CURRENT COMPLIANCE
In the Real World:
The Internal Revenue Code actually has it's origins in the Torah (Old Testament) which outlines ways in which people may serve debt other than payment in full.
In the modern IRS code, the term "pay or compromise" liability allows the government to reduce liability under certain circumstances.
Today, there are three circumstances that allow the Government to accept an Offer in Compromise. You can look these up in more detail by scrolling down to to them on the Home Page.
The first is an error the government made that causes a DOUBT AS TO LIABILITY. Believe it or not, considering the millions of steps in the process of operating this vast collection system, the IRS makes very few errors.
Three of four times a year I get a call from someone who is sure that the IRS made a mistake of some sort. I've discovered errors a few times, and once pointed out, the IRS usually changes the numbers. However, most of the time the change of numbers has little effect on the bottom line. The amount of Doubt as to Liability cases I've filed can be counted on one hand.
The second reason for an Offer in Compromise is DOUBT AS TO COLLECTABILITY and the vast majority of cases are in this area. The simple fact is the IRS must compromise because they can't collect.
The third is EFFECTIVE TAX ADMINSTRATION. In this category, the obligation for the tax is not in dispute nor is collectability in dispute however, if the Government went after the taxpayer, it would create an economic hardship and it would be unfair and inequitable. This is a fairly new category and as I work with it, I think it applies mainly to people with retirement funds supportive of the taxpayer and collection of those funds would create an economic hardship.
When it first came into being, I had a group of four or five people who were very economically well off, but they convinced themselves that the Government should let them off the hook because to them, collection of the tax would be unfair and inquitable.
IF YOU ARE IN BUSINESS
Your business is especially venerable
to tax collection. It is the source of your income, and a prime target
to the collection department of both the Internal Revenue Service and your
State. A tax lien filed against the business can effect your relations
with current and future customers, good-will, credit ratings, and more!
If you have accounts receivable, the IRS does have the right
to collect them from your customers. Some State licenses that have value,
like liquor licenses, can be ceased and sold. If you owe payroll
tax, you have fiduciary duties and using that money for some other business
purpose, is on the cusp of being criminal. Your not protected by
your corporation. The Internal Revenue Service can apply a Trust Fund Penalty
against any officer or employee who was even in part responsible for, and
had knowledge of, the fact that these fiduciary taxes were not being paid.
For more information, you can look up "Trust Fund Recovery
Penalty" at www.irs.gov.
It is critical that you seek help immediately.
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