How to Settle Tax Debt
The following is a transcript of an interview with paralegal Adriana Pedraza and attorney Jonathan Mishkin. In this interview, they discuss what taxpayers can do to settle their tax debt with the IRS and the Oregon Department of Revenue.
Adriana: Thanks for joining Jonathan Mishkin, a trusted expert in tax law and tax controversy. I’m your host and Jonathan’s paralegal, Adriana Pedraza. Today, Jonathan will talk about tax at settlements. Hello, Jonathan. What can taxpayers do to settle their tax debt with the IRS and the Oregon Department of Revenue?
Jonathan: Hi, Adriana. Hi, everybody. As some of you may be aware, both federal and state taxing authorities allow a taxpayer to approach them to settle a tax whether it’s individually related, or corporate related, income tax-based employment tax based.
Some of you have heard on TV the phrase the offer and compromise, also called an OIC. It’s essentially a program some people refer to as the fresh start, where you can take your federal tax debt and settle it for less than the amount owed. It’s an option for taxpayers who either do not have the ability to pay in full, or they’re at a point in their life, age, medical condition, where it would create an extreme financial hardship.
Similarly, Oregon has an analogous program called a settlement offer. And again, it applies to taxes owed to Oregon. Both of these agencies will evaluate basically two things: what is the equity and all of the assets you own, you know, bank accounts, retirement, home equity, cars, they’re going to figure out how much quote “stuff” you have. Then they’re going to look at what is your disposable monthly income, which is simply here’s what I earn at my job, here are my standard monthly expenses such as housing, utilities, food, insurance, car expenditures, and so on. Using that information, we get to a number based on a formula that both taxing authorities would consider settling.
One other thing I want to mention to everybody as there are requirements before you can apply. You cannot apply to settle if you have an open bankruptcy proceeding. Another very important concept is current compliance. Most people are always thinking that I need to pay the oldest balance because I’ve owed that for the longest, but the IRS sees it differently and so does Oregon. They would rather see you in current compliance and then allow you to chip away at the past while maintaining current compliance. So, you must have all income tax returns timely and filed. You must have made all requested estimated tax payments and deposits for the current year. Without doing that, your offer will be returned. If you need any help with discussions on settlement because we are just coming out of the COVID pandemic, we would be more than happy to help.
Adriana: Thanks, Jonathan. To schedule a consultation with Jonathan to resolve your tax debt, please log on to www.jmishkinlaw.com.