerable effort into securing these agreements, and it’s disheartening when clients find themselves in a situation where they can’t or won’t fulfill they’re end of the deal. Naturally, defaults can happen for various reasons, including additional assessments, missed payments, or increased tax liabilities. Regardless, it’s worth noting that the consequences of default can vary depending on your history with the IRS.
If it’s a first-time default, it may be relatively easy to correct through an appeal and reinstatement process. However, if you have a history of defaults, things become much more complicated. The IRS doesn’t want to be an ongoing partner in a failing business, and if your business repeatedly defaults, they may take actions to promote the closure of your business. In such cases, it becomes essential to strategize and make significant changes to your business operations to demonstrate to the IRS that you’re committed to compliance. While some clients may find themselves in a cycle of renegotiating agreements each year, our goal is to prevent this from happening by helping them address the root causes of their tax issues.
The Role Of Financial Analysis & Documentation In Negotiating IRS Agreements
Financial analysis and proper documentation play a critical role in the negotiation and finalization of agreements with the IRS. Your financial records are like the key to a treasure chest during these negotiations, providing the necessary information to support your proposed terms and demonstrate your ability to meet your tax obligations. When we submit this financial information to the IRS, they scrutinize it carefully. If they disagree with any part of our proposal, they will communicate their concerns, opening the door to further negotiation or even an appeal. If it wasn’t available before, this is where having accurate and well-documented financial information becomes absolutely crucial.
Another big advantage of conducting financial analysis is that if the IRS disagrees with your proposal, they have to respond before taking any harsh actions like levies or seizures. In simple terms, they must either agree or disagree. When the IRS disagrees with your proposal, it kicks off an appeals process, and your case is passed to a third-party appeals division. The advantage comes in the way that, from my experience, these appeals officers tend to be more down-to-earth and professional, often leading to more favorable outcomes for our clients.
Real-World Example: Transportation Company Suffered… Until Appeals Helped Them
A real-world example of the impact of financial analysis involves a transportation company that I represented. They operate buses shuttling passengers from hotels to airports, and it’s quite an extensive fleet, with around 50 different vehicles, each having unique VINs and various loans. Unfortunately, the operation’s financials weren’t in the best shape, which led to tax issues with the IRS.
The revenue officer assigned to their case was incredibly diligent, almost to the point of obsession. They meticulously scrutinized each individual vehicle, VIN, and loan amount, trying to make sense of how it all connected to the company. But this led to major problems, as these buses were constantly in and out of service, frequently traded, and had various loans, making it all incredibly challenging to track.
This revenue officer kept rejecting our proposals time and again because we couldn’t provide all the VINs and make everything align perfectly. It was a frustrating ordeal that lasted for six months – until I finally decided to file an appeal after numerous rejections. I secured a hearing with an appeals officer who reviewed the case’s history and simply said, “I don’t understand why the revenue officer is fixated on these details. It’s evident that this is a transportation company, and here’s what they can realistically pay. Let’s establish an agreement.”
After navigating through the frustration with the revenue officer and the exhaustive production of VINs, the appeals officer looked at the situation from a more practical financial perspective. They decided to stop the fuss and instead focus on setting up a payment plan to address the debt.
Naturally, this resolution was a game-changer for the client, who had been on the verge of closing their business, feeling like there was no way out of the IRS’s grip. Thanks to the appeals process and the ability to showcase the financial realities, they managed to find a solution that worked, and they’ve been compliant ever since. Needless to say, it was a tremendous relief for the client to get past the roadblocks and work with someone who could genuinely understand and resolve the case.
In conclusion, financial analysis and documentation are the cornerstones of successful negotiations with the IRS. They enable us to present a clear and compelling case, increasing the likelihood of finding a resolution that works for both the IRS and our clients.