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7 Options for High-Income and High-Net-Worth Taxpayers Facing IRS Collection

June 28, 2024


If you are a high-income or high-net-worth taxpayer and you have concerns about the IRS collecting your tax debt, you should discuss your situation with an experienced Texas tax collection attorney as soon as possible. While you have options available, you will need to choose the best option for your specific circumstances, and you may need to act quickly to avoid tax liens, tax levies and other unnecessary consequences.

How Can High-Income and High-Net-Worth Taxpayers Avoid Collection?

Depending on the circumstances at hand, the options that you have for avoiding IRS collection may include:

1. File an Appeal with the IRS’ Independent Office of Appeal

If you have not already disputed the IRS’s determination of your federal tax liability, you may be able to dispute its determination by filing an appeal with the IRS’s Independent Office of Appeal. Broadly speaking, taxpayers can dispute their liability on three grounds:

  • The IRS misinterpreted the law
  • The IRS misapplied the law
  • The IRS failed to consider (and only consider) relevant facts

Determining high-income and high-net-worth taxpayers’ liability is often an exceedingly complex process that entails complex legal analyses and careful attention to the nuances of the taxpayer’s tax planning and mitigation strategies. As a result, the IRS can (and does) make mistakes, and if you are facing substantial tax debt and possible collection, it will be well worth working with an experienced Texas tax collection attorney to scrutinize the IRS’s determination of your liability.

2. File an Appeal in the U.S. Tax Court

Rather than seeking a resolution at the IRS’s Independent Office of Appeals, you may also be able to take your tax controversy directly to the U.S. Tax Court. Litigating your case in the U.S. Tax Court may also be your next step if the Independent Office of Appeals denies your initial appeal. High-income and high-net-worth taxpayers will often need to litigate to protect themselves, and, here too, working with an experienced attorney who can provide sound advice and effective representation will be critical.

3. Negotiate an Offer in Compromise (OIC)

If you do not have grounds to challenge the IRS’s determination of your liability or you have exhausted your appellate rights, then it might be time to consider an Offer in Compromise (OIC). The IRS’s OIC program has strict eligibility criteria, and high-income and high-net-worth taxpayers won’t always qualify. But, if you do qualify, negotiating an OIC with the IRS could allow you to avoid collection while paying substantially less than the full amount you owe.

4. Negotiate a Settlement Agreement

Another option for paying less than the full amount you owe is to negotiate a settlement agreement with the IRS. Filing an appeal with the IRS’s Independent Office of Appeals can provide an opportunity to settle, though there are other means of opening settlement negotiations with the IRS as well.

The IRS is devoting substantial resources to closing the tax gap, and it is placing particular emphasis on high-income and high-net-worth taxpayer enforcement. But, if your attorney can raise legitimate questions about your federal tax liability, or if your financial circumstances and holdings are such that the IRS’s ability to successfully pursue collection would be limited, then negotiating a settlement agreement may be a viable solution.

5. Negotiate an Installment Agreement

Negotiating an installment agreement is another option for avoiding IRS collection action. Depending on the circumstances, it may be possible to negotiate a payment plan as part of an OIC or settlement agreement, or it may be necessary to negotiate a standalone installment agreement that allows you to make payments over time. In either scenario, once you have an installment agreement in place, the IRS will generally be prohibited from pursuing collection action unless you miss a payment.

6. File for Penalty Relief

If you are facing IRS collection because you owe more than you can pay, you may also be able to reduce your total liability by filing for penalty relief. The IRS has three penalty relief programs:

  • First-Time Penalty Abatement – If this is your first time facing penalties for failure to file, failure to deposit or failure to pay, you may qualify for first-time penalty abatement or an administrative waiver.
  • Penalty Relief Based on Reasonable Cause – If you (or your attorney) can establish reasonable cause for your payment deficiency, this may qualify you for a penalty waiver as well.
  • Penalty Relief Based on a Statutory Exception – The IRS also recognizes certain statutory exceptions to penalty liability. An experienced Texas tax collection attorney will be able to assess whether any of these exceptions apply.

Filing for penalty relief won’t eliminate your tax debt entirely, but it could significantly reduce the amount you owe. If you qualify for penalty relief, you may also be able to further reduce your liability or stave off collection through other means.

7. Challenge the IRS’ Collection Efforts

When necessary, high-income and high-net-worth taxpayers can directly challenge the IRS’ collection efforts through various means. In addition to hearing challenges to taxpayers’ liability, the IRS’ Independent Office of Appeals also hears appeals based on inappropriate collection actions. Taxpayers can go to court to challenge the IRS’ collection efforts when necessary as well.

While the IRS has substantial authority to issue summonses and pursue tax levies and tax liens for enforcement purposes, it can (and does) overreach—and this overreaching can provide grounds to fight in many cases. As a result, if you have received a summons, a notice of federal tax lien or a notice of intent to levy from the IRS, you should speak with an attorney about your options as soon as possible.

Request an Appointment with a Texas Tax Collection Attorney at Brown Tax, P.C.

If you need to know more about your options for avoiding IRS collection as a high-income or high-net-worth taxpayer, we encourage you to contact us promptly. To request an appointment with a Texas tax collection attorney at Brown Tax, P.C., please call 888-870-0025 or send us a confidential message online today.

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