One of the most common things that I do is help people with many years of delinquent filings.  This often involves tracking down prior-year income information  (don't worry, it's easier than you think) I also will frequently help people who have large tax debts that they can't afford to pay, with a pretty good success rate. Often I will help clients apply for a waiver of the late filing and late payment penalties.

Missing Tax Returns

The U.S. Treasury keeps records of personal information such as wages and freelance income (yes, very Orwellian, I know), and I can usually get this information pretty quickly and easily.  When people have multiple years of missing taxes, I'll usually just have them sign a Form 2848 (IRS authorization), pull the records, and reconstruct the tax filings.  Sometimes it will be up to the taxpayer to supplement these numbers with their own expenses and deductions.  This is particularly true for self-employed individuals with 1099 income.

Installment Agreements

The IRS will let people pay off back taxes in monthly installments based on their "disposable income", which is their total income minus certain allowances for rent, groceries, transportation, medical expenses, and so on.  Thus, even if a person owes $1,000,000 in back taxes, if he or she only has $500 of disposable income per month, the IRS will accept this as a monthly payment.  There is a ten-year statute of limitations on the collection of taxes, so if the disposable income does not fully pay the tax within this time frame, the rest is discharged - this is known as a "partial payment installment agreement."

As you might guess, obtaining a favorable installment agreement requires submitting lengthy proofs and documents to the IRS; you don't need an attorney to help you with it on it but depending on the size of the tax debt in question it might be worthwhile.

Offers in compromise

There is also something called an "offer in compromise."  This is available when a taxpayer is able to make an offer that equals his or her  "collection potential."  For example, if a taxpayer has a disposable income of $100 per month over 10 years and no money in the bank, his or her collection potential is $12,000.

Offers in compromise are not usually accepted (the rejection rate is about 86%) because a taxpayer's collection potential is almost always greater than any lump sum he or she would have.  A taxpayer with $12,000 in the bank would have a collection potential of $12,000, plus any future disposable income until the statute of limitations  expires.  This type of submission only really works when there is an external source for the money such as a family member.  (although I've had more luck with them at the state level)  I generally don't advise people to apply for an offer in compromise with the IRS; usually I advise them to put the back taxes on a partial payment installment agreement, as described above.

More Information

Feel free to message me for help with your own specific situation.

Nate Strand, Tax Attorney

18 West 18th Street, New York NY 10011

(646) 737-4639