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San Jose, CA tax debt relief attorneyWhen a married couple files a joint tax return, “joint and several liability” will apply to any tax debts related to that return. This means that if the Internal Revenue Service (IRS) conducts a tax audit and determines that the couple owes taxes due to erroneous information on their joint tax return, the spouses will be equally liable for paying these tax debts. This can sometimes come as a surprise, especially if a couple has gotten divorced since filing the joint tax return in question. Even if a divorce decree addressed tax issues and states that one spouse will be responsible for paying joint tax debts, the IRS can still pursue repayment from both spouses. However in some cases, a person may receive innocent spouse relief if they were not responsible for the tax debts.

Innocent Spouse Relief Eligibility Requirements

Innocent spouse relief may be available in situations where individual income taxes or self-employment taxes are owed to the IRS based on incorrect information on a couple’s joint tax return. To be eligible for innocent spouse relief, a person must be able to show that errors on a tax return were solely attributable to their current or former spouse. They will need to verify that when they signed the joint tax return, they did not know or could not reasonably have known about the errors.

A person may receive innocent spouse relief based on errors on a tax return related to unreported or misreported income or claiming of improper tax deductions, credits, or property basis. For example, if a person’s ex-spouse was a business owner, and they did not report all income earned through their business in a certain year, while also claiming tax deductions for business expenses without actually paying for those expenses, a tax audit may determine that taxes are owed. If the other spouse was not involved in the business and had no knowledge of the business’s finances, they may be eligible to receive innocent spouse relief, and the other spouse will be solely responsible for paying the tax debts.

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San Jose, CA tax law attorney for IRS installment agreementsCompliance with tax laws is a requirement for people and businesses in the United States, but some taxpayers may struggle to pay the taxes they owe. A person who has unpaid taxes may worry that they will be subject to collection actions by the Internal Revenue Service (IRS) such as wage garnishment or tax liens. Currently, this is a major concern for those who have experienced financial difficulties due to the COVID-19 pandemic. As part of its ongoing efforts to address these issues, the IRS has given taxpayers more options for paying the taxes they owe through installment agreements.

Installment Agreements Under the Taxpayer Relief Initiative

Taxpayers with outstanding tax liabilities have the option to pay off the amount they owe over time by making regular payments to the IRS. To qualify for an installment agreement, a taxpayer will need to have filed all required tax returns and tax forms. To address the financial issues that many people have experienced due to the COVID-19 crisis, the IRS has created a Taxpayer Relief Initiative that has expanded people’s ability to use installment agreements. The changes made under this program include:

  • While installment agreements had previously been available to individual taxpayers who owed up to $50,000 in taxes, penalties, and interest, this option is now available for certain individual taxpayers who owe up to $250,000. These taxpayers may be able to set up installment agreements without the requirement to provide financial statements verifying their monthly income and without the need for the IRS to file a federal tax lien.
  • The time limit for paying off tax debts through short-term installment agreement plans has been increased from 120 days to 180 days.
  • For taxpayers who have existing installment agreements, the IRS will automatically add certain types of taxes owed in subsequent tax years to their balance rather than causing them to default on their agreement.
  • Taxpayers who use direct debit to make payments in an installment agreement can use the IRS’s Online Payment Agreement system to request changes to their agreement, such as lowering the amount of their payments or changing the payment due dates.

The Taxpayer Relief Initiative also provides several other options for those who owe taxes. In some cases, taxpayers may request that the IRS delay collection of taxes until their financial situation improves. Taxpayers may also be able to negotiate offers in compromise with the IRS to pay taxes owed, or they may qualify for penalty abatement relief if they can show reasonable cause for failure to file tax returns or failure to pay taxes.

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San Jose, CA tax lawyer for offers in compromiseCOVID-19 has completely transformed most people’s day-to-day lives. You may be working from home or unable to work until the quarantine period is over. You may have been laid off from your job and now must survive with no income. Even if you are able to continue working, you may be left without childcare or other necessary services. These issues can quickly create serious financial hardship. You may struggle to pay your bills or even to put food on the table. During hard times like these, paying tax debts may simply not be possible. Fortunately, an “offer in compromise” offers many struggling taxpayers the opportunity to settle their tax liability for a reduced amount.

