When it comes to paying income taxes, every case is very unique. Before an attorney can determine how much a client can or cannot afford to pay, he must first look at a number of factors—including the client’s current income, other debts, and family size. Palm Springs attorney John Monkman, of Monkman Law, says that in some cases, his clients might not end up owing any back taxes at all - especially if he is able to uncover any errors that were made in previous income statements and tax filings that could alter a client’s status with the IRS. “You have to look at the situation individually,” Monkman says.
It’s common that clients who owe back taxes will say they went years without filing income tax returns in the past, and then suddenly received a bill in the mail from the IRS one day. In these cases, especially, it can be helpful to have a tax pro like Monkman take a look at what went wrong and figure out if there are any figures that can easily be adjusted to lessen the client’s liabilities.
When a person fails to file a personal income tax statement with the IRS, what usually happens is that the IRS will file one for him. Of course, the return that the IRS files will not include any deductions or credits that the person could very well qualify for. That’s why the first step that Monkman takes in sorting out tax liability issues for his clients is to take a look at their IRS and state tax returns for the previous year, along with any W2s or 1099s they were given. “Usually in these cases, the IRS would have just figured out what the person’s taxes were and sent them a bill,” Monkman says. “And if they didn’t respond to that bill, then the IRS will begin to assess the tax.”
Monkman says that as a longtime attorney in Palm Springs, he has worked with clients who owed all amounts of back taxes—from millions of dollars to a few thousand dollars. When sorting out these issues for them, he will first obtain either an IRS power of attorney or a state power of attorney, depending on the jurisdiction, in order to begin his investigation to discover exactly what went wrong. In doing so, he will see all the documentation that the IRS has on file and find out exactly what documents they have for his clients.
If the IRS has been filing tax returns for a client—because the client was not filing them on his own—then Monkman says he will take that information and spend time redoing the past returns himself. “Hopefully in doing that, I can get the tax reduced down,” he says. “And in most cases, I can.” Monkman says that cases where the client simply failed to file one or more tax returns are usually the easiest to resolve, since all he needs to do is work out the documentation and file an amended return for the client. For clients in the Palm Springs area, an attorney like Monkman should be able resolve these issues from start to finish without much complication.
There are cases, though, where Monkman says he might file an amended return and the client still cannot afford to pay whatever amount the IRS claims it is owed. In those cases, things can get trickier to resolve.
In cases like that, Monkman says he will do what is called an “offer in compromise,” wherein he attempts to negotiate with the IRS to lessen his client’s tax bill. On the downside, these types of “offer in compromise” issues usually take more than a year to resolve, since that is how long it takes the IRS to approve to disapprove the offers. On the upside, though, the IRS will not put any liens on the client’s property or bank accounts for as long as the offer is on the table, which can give clients up to an entire year of freedom from liens and other IRS holds on their accounts.
Additionally, Monkman says he will sometimes deal with the collections departments directly, rather than waiting to hear back from a government agency. Collections departments in certain regions will compromise on the amounts that debtors owe, he explains, but the amount that they will agree to forgive can vary greatly from region to region.
For someone who cannot afford to pay his taxes, an offer in compromise is an excellent way to forestall any immediate action. If the offer is approved, then the client will be able to pay a reduced amount, which could make affording the back taxes much easier for someone on a tight budget. In cases where the client simply cannot afford to pay his back taxes, even if the compromise was accepted, Monkman says most people will go to family or friends for help. “A person can make a loan to a family or friend in this type of situation quite easily,” he says.
Monkman recommends that anyone who is struggling to pay back taxes to the IRS contact his office for immediate advice on what his next course of action should be.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
