IRS Tax Debt Solutions and Advice

Installment Agreement for Tax Debts

Many taxpayers cannot qualify for an Offer in Compromise, Statute of Limitations expiration, or bankruptcy relief but still seek resolution for their IRS tax liability. In these cases, it may be possible to negotiate long term IRS payment arrangements for your tax debt. The IRS allows “structuring” five primary types of payment plans for tax debts, 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 Status and Tax Debts

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 for tax debts. If a client is placed in CNC status, the statute of limitations continues to run and the IRS will not pursue tax collection actions. However, if a taxpayer’s financial status improves, the IRS can remove the file from CNC status and return to active tax 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 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 a tax audit, or a proposed assessment that has become final. From that day, the IRS has ten years to collect the full amount of the tax debt, 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 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 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 help with the IRS 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 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 tax debts. It is important to know that like death and taxes, your tax debt issue will not simply vanish, so you should seek help before the IRS escalates tax collection efforts and/or you accrue additional penalties and interest.