Irs Debt Help: 5 Options To Getting
Rid Of Tax Debt
Do you owe the IRS? Are you struggling with
IRS debts and cannot figure out what to do? Don t despair, you are not
alone. Many Americans owe back taxes, or cannot afford to pay their
IRS debts. If you want to get IRS debt help, it s important to understand
the different IRS tax debt strategies.
There are five strategies for getting out
of IRS tax debt.
1.Offer in Compromise: a program where
you can settle your tax debts for less than what you owe. Requires making
a lump sum or short term payment plan to pay off the IRS at a reduced dollar
amount.
2.Installment agreement: a monthly payment
plan for paying off the IRS.
3.Partial payment installment agreement:
a somewhat new debt management program where you have a long term payment
plan to pay off the IRS at a reduced dollar amount.
4.Not currently collectible: a program
where the IRS voluntarily agrees not to collect on the tax debt for a year
or so.
5.Filing bankruptcy: discharge your tax
debts under the strict rules of a Chapter 7 or 13 bankruptcy petition.
Offer in Compromise
Many people who find themselves in debt
to the IRS might focus on the first option above the Offer
in Compromise ( OIC ). For those who qualify it can be the optimal solution,
however, it is important to note that not everyone qualifies for the Offer
in Compromise solution. Only about 15% of applicants succeed in reducing
their debts through the OIC program. For this reason and because of the
complexity of filing an Offer in Compromise many people enlist the services
of a Tax Professional who has a track record of success negotiating with
the IRS. This Tax Professional will not only be able to determine if you
are eligible to reduce your IRS debts via an OIC but they will also assist
you in navigating the complicated IRS bureaucracy to achieve the desired
outcome.
An Offer in Compromise is a lengthy and
time-consuming process. It takes most individuals anywhere from 12 months
to 24 months to achieve a successful resolution on your offer application.
Through an Offer in Compromise, taxpayers 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%.
Installment Agreement
Many taxpayers cannot qualify for an Offer
in Compromise, Statute of Limitations expiration, or bankruptcy relief
but still seek resolution for their IRS liability. In these cases, it may
be possible to negotiate long term IRS payment arrangements. 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.
Currently Not Collectible
If a taxpayer does not qualify for an offer
in compromise and cannot afford to pay an Installment Agreement, Currently
not Collectible (CNC) status may be an option. If a client is placed in
CNC status, the statute of limitations continues to run and the IRS will
not pursue collection actions. However, if a taxpayer s financial status
improves, the IRS can remove the file from CNC status and return to active
collection status.
Reasons for attempting CNC status:
1. Taxpayer has income below allowable
expenses and there is no indication that the financial situation will improve
in the future;
2. Due to high equity, the taxpayer does
not qualify for an OIC and has more allowable expenses than income so an
Installment Agreement is not an option; and,
3. Taxpayer has more allowable expenses
than income and the statute of limitations is getting close to expiring.
Statute of Limitation for IRS Tax Debt
The IRS has 10 years to collect outstanding
tax liabilities. This is measured from the day a tax liability has been
finalized. A tax liability can be finalized in a number of ways. It could
be a balance due on a tax return, an assessment from an audit, or a proposed
assessment that has become final. From that day, the IRS has ten years
to collect the full amount, plus any penalties and interest. If the IRS
doesn't collect the full amount in the 10-year period, then the remaining
balance on the account disappears forever. The statute of limitations on
collecting the tax has expired.
Selecting a Tax Professional to handle
your IRS Tax Debts
Because of the complexity of the Offer
in Compromise and other IRS tax debt processes, many taxpayers hire a tax
professional to prepare their IRS documentation and to negotiate directly
with the IRS. Tax professionals charge anywhere from $1,500 to $6,000 or
more for accurate and thorough IRS representation. Because most of the
IRS tax debt solutions involve negotiating with the IRS, your tax professional
should be admitted to practice before the IRS. You should be looking for
a Tax Attorney, an Enrolled Agent (EA), or a Certified Public Accountant
(CPA) to handle your Offer in Compromise. The tax professional must know
about the laws governing IRS collection of tax debts, how the IRS evaluates
offers, and what all the options are for resolving tax debt problems.
Taxpayers should be looking for a tax professional with years of experience
in IRS collection matters, especially experience in dealing with revenue
officers, the Automated Collection Systems division, and the complex IRS
process according to Jim Brown, the managing tax attorney with Freedom
Tax Relief.
Please be aware that even the most successful
tax professionals have lost Offer in Compromise cases, so not every consumer
looking for IRS debt help is guaranteed the most savings. It is important
to know that your Offer in Compromise will be decided based on your unique
financial situation. If you do need IRS debt help, having a tax professional
represent you before the IRS will help ensure that all letters and phone
calls from the IRS are handled quickly and professionally. But in the end,
it is up to the IRS to make a decision about your case.
It is important to know that like death
and taxes, your IRS tax debt issue will not simply vanish, so you should
seek help before the IRS escalates collection efforts and/or you accrue
additional penalties and interest.
Author-Bio: Brad Stroh is currently co-CEO
of Freedom Financial Network and http://www.Bills.com. |
