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When a person does not pay their tax debts, the government protects its interests in your financial assets or property by filing what’s called a Notice of Federal Tax Lien (FTL). This is a public document designed to alert creditors that the government has a legal right to the taxpayer’s assets. The lien attaches to all of your current and future assets and can potentially limit a person’s ability to obtain credit. This is a challenging situation; however, there are ways to avoid or prevent tax liens.

Don’t Ignore the Problem

Some people who owe taxes may wonder whether they should pay those liabilities, or just ignore them. Don’t ignore the problem! Owing a large amount of money is bad enough. Owing additional penalties and interest can make your financial hardships even worse. Also, even if you cannot pay the Internal Revenue Service (IRS) the full taxes owed, it is still a good idea to file your income tax return on time. 

Streamlined Installment Agreement

The easiest way to avoid a federal tax lien is to pay your taxes on time, and in full. But if you cannot afford a lump sum payment, the IRS offers payment plans – which are also known as installment agreements. These agreements make repaying the taxes a little easier by allowing an extended time frame for payments. In other words, the taxpayer will still be responsible for their debt, but he or she will have a longer time to pay it. 

If you owe less than $50,000, you can consider applying for a Streamlined Installment Agreement. A Streamlined Installment Agreement is a type of payment plan that the IRS offers to individuals who are trying to pay off any tax debt. It’s part of the IRS’ Fresh Start Program. These agreements are known as “streamlined” because they do not require a financial statement to determine whether you qualify, meaning that the IRS can process the agreement in a more streamlined and efficient manner. Under a Streamlined Installment Agreement, the taxpayer agrees to a 72-month payment plan via automated direct debits or payroll deductions. In exchange, the IRS will not file a public notice of a federal tax lien. 

First Time Abate Program

The IRS’ First Time Abate program is also designed to provide relief for taxpayers facing penalties, and potentially, a lien on their income or property. The First Time Abate program removes certain late-payment or late-filing penalties for individuals, businesses, and employers with clean compliance histories. A person or entity can apply for abatement if: 

    • they did not previously have to file a return, or did not have any penalties on the three previous years’ tax returns, 
    • they filed all required returns, or filed an extension, AND
    • they have paid or arranged to pay any taxes due. 

Offer In Compromise

An Offer in Compromise is an agreement between the taxpayer and the IRS that settles the individual’s tax liabilities for less than the full amount owed. Typically, taxpayers will not qualify for an Offer in Compromise if he or she is able to pay their tax liabilities in full through an installment agreement or by other means. The IRS will also not accept an Offer in Compromise agreement unless the taxpayer offers to pay less than their calculated reasonable collection potential (their assets and ability to repay on a monthly basis). 

The IRS may accept an Offer in Compromise if: 

    • there is doubt or a genuine dispute as to the correct tax liability, 
    • there is doubt that the amount owed can be collected in full, OR
    • there is no doubt that the tax liability is accurate and that the full amount can be collected. But, because of exceptional circumstances, requiring a payment in full would be unfair or would create an economic hardship for the taxpayer. 

Letter of Appeal

Another way to avoid a federal tax lien is to file a letter of appeal to with the IRS, explaining how the lien would not be in the government’s best interests. The letter implies that the government would collect significantly less money from the taxpayer if the IRS files the lien, than if the IRS does not file the lien. 

 

Contact Wiggam & Geer, LLC: Tax Attorneys Atlanta GA

If you are facing tax debts, whether it was your fault or someone else’s, please contact Wiggam & Geer, LLC for help with your case. We’ve worked with individuals, businesses, officers, directors, shareholders, and partners in matters before the Internal Revenue Service, the Georgia Department of Revenue, and other state tax departments. Our experienced Atlanta tax attorneys can help you choose the right strategy to resolve your tax issue and help reduce your criminal exposure. You can reach us by phone at (404) 233-9800 or send us a message through our website.