Debtor Uses Threat of Bankruptcy to Negotiate an 83% Reduction in Tax Debt
Tax problem attorney Darrin Mish of Tampa has recently begun publication of his "IRS Problem Solver blog." As you might imagine bankruptcy filings are often driven by tax problems. If you have tax problems in the form of unpaid taxes, huge penalties and imminent collection, it might make sense to speak to both a bankruptcy lawyer and a tax problem lawyer like Darren to review all of your options.
Darrin recently wrote about a case where he used the "bankruptcy card" in his negotiations with the IRS to negotiate favorable terms in an Offer in Compromise. The case involved a debtor who had not filed tax returns for ten years and owed an estimated $145,000. Darrin was able to negotiate a Offer in Compromise in the amount of $24,000 with the IRS Appeals Division by pointing out that the Internal Revenue Manual says that if a taxpayer threatens bankruptcy, then the IRS must calculate what the IRS would likely receive after the bankruptcy was over.
Obviously, not every $145,000 tax liability will settle for 17 cents on the dollar, but this is an example of how even the threat of bankruptcy can make a difference.
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Comments on Debtor Uses Threat of Bankruptcy to Negotiate an 83% Reduction in Tax Debt
Hi: Thanks for the information:
I don't understand because i thought that tax debt had to be paid back at a 100 percent rate in a Chapter 13;
Thanks John
No you do not have to pay tax debt back at 100% all of the time. Tax debt can be priority, secured (by a tax lien) or unsecured. Unsecured tax debt – also known as stale tax debt – is treated like any other unsecured creditor's debt. So, if you are paying unsecured debt like credit cards and medical bills at 3 cents on the dollar, you can pay stale tax debt at the same percentage. Tax debt is stale if (1) there is no lien and (2) it is old enough – at least 3 years old, but there are a number of other rules.
An offer in compromise is not the right solution to a tax problem for everyone. Really it's not right for most taxpayers in trouble with the IRS. There are other options available that may be better, and can still save you pennies on the dollar. Attorney Darrin Mish promotes an analysis of a taxpayer's situation that will support the BEST possible solution to a taxpayer's problem. Every taxpayer's situation is unique, don't be fooled, each situation has enough variances to make an analysis well worth the time and money.