IRS Back Tax Debt Removal Cases
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These are actual back tax debt cases that ALG Tax Solutions resolved for clients. We used our unique ability to gather information from multiple sources to develop creative tax strategies for these clients. This case also required steady persistence. We omitted names and locations to protect the confidentiality of our clients.
IRS Back Tax Debt Removal - Individual Case
The client owed $100,000 of IRS and Michigan back tax debt over a four-year period. The taxes are 8 years old, and the client believes they are incorrect. Several years ago, the client hired an accountant to fix the problem by filing an amended return, but the IRS never processed the amended return. Eventually, the client stopped trying and let the problem go. As a result, the IRS started levying the client’s paycheck to collect on the IRS back tax debt. The client decided to hire ALG Tax Solutions because of an inherited home the client wanted to sell. The client could not sell the home because all proceeds would have been applied to the IRS and Michigan back tax debt.
- We removed the IRS tax levy on the client's wages by setting up an installment agreement.
- We gathered documentation from the client, accountant, and IRS and determined that the client, accountant, and IRS had all made mistakes. The client didn’t respond to the IRS in a timely manner. The accountant made a significant error on the amended tax return. The IRS made an erroneous adjustment to the client’s tax account.
- In response to a new tax lien filed by the IRS, we filed 12153, Request for a Collection Due Process or Equivalent Hearing.
- We prepared a case to prove the client should owe zero taxes. In fact, we could prove a $19,000 IRS tax refund. We knew we could wipe out the client’s taxes by filing an Offer in Compromise, but then the client would not get an IRS tax refund, so we decided against this.
- After repeatedly calling the IRS and being bounced between different departments, we decided to open up a case with the Taxpayer Advocate. We submitted our case to both the IRS Underreporting Department and Taxpayer Advocate.
- The IRS Underreporting Department agreed with our position and made all adjustments for the first year. The account now showed a $19,000 IRS tax refund for the first year and $10,000 of IRS back tax debt for the following three years.
- The IRS did not correctly apply the $19,000 refund to the $10,000 in back taxes and informed the client that the refund had expired, so we got the case reassigned to a Taxpayer Advocate.
- The client’s IRS tax account was fully adjusted. The client received an IRS refund check and owed zero IRS back tax debt. The IRS also released the tax lien on the inherited home.
- We finalized the Michigan tax lien removal. The client sold the inherited home and a portion of the proceeds from the home sale paid off all Michigan back tax debt.
This client was very satisfied with the outcome and wished this had been resolved years ago. The client no longer owes IRS or Michigan back tax debt, received an IRS tax refund, and was able to sell the inherited home. We were happy to resolve this case for the client. Please Note: It can take 6 months to a year to fully fix complicated tax problems. This can be due to several factors such as the tax relief strategy or IRS delay.
IRS Back Tax Debt Removal - Self Employed Case
- We contacted the IRS Revenue Officer and filed a Power of Attorney. The IRS Revenue Officer provided gave us 30 days to file all missing tax returns.
- Working with the client, we prepared the missing tax returns. The returns showed that the client would owe the IRS less than $15,000 including penalties and interest.
- The IRS processed all tax returns prepared by us. The IRS reduced the $130,000 tax balance owed to about $15,000.
- A 72-month payment plan for $200 per month was set up to pay back the back IRS taxes.
The client was extremely happy with the result. The IRS Revenue Officer was also happy as the case was closed and off his desk. We continue to help this client by preparing yearly tax returns.
IRS Back Tax Debt Removal - Business Case
The client's business was struggling financially, so the business owner decided not to file and pay IRS payroll taxes. Eventually, it was unsustainable to continue to operate the business at a loss. The owner decided to close the business and sell the business assets. The business owed more than $35,000 in back IRS payroll taxes. The business owner was afraid to be personally responsible for the payroll taxes owed by the business. An IRS Revenue Officer was assigned to the case.
- Our goal was to pay off the trust fund portion of the IRS payroll taxes with the proceeds of the sale. The business owner can be held personally responsible for the trust fund portion of the payroll taxes. The business owner could not be held personally responsible for the non-trust fund portion, penalties and interest.
- We informed the IRS Revenue Officer that the client would be selling the business assets and using the proceeds to pay off the trust fund portion of the outstanding IRS payroll taxes. The IRS Revenue Officer allowed us time to coordinate the sale.
- The business assets were sold and we worked with the IRS Revenue Officer to pay the trust fund portion of the payroll taxes.
- The IRS Revenue Officer closed the case on the business.
The business originally owed about $35,000 in IRS payroll back taxes. The client sold the business assets and paid about $20,000 towards the trust fund portion of the IRS payroll taxes. The client had money left over from the sale, which was used to pay off other business debts. We continue to work with the client as the tax accountant, preparing yearly personal income tax returns.