Two Strategies for More Successful Tax Resolution Casesby
The IRS isn’t always forthcoming about what the taxpayer’s best options are and that can make the whole process of helping a client navigate their tax debt frustrating and mysterious.
To help, we’ve put together three simple strategies you can use when you’re confronted with a tax resolution problem you need to solve.
Know the Best Uses for Different Settlement Types
One of the best ways to increase your odds of getting your settlement accepted is to request the right type. There are two primary types of settlements and knowing when to use each will help you get your client relief as quickly as possible.
1. Installment Agreements
An installment agreement is the most basic type of settlement. It doesn’t allow the taxpayer to pay any less than what they owe, but it does still provide a good way for the taxpayer to pay their debt to the IRS.
Installment agreements are usually best for clients that owe back taxes but don’t have any other extenuating circumstances. For clients who can afford to pay their debt—just not in one lump sum—a payment plan is almost always going to be the best option. It’s also likely to be the only option the IRS will accept for these situations.
Partial Payment Installment Agreement
Like the name implies, a partial payment installment agreement (PPIA) is like an installment agreement, except that it doesn’t require the taxpayer to pay their debt in full.
PPIAs are best for clients that aren’t in a position to make large enough payments on their tax debt to completely erase the debt before the CSED date makes the debt uncollectible. A PPIA is the best option for the IRS if the CSED date is soon and partial payment is the best payment they can hope for.
The IRS also prefers a PPIA when a taxpayer’s financial situation is likely to improve significantly before the CSED date. In this type of case, a PPIA allows the IRS to re-evaluate the taxpayer’s financial situation periodically in hopes that they might be able to collect more money than when the PPIA is put into place.
Offer in Compromise
An offer in compromise (OIC) is often one of the best options for your clients—and also one of the most difficult to secure. An OIC allows a taxpayer to settle their debt without having to pay the full debt or wait until the CSED date runs out.
OICs are best for clients with extenuating circumstances that aren’t likely to change before the CSED date. These types of clients are often on a fixed income or have some other type of ongoing hardship that limits their ability to pay their debt. If you can prove that an OIC represents the most the IRS is likely to collect from the taxpayer, the IRS is likely to accept your offer.
2. Use the IRS’s Words Against Them
The Internal Revenue Manual(IRM) may not be the most captivating piece of literature in the world, but it is one of your best weapons when it comes to representing your clients before the IRS. As a former Revenue Officer for the IRS, the single best thing you can do to increase your chance of tax resolution success is to be sure you can back up the foundation for your client’s case in facts and IRM references.
Appealing to fairness and the emotional side of things may have some effect, particularly with Effective Tax Administration cases, but they shouldn’t comprise the core of your argument for your client. Instead, it’s vital that you center your argument on the legalities spelled out in the IRM and other tax law documents.
Jeffrey McNeal, EA is the Tax Resolution Manager at Canopy. He previously worked as a Sr. Revenue Officer in the IRS, Small Business/Self Employed division, tasked with coaching other Revenue Officers in correct procedure adherence, application of directive and policy statements, along with...