Tax Relief for IRS Debt

Assets are everything a person owns that is worth more than what is owed on it.  This can include physical property like a house or car, as well as intangible property, such as stock options.

A bank levy is a tool used by the IRS to collect on your IRS tax debt.  A bank levy freezes any money in your bank account that is less than the amount listed on the levy notice for 21 days. If the levy is not released prior to the end of the 21 days, the money in the account will be sent to the IRS. A bank levy is a one-time tool, though the IRS can levy a single account over and  over. Only money that is in the bank account the day the levy is received and processed by the bank is subject to the levy.

A company hired by a creditor to collect a debt that it is owed.

A third-party managed debt payoff strategy where your interest rates are lowered and your monthly payments decline. A credit counseling program typically takes around five years to get debt free. Each consumer's experience depends on his or her creditors.

CNC is an agreement by the IRS not to seek collection of a tax debts for a specific period of time. To qualify for CNC, a taxpayer must prove to the IRS that he or she can't afford to make a monthly payment or easily liquidate assets. The IRS almost always places a tax lien on anyone who is placed in CNC status.

Taking multiple debt or credit lines and consolidating them into one new payoff plan. Frequently, this is a consolidation loan, provided to consolidate debts into one loan with one payment, typically shifting credit card debts to secured debt by refinancing a mortgage. 'Debt consolidation' is sometimes used to refer to a credit counseling or debt settlement program.

Debt settlement, also called debt negotiation, is a process by which creditors (the lenders) agree to forgive a part of a balance, saving the debtor (the borrower) up to 50%+ of what was owed. The debtor must pay the new agreed-upon sum only and no more. In some cases, the debtor may continue to make monthly payments until the newly agreed balance is paid. In others, the debtor must make a lump-sum payment. The forgiven balance MAY be considered taxable income by the IRS and MAY be noted on a form 1099-C. Check with a tax advisor. The settlement may also be noted on the debtor's credit report.

In IRS terminology, an Installment Agreement (IA) is a payment plan for repayment of a delinquent tax debt.  The IRS has various types of Installment Agreements. The kind of IA a taxpayer ends up in depends on the kind of tax owed, the size of the tax debt, the length of time remaining for the IRS to collect on the debt, and the taxpayer's financial means to make payment.

IRS tax debt has a 10 year statute of limitations. That means that the IRS has 10 years from the day the tax liability is assessed to collect it. The statute of limitations can be extended beyond 10 years, if you file for bankruptcy. The clock stops ticking on the collection statute while you are under the protection of the bankruptcy court or during the time that the IRS is reviewing your Offer-in-Compromise submission.

A lien is a legal claim for money owed by a person that is a matter of public record. A lien can affect any property that the debtor owns. A lien against a debtor with real estate clouds the title to the property. Unless the lien is paid or 'satisfied', ownership  of the property cannot be transferred.

An Offer in Compromise or OIC is a reduced balance settlement on IRS debt or state tax debt.  In the last published IRS statistics, the IRS reports that the average discount on accepted Offers was 88% (only 12 cents on the dollar was paid by Americans with accepted OICs), and that the average acceptance rate was around 24%. Typically, when an Offer in Compromise is accepted, the tax debt must be paid off in one lump sum payment.  A tax relief provider can help prepare and coordinate the process of applying for an Offer in Compromise. OICs submitted by tax professionals have a  much higher rate of success than OICs submitted by individuals.

A PPIA is a hybrid of an installment agreement and an Offer in Compromise. A PPIA requires a monthly payment, like an installment agreement, but the sum total of all the payments will not pay off the tax debt in full. A PPIA is only available to a taxpayer who can prove an inability to pay the tax debt in full.

An SFR is a return that the IRS prepares and files in lieu of a return that the taxpayer neglected to file. When preparing an SFR, the IRS does not apply any deductions that the taxpayer would have claimed. Because of this, SFRs can result in highly inflated tax assessments. Taxpayers can file a return to replace the SFR.

A tax lien can be filed against a taxpayer by the IRS or by a state tax agency. A tax lien is a public notice of a taxpayer's indebtedness that will appear on the taxpayer's credit report. A lien is tied to the person, not any property that he or she owns, but the lien will encumber any property owned, possibly preventing sale or transfer of ownership. Once filed, a tax lien remains in force until the debt is paid in full, settled, discharged in a bankruptcy, or the collection expiration date expires. Tax liens do not necessarily lead to collection efforts.

A wage garnishment is a legally binding order for an employer to withhold a portion of an employees pay. Standard creditors need to obtain a court order to garnish a taxpayer's wages. The IRS or state tax agencies do not need a court order. An IRS wage levy can leave a single person with as little as $475.00 per month to live on. The IRS publishes a table that shows how income exempted from garnishment is calculated.