Payroll Tax Liability Payment Options

For payroll tax liabilities, taxpayers who are unable to pay in full generally have three options to settle their debts with the federal or state taxation authorities. These liabilities are resolved primarily in the same manner on the federal or state levels; however, there are a number of nuances that you should be made aware of. Please contact our office to speak with our attorneys and staff for more information 

1) Currently Non-Collectible Status: For certain taxpayers facing economic hardship and with little future collections potential, the federal and state tax agencies are able to suspend collection activity in certain circumstances. The program is not heavily advertised by the federal or state tax agencies and is considered a last resort when no other viable options appear readily available. Currently Non-Collectible status is difficult to obtain and requires an experienced advisor to guide you through the process and to negotiate with the government  

Please contact our office if you are interested in obtaining non-collectible status.  

2) Offer in Compromise: This program authorizes federal or state tax agencies to settle liabilities for less than the full amount owed. In order to qualify for the Offer in Compromise program your business must be no longer operation and inactive. In rare circumstances, the federal or state tax agencies will accept an Offer in Compromise if the taxpayer no longer has an association or controlling interest in entity that incurred the liability. Further restrictions to the program apply such as having no saleable assets or the future earning potential to settle the liability and not being able to pay more than the accumulating interest on an annual basis. Furthermore, the program will only apply to liabilities that are not in dispute and not the result of fraudulent activity. 

An Offer in Compromise consists of a two step process, which includes filing an application along with a detailed financial statement. Although the application forms are fairly straight forward, Offer in Compromises are based on a strict formula that the offer specialists follow. During your client consultations with our staff, using the same formula as the government, we perform a pre-analysis of your financial information and other factors that could affect your offer. Unlike some firms, our strict office policy is not to submit offers unless they have a reasonable chance of acceptance. Assets or personal living expenses, no matter how ordinary or necessary to your livelihood, are often grounds for offer rejection. However, we strategize with our clients to assure their offers have the best chances for acceptance and that you meet all of the criteria of the federal or state tax authorities. 

Once your application has been assigned to an offer specialist, we work diligently to cease any collection activity being taken against you and negotiate acceptance at the lowest possible dollar amount. Our advocacy skills combined with an expert knowledge of California tax law and internal offer specialist procedures have ensured our success in negotiating offers.  

3) Installment Agreement: These arrangements allow the taxpayer to pay a liability over a fixed period of time. In the interim, the federal or state tax agencies will cease all collection action, including levies garnishments, as long as the taxpayer does not accrue additional liability and makes all of their required filings and payments. However, interest and late payment penalties will continue to accrue on the remainder of the balance and the government may file a federal or state tax lien until the liability is satisfied. 

Installment agreements are a convenient method to utilize future cash flow and to pay off liabilities over a fixed period of time. However, the government will only grant them as a last resort, and will want taxpayers to sell, borrow against their assets, and exhaust potential lines of credit before considering an installment agreement. The government’s stringent standards may be unworkable for individuals or they may refuse to grant them entirely, even to cash strapped taxpayers or those facing insolvency. 

An experienced tax attorney can help guide you through the installment agreement process and get the results that work best for you. Whether your goal is to pay the tax as quickly as possible to minimize the accruing interest and penalties or to negotiate a minimum monthly payment to increase your financial flexibility, we can help. Furthermore, we can help roll your current compliance into your monthly installment payments, help stall collection actions, or help deal with difficult or inflexible government personnel.