Tax Debt Resolution Attorney Connecticut

If you owe back taxes to the IRS or the Connecticut Department of Revenue Services, you may be feeling like the pressure is continuing to mount. Our Connecticut tax debt resolution attorney team has helped individuals and businesses work through serious tax problems for over 43 years. At The Law Offices of Neil Crane, we represent clients dealing with federal and state tax debt, unpaid payroll taxes, and collection actions that have already started. If you need a tax debt lawyer in Connecticut who understands both IRS and DRS enforcement, contact us for a free consultation.

Types of Tax Debt Cases We Handle in Connecticut

Our firm handles a range of IRS and state tax debt matters for Connecticut residents and businesses. But each situation is different, and the strategy we use depends on how much is owed, what type of tax is involved, how far along the collection process is, and whether filing for bankruptcy protection is a viable part of the plan.

• IRS Offer in Compromise (OIC). The IRS allows certain taxpayers to settle tax debt for less than the full amount owed when full payment would create a genuine hardship. Qualifying requires meeting specific financial criteria, and the application process is involved. We evaluate whether you’re likely to qualify before putting time and money into the process.

• Connecticut DRS Offer in Compromise. Connecticut has its own OIC program separate from the federal process. The DRS can be less flexible than the IRS, and the state OIC rules differ in important ways. We’ve handled both and know where each process is negotiable.

• IRS Installment Agreements. For taxpayers who owe more than they can pay at once but can manage structured monthly payments, a tax installment agreement may stop aggressive collection actions while preserving a path forward. The IRS offers several types of payment plans depending on what you owe.

• Tax Debt Discharge Through Bankruptcy. Under specific circumstances, federal income tax debt can be discharged in bankruptcy. Strict timing rules apply, including requirements around when the return was filed and when the tax was assessed. 

• Federal and State Tax Lien Defense. When the IRS or DRS files a lien against your property, it becomes a public record attached to everything you own. We help clients challenge improperly filed liens, negotiate releases, and address the downstream impact on credit and property transactions.

• Wage Levy and Bank Account Levy Response. The IRS can seize wages and bank accounts without going to court first. If you’ve received a notice of levy, timing matters. We move quickly to explore hardship releases, installment agreements, or other resolutions that can halt collection activity.

Connecticut Legal Requirements for Tax Debt Resolution

Connecticut residents dealing with tax debt face two separate systems, including the IRS and the Connecticut Department of Revenue Services. Both have their own rules for collections, appeals, and resolution options.

At the federal level, the IRS follows a multi-step process before levying property. Taxpayers are entitled to a Collection Due Process (CDP) hearing before most levies take effect, giving them a formal opportunity to challenge the collection action or propose alternatives. The IRS collection process runs on a 10-year statute of limitations from the date of assessment, after which the debt generally cannot be collected.

For federal installment agreements, most individuals who owe $50,000 or less in combined tax, penalties, and interest may qualify for a streamlined agreement without submitting a full financial disclosure. Larger balances require more documentation.

The Connecticut DRS operates differently. The DRS has partnered with outside collection agencies and participates in the federal Treasury Offset Program, meaning it can intercept federal tax refunds to satisfy a Connecticut tax debt. Under this program, the DRS sends a Notice of Intent to Offset by certified mail, and taxpayers have 60 days to respond before the offset occurs. Even an active payment plan does not stop DRS from pursuing federal refund offsets.

An IRS Offer in Compromise requires that all tax returns are filed, current estimated payments are made, and the amount offered represents the most the IRS could realistically collect. These requirements apply before the agency will even process the application. Understanding where you stand in the collection timeline and what options remain open requires a working knowledge of both systems. The rules are detailed, and missing a deadline or misreading an eligibility requirement can close a resolution path permanently.

Important Aspects of a Connecticut Tax Debt Case

IRS Penalties and Interest

Tax debt doesn’t stay at the balance owed, as the IRS adds a failure-to-pay penalty of 0.5% per month on unpaid balances, plus interest tied to the federal short-term rate. Those amounts compound, which means a balance that felt manageable a year ago can grow significantly without any action on the taxpayer’s part. Getting ahead of the problem early matters more than most people realize.

Federal Tax Liens

When the IRS files a Notice of Federal Tax Lien, it attaches to all property you currently own and everything you acquire while the lien is active, including real estate, vehicles, business assets, and financial accounts. These actions do become public record. It can complicate the sale of property and can affect your ability to get credit. The lien doesn’t release automatically until the full balance, including penalties and interest, is fully paid. In some cases, we can challenge a lien that wasn’t filed properly or negotiate a discharge or subordination.

Currently Not Collectible Status

The IRS has the ability to temporarily pause collection if it determines that pursuing the debt would prevent you from meeting basic living expenses. This is called “currently not collectible” status. The debt doesn’t go away, and interest continues to accrue, but active collection stops. It can provide space for clients in genuine financial distress while longer-term options are worked out.

Bankruptcy and Tax Debt

Not all tax debt can be discharged in bankruptcy. Federal income taxes may be eligible for discharge in a Chapter 7 if the tax return was due more than three years before filing, was actually filed more than two years before filing, and the tax was assessed more than 240 days before the bankruptcy petition. However, all of these requirements must be met. If they are, bankruptcy can wipe out that liability entirely. For clients with a mix of dischargeable and non-dischargeable tax debt, a Chapter 13 repayment plan may allow them to repay priority tax debt over three to five years while discharging other obligations.

State-Specific Enforcement by CT DRS

Connecticut’s Department of Revenue Services uses wage garnishment, bank levies, and property liens in addition to participation in federal offset programs. The DRS can also refer delinquent accounts to private collection agencies. Unlike the IRS, the DRS is often less willing to negotiate penalty abatements, and it requires that all tax and interest be paid before it will consider waiving penalties. Knowing what leverage exists with each agency requires working with attorneys who have navigated both.

Contact the Law Offices of Neil Crane

If you’re dealing with IRS collections, a Connecticut DRS notice, a wage levy, or a tax debt that has grown past the point where you can manage it alone, we can help you understand your options. Our attorneys have handled tax debt cases in Connecticut for over four decades. We offer free consultations without obligation so you can learn more. Contact us today to schedule your consultation with a member of our team.