Korntved & Associates
Your Place For Solutions To Tax Problems.
Special
Consideration Offers.
The Internal Revenue Service allows settlements for reasons other than hardship (mathematical considerations). They are described below.
Effective Tax
Administration (ETA).
The ETA offer is relevant when it would be good public policy to accept the offer even though the taxpayer has assets sufficient to pay the obligation. Notice, that cash flow is not included. If a taxpayer has cash flow an ETA offer is not possible.
ETA offers work when an individual has equity but no cash flow and taking or financing the equity would cause a severe hardship. This typically occurs with elderly taxpayers that have a small or no mortgage and own their home but are still having a difficult time paying their bills.
ETA offers generally involve age and health problems but can be health or other problems alone.
Sometimes regulatory or other issues can cause an ETA offer to work. This scope is too involved to go in to here.
Liability
Offers.
Liability offers are used when an individual believes he is genuinely not liable. This type of offer is rare, requires less up front paperwork and only applicable where taxpayers have been given income illegally by fraudulent businesses (that later went out of business), social security number issues with stolen identity, etc. The scope is too involved to go in to here.
Bankruptcy.
Chapter 7 bankruptcy generally discharges 1040 income taxes if they have been filed by the taxpayer (not the tax agency) at least three years ago. Bankruptcy is available when a taxpayer owes for old years and is in a bankrupt situation.
Chapter 13 bankruptcy is available when a taxpayer qualifies for bankruptcy but has too much unsecured debt – especially charge cards. The charge card companies lobbied Congress hard and got laws passed that limit discharge of charge cards. Chapter 13 will discharge some 1040 taxes but not to the extent of a Chapter 7.