Have a Tax Question? Ask a Tax Expert
Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.Your question is difficult to answer because the sale of the business has many aspects. If the tax has been assessed then filing bankruptcy may be an option but of course she also could set up a payment plan or an offer in compromise.When an individual debtor files for bankruptcy under chapter 7 or 11 of the Bankruptcy Code, the bankruptcy estate is treated as a new taxable entity, separate from the individual taxpayer.Income taxes can be discharged in a Chapter 7 bankruptcy but only if all of the tax code rules are met.One of those rules is the 3 year rule. The tax return on which the tax debt arises must have been due at least three years before you file for bankruptcy.
If this is a new tax situation then filing Chapter 7 now would not assist her.
She would want to first look to setting up a payment arrangement .
This would then set her in place for an Offer Incompromise
Payments must first be looked to be an OIC is offered.
She has set up a payment plan. But with this years taxes coming up, that payment may go up.
What has been your experience with settlement? As far as percentage of total debt that they will accept. If that makes sense
Every case is so totally different because the IRS looks to see what all the assets are and what they could potentaill get if they insist on payments.
She only has a car worth $14000. Other than that she literally has nothing. Is that better for negotiating?
If that is all she has and no accounts or property and no wages that she earns then why do you expect the payments to increase?
Yes, if she only has the car then $14000 would be her asset limit.
There are two main areas the IRS considers when reviewing an OIC based on doubt as to collectability:
What is the lowest percentage you have seen? Sorry, I just want to get a ballpark. I realize that every case is different.
I have experienced where an individual owed a little less than $20,000 and only legally owned a car (worth $a little more than $5000) the IRS accepted the $10,000 offered but demanded the payment then.
And once you negotiate a price with the IRS, is it due in full within a certain time?
Oh, you just kind of answered that....
It is due but it is allowed for payments within a certain time.
Your initial payment will vary based on your offer and the payment option you choose:
Is there anything else or any little nuggets of advice you can think of? I just can't stand to see her so devastated....I appreciate your help
I know it is difficult to watch someone go through this. I think the best advice I could offer further would be to encourage her to use a true tax professional to assist if she makes the offer. Anyone that guarantees they can make the IRS accept turn and run.
There are no guarantees but on the surface she appears to have a good chance.
Your positive rating is always thanks enough.
I really enjoyed working with you – please feel free to request me again when you come back to ask another question.You will find the request feature when you come back under your MY QUESTIONS section.