Resolving Tax Debts: Fighting Back Against IRS Collection

When you owe taxes and can’t pay, the IRS can take your property or assets to cover the amount owed. But before they do that, they must notify you in writing and give you a chance to have a fair hearing. During this hearing, you can raise issues like spousal defenses, questioning the appropriateness of their collection actions, or proposing alternative ways to settle the debt.

You can also challenge the existence or amount of the tax liability if you never received a formal notice or had a chance to dispute it before. If you’re not satisfied with the hearing outcome, you can appeal to the Tax Court and contest the decisions made by the IRS.

A recent case highlights the struggles of a taxpayer who owed taxes on joint returns. After her husband passed away, she had to start working to support her family, but her income was low. She later discovered that her husband hadn’t paid enough in taxes. Hoping for relief, she tried to settle the debt with an offer-in-compromise.

However, there was a disagreement about including a $47,000 car she had bought using life insurance money. The IRS initially considered the car’s value in determining her ability to pay. Eventually, they agreed on a lower amount by considering the car’s market value and loan.

The taxpayer argued that the car shouldn’t have been considered in the settlement because she needed it for transportation and finding work. She believed her situation warranted special consideration.

Fortunately, the Tax Court agreed with her. They felt it was unfair for the IRS to include the car’s value in the settlement calculation. They recognized the importance of the car for her livelihood, especially after her husband’s death.

As a result, the court ruled in her favor, stating that the lien notice should be withdrawn. This decision took into account her need for the car and the difficult circumstances she faced.

This case reminds us that when dealing with tax debts and collection actions, it’s crucial to know your rights and explore available options. Seeking professional advice and presenting strong arguments can help you find a resolution that considers your unique situation.