IRS tax relief programs 2018: Answers to the most common questions

Where do I find an IRS tax relief application? What are the fees?


There is no one universal IRS tax relief form, just as there is no universal IRS tax relief program.  The correct form, if any, varies depending on the IRS program that is best for your situation. Some can be done over the phone.  Some programs have fees, some do not. And recently, the proposed Taxpayer First Act would eliminate some of the program fees for taxpayers in financial distress. Stay tuned for that.


What are the IRS tax relief programs for back taxes?


The most helpful way to think about IRS tax relief services for unpaid back taxes is two ways:

  • You can’t afford to pay or
  •  you actually don’t owe the taxes.


If you can’t afford typically involved a full repayment or partial repayment over time, or even no repayment at all. Or perhaps it could be submitting an Offer in Compromise for what the IRS deems your “reasonable collection potential” to be.  If you don’t actually owe the taxes, an audit reconsideration or claim for refund or and Offer in Compromise doubt as to liability may be the way to go.


What other type of IRS tax relief programs are there?


Other types of amnesties involve limiting criminal exposure, unfiled returns, and penalty mitigation. And there is the IRS First Time Penalty Relief program that is guaranteed as a matter of right. You just have to ask for it. Sometimes it just takes a call, others times the request must be in writing. It depends on how large the penalty you are seeking to remove.


Also, the IRS is very interested in assessing large penalties for those with unreported foreign accounts or assets, including inheritances from abroad and pensions located overseas. The penalties can get out of hand quickly – starting at $10,000 per year and the potential to reach so high they could actually completely ruin someone. We submit a significant amount of disclosures under the Standard Offshore Voluntary Disclosure Program (OVDP), which is ending in September of 2018, and the Streamlined Disclosure Programs, which have no end dates as of yet.  


And still another type of tax relief is a general tax relief for when taxpayers are in a declared disaster area due to a hurricane, earthquake or some sort of natural or even man-made disaster. These amnesties typically push back dues dates to everyone in the affected area to eliminate potential penalties, yet it does negate ones requirement to pay the underlying taxes. If however, your ability to pay was greatly reduced by natural disaster situations, or even say something like a terrorist attack, this fact should be properly incorporated into a claim that you can’t afford to pay the tax bill in full.   


What about mental illness? Is there any tax relief available for taxpayers with mental illness?


We often get calls from family members and friends of a taxpayer who has both tax problems and mental health problems. While there is no specific tax relief initiative for the mentally ill, properly documenting the illness can often mean the difference between disaster and a favorable settlement. The biggest problem in these cases is removing the fear. Cases with mentally ill clients are difficult and require extra patience, but are incredibly rewarding when we are able to resolve at least one of our clients’ problems.

 Is IRS tax relief a scam?


There are a lot of tax relief companies out there who advertise heavily with TV and radio commercials, and the internet. Many of them are, in fact, scams and not legitimate. The tax resolution industry is loaded with people claiming that are “top rated tax relief companies” and “the best tax problem attorneys.” Many of these people making these claims aren’t lawyers Which is fine, a non-lawyer can help you, but lying is dishonorable. Yet, they are never called out on it, closing their doors when the complaints get too large and then reopening under a different name. Many these firm pay for fraudulent reviews or use other services to suppress unfavorable reviews.


The IRS does not regulate these companies to any meaningful degree, the Federal Trade Commission tends to be more aggressive, but there is only so much they can do. The best advice is to exercise due diligence on who you hire, if anyone, to help you get this problem behind you.  


The good news is that there are a lot of very good tax relief specialists out there. A lot of them are my friends. Some are Enrolled Agents. Some are CPAs. Some are actual real tax relief lawyers. We are tax attorneys so the cases best suited for us are where:

  • there is a fear of criminal exposure
  • the stakes are quite high
  • businesses are involved
  • the issues are incredibly complicated (especially when foreign assets or income is included),
  • or it is a case where the client prefers to have the protection of the attorney-client privilege.


Is IRS tax relief available for tax liens?


A Notice of Federal Tax Lien notifies anyone that you do business with that you owe the IRS money. This can frustrate your ability to borrow money so that you can get our of your financial problems. Unfortunately, the IRS is very aggressive on filing tax liens, even when taxpayer have nothing to the lien will actually attach to, other than future earnings. The good news is that there are IRS lien programs to remove federal tax liens automatically. The problem is they typically require a payment in full or an installment agreement that may be unaffordable.


Part of the IRS Fresh Start Program was to allow for federal tax liens to be withdrawn once paid in full. This is the best thing for your credit report. Also, when an Offer in Compromise is satisfied, a lien is automatically released within about 2 months.  

Does IRS tax relief vary from state to state?


Absolutely. The IRS takes into account the various differences in the cost of living. Yet, the differences sometimes are not enough. The reason is the IRS will take an average of an geographic area that might not be really be realistic. For instance, in the hyper-wealthy Fairfield county in Connecticut, the largest city is Bridgeport, which is quite cheap to live in, although a bit distressed in appearance in security. Yet the standards for living in says uber-wealthy Greenwich is exactly the same as it is for a taxpayer in Bridgeport. So the key in proving a limited ability to pay is to make a successful non-standard argument.


Same thing is true in Los Angeles county. There are very expensive places to live, and others quite impoverished and lower-cost. The IRS averages them all together. The allowable standards for Santa Monica is exactly the same for a taxpayer living in Compton. Again, the key is to make a non-standard argument, which typically involves the highest level of advocacy.


Additionally, the IRS Office of Appeals differs from region to region. IRS Appeals is where we often find ourselves in order to negotiate the best possible settlement for our clients. The standard and quality of Appeals Officers vary greatly. It is important to know this going in, as there might be a way to change venue.  


Also, some states are what are known as community property states. In a community property state, the IRS can reach into half of the the assets of the non-liable spouse. This can create quite a complicated situation for us, especially in the case of unpaid payroll tax liabilities. The community property states are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin
  • Alaska is an opt-in community property state that gives both parties the option to make their property community property.


For more information on how IRS tax relief programs work, suggested links are below.