IRS Tax Debt

IRS Debt Help: 6 Options to Getting Rid Of Tax Debt

Don't despair too much if you have tax debt. Here are 6 things you can do to get IRS debt help. Remember, dealing with the IRS can be time consuming and often very frustrating. Negotiating with the IRS can be a losing battle, but if you want someone to help you get the best results, please contact us today for a free consultation. We can have you talk with a tax professional who has the additional knowledge you may need.

The 6 ways to get out of IRS tax debt.

1. Pay the tax – it is important to realize that if you have valuable assets or the money to pay your tax debt, the IRS will see to it that you pay the debt.
2. Installment agreement - a monthly payment plan the IRS will use to help you pay off your entire tax debt over time.
3. Partial payment installment agreement - the IRS sets up a payment plan you can afford, the sum of which is less than your entire tax debt by the time the statute of limitations runs out.
4. Not currently collectible - the IRS voluntarily agrees not to collect on the tax debt for a temporary period of time (this is not a permanent solution to resolve your tax debt, but buys you time to find a job, increase your income, etc.).
5. Offer in compromise - allows you to settle your tax debt for less than what you owe the IRS.
6. Filing bankruptcy - discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition. Understand that bankruptcy may not excuse your tax debt. There is always the chance that the judge will choose not to discharge your tax debt.

Pay the Tax

Having a large tax debt can be debilitating. However, if you can afford to pay the tax debt or if you are sitting on assets of value that the IRS can tie up, they will stay after you to pay what you owe.

Unfortunately, paying the IRS is difficult and confusing unless you have a good plan in place. Even if you write a check to the IRS today, your payment can be soaked up in interest and penalties. This is a common issue with the interest rates and stiff penalties enforced by the IRS. Often a taxpayer can pay for years and never make an appreciable dent in the principle debt. If you have let a tax debt go for several months or even years and the IRS places a lien on your property, simply writing a check for the debt (even in full payment) does not necessarily mean the IRS will automatically release the lien. Even paying the IRS in full requires a fair amount of planning and knowledge to avoid having to pay more than you owe in the long run.

Installment Agreement

The IRS allows structuring five primary types of payment plans, or Installment Agreements: Guaranteed Installment Agreements, Streamlined Installment Agreements, In-Business Trust Fund Agreements, Long-Term Installment Agreements, and Installment Agreements on Specified Balance Due Accounts. If you have moderate tax debt, this is often the best way to get started paying off your debt. Installment agreements can be arranged by contacting the IRS. The process is usually not too difficult, but if you would like to dispute the charges, your best option will be to contact us for additional help. If the IRS tries to set you up with an installment agreement you cannot afford, definitely give us a call. We can make sure the IRS accepts a plan you can afford.

Currently Not Collectible

Often people are not able to pay their back taxes because of job loss. If you don't qualify for an offer in compromise and cannot afford to pay an Installment Agreement, Currently not Collectible (CNC) status may apply to you. If you are placed in CNC status, the statute of limitations continues to run and the IRS will not pursue collection actions. However, if your financial status improves, the IRS can remove the file from CNC status and return to active collection status. For this reason it will be important to communicate your financial status to the IRS often. Also understand that this is typically not a permanent solution to resolving tax debt, but a temporary agreement that will change as soon as you are able to begin paying on your IRS tax debt.

Offer in Compromise

An Offer in Compromise can be highly beneficial if you are able to get qualified. This is very difficult to do. In fact, only around 15 percent of people succeed in reducing back taxes with an Offer in Compromise. OIC's are also very complex and usually take a while to get approved - up to 1 or 2 years is not uncommon. Through an OIC, you agree to pay the IRS only the reasonable collection potential instead of the full amount of taxes owed. For some people the "reasonable collection potential" will be less than the full amount of taxes owed, sometimes as little as 10 percent or even less.

We can help determine if you are eligible for an OIC and we will also assist you in navigating the complicated IRS process to get the best outcome possible while you continue on with other responsibilities in your life.

Filing Bankruptcy

If you have so much tax debt that you are considering filing for bankruptcy, please contact us today. Often people think their situation is hopeless, but you might be surprised what we can work out for you.

Even those who file bankruptcy have no guarantee that their tax debt will be discharged as part of the proceedings. If this is the case, the IRS will resume collection efforts as soon as the bankruptcy is finalized. If the judge discharges your tax debt in the bankruptcy, you must make sure that you file the tax return for that year correctly so the IRS does not view your forgiven debt as taxable income.

We are here to help, and we offer a free consultation, so there is absolutely no reason not to call.