Addressing Outstanding Tax Debt Through an Offer in Compromise

Having an unpaid tax liability can be a very distressing burden to bear. If you currently owe the IRS money, you may be worried that you will be visited by an IRS agent or even face criminal charges for failure to pay. Fortunately, the IRS is much more interested in collecting unpaid taxes than punishing taxpayers who have an unfulfilled tax obligation. The agency offers several options that can help taxpayers who are experiencing financial struggles to fulfill their tax obligations and become compliant with the law.

An offer in compromise allows a taxpayer who cannot afford to pay his or her full tax debt to settle the debt for less than the original amount. If paying your full tax debt would create a financial hardship, an offer in compromise may be right for you. When deciding whether or not to grant an offer in compromise to a taxpayer, the IRS will consider the taxpayer’s income, assets, expenses, and overall ability to pay. In order to qualify for this program, you must file all of your required tax returns, and you cannot be in an open bankruptcy proceeding. The IRS typically charges a fee when submitting an OIC application; however, this fee may be waived if the applicant’s adjusted gross income or household’s gross monthly income is below 250 percent of the poverty guidelines issued by the Department of Health and Human Services. The IRS also typically requires a 20% “deposit” of the offered amount be made at the time of offer submission. Upon offer acceptance, this “deposit” then becomes part of the offered amount. HOWEVER, very importantly, if the offer is rejected, the deposited amount is NOT returned to the taxpayer and is logged as a payment toward the unpaid tax liability. John D. Teter will work extensively with you to ensure you are making a “good” (acceptable to the IRS) offer to maximize the likelihood of offer acceptance and get you back on the road of tax compliance with a fresh start and old tax debt resolved.

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San Jose, CA tax law attorney for IRS leviesPaying taxes is an important and often complicated responsibility. If a taxpayer does not adequately fulfill his or her tax obligations, the Internal Revenue Service (IRS) can take several actions. In some situations, the IRS may even seize some of the taxpayer’s personal wealth and property to satisfy his or her tax debt. If you have been contacted by the IRS about a tax liability-related concern, you should speak to an experienced tax attorney to get the legal guidance and help you need.  

What Is an IRS Levy?

Many people do not realize that the federal government is permitted to seize some of an individual’s assets if he or she does not pay his or her taxes. If you have an unresolved tax debt, the IRS may eventually use a levy to collect the delinquent tax. Before the IRS issues a levy, it will send you a “Notice and Demand for Payment.” If you do not respond, you will then receive a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing.” If you still do not resolve the debt or make an arrangement with the IRS for settling the debt, the IRS may be permitted to take ownership of your property.

What Types of Property Can the IRS Take?

The IRS is permitted to levy any property that you personally own or property in which you have an interest. The IRS could levy your bank accounts, part of your wages, accounts receivable, dividends, income from rental properties, retirement accounts, business assets, and more. The IRS could also seize personal property such as vehicles, and if approved by a U.S. District Court Judge, even your home. The IRS cannot levy assets that you did not own or did not have an interest in at the time the levy was enforced. For example, if a relative gifts you money and you add it to your bank account after the levy was issued, these funds are not subject to the levy. The IRS will also not levy:

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San Jose, CA tax lawyer for innocent spouse relief

Married couples have the option to file a joint tax return instead of separate tax returns. There are often benefits to choosing this filing status, but there can also be drawbacks. Couples who file jointly are “jointly and severally” responsible for any tax liability, interest, or penalties due. The terms “jointly and severally” mean that each spouse is legally responsible for the entire tax debt. When one spouse does not adequately fulfill his or her tax obligations, this can leave the other spouse in serious trouble with the Internal Revenue Service (IRS). Fortunately, there are several ways that a spouse in this situation can be released from tax liability. One of these types of tax relief is called “innocent spouse relief.”

What Is Innocent Spouse Relief?

Imagine this scenario: your wife is a business owner who struggles to keep track of her profits and expenses. When you jointly file your tax returns, the IRS notices that there are inconsistencies with the business income, expenses, and/or deductions. You are audited. As a result, both of you now owe a significant amount of money in back taxes. In situations like this, innocent spouse relief, also called innocent spouse protection, may help a guiltless spouse avoid his or her spouse’s tax liability.

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