IRS Debt Help Options

Many people struggle with back taxes, unfiled tax returns, or audit penalties, all of which produce debts they simply cannot afford to pay. If you’re struggling, review the following IRS debt help options. Once you understand your options, contact a licensed tax attorney, Enrolled Agent, or Certified Public Accountant with experience resolving tax debts. They can help you successfully navigate the IRS maze.

Tax Debt Options

In addition to full, prompt payment, which many people can’t afford, IRS debts can be resolved with one of five options:

Offer in Compromise: an agreement to settle the debt for significantly less than is owed via a lump sum payment or a brief installment plan.
Installment agreement: a monthly payment plan for the full balance of the IRS debt.
Partial payment installment agreement: a monthly payment plan for a portion of the tax debt.
Currently not collectible: an agreement by the IRS not to seek collection of a tax debt for a specific period of time.
Bankruptcy: an order to discharge all or part of your IRS debts under chapter 7 or 13 bankruptcy.

Offer in Compromise
You’ve probably seen ads on television that promise to settle tax debts for as little as 10% of the total amount due using the IRS Offer in Compromise (OIC). Despite their claims, offers-in-compromise are not simple or common. Only about 15% of OIC applications are approved by the IRS and applications take 12-24 months to process. If you’re interested in this option, contact a tax professional with a proven record of successfully negotiating offers in compromise.

Installment Agreement, Full or Partial
If you don’t qualify for an OIC and are deemed able to pay all or most of the debt, the IRS may offer an installment agreement. Individuals who owed less than $25,000 can often apply for these themselves if they plan to pay the debt in full, but a tax professional should assist you if you wish to apply for a partial installment plan or owe more than $25,000

Currently Not Collectible
If you don’t qualify for an offer in compromise, but can’t afford an installment agreement, a tax professional can help you apply for Currently not Collectible (CNC) status. Under this agreement, the statute of limitations continues to run and the IRS will not pursue collection actions. However, if your financial situation improves, the IRS can remove the CNC status and resume active collection.

You should consider applying for CNC status if:

Your income is lower than your allowable expenses and this is unlikely to improve in the future;
Your income is lower than your allowable expenses and the statute of limitations will soon expire.

Bankruptcy All or some of your IRS tax debt may be discharged under chapter 7 or 13 bankruptcy filings. The discharge is subject to strict rules and can only be ordered by a bankruptcy judge. If you’re considering bankruptcy, contact an experienced bankruptcy attorney for help.

Statute of Limitation
The IRS has 10 years from the day the tax liability is finalized to collect it. A tax liability can be finalized as a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. If the statute of limitations has expired, the IRS must cease all collection attempts and the tax liability is erased.

Seek Professional IRS Debt Help

Because of the complexity of the offer-in-compromise and most other IRS tax debt processes, you should hire a tax professional to prepare your IRS documentation and to negotiate directly with the IRS. Tax professionals charge anywhere from $1,500 to $6,000 or more. In order to represent you, the tax professional must be admitted to appear before the IRS. Qualified professionals include tax attorneys, Enrolled Agents (EA), or Certified Public Accountants (CPA).

“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,” says Jim Brown, the managing tax attorney with Freedom Tax Relief.

If you owe an IRS debt, don’t simply wait for it to vanish. In addition to penalties and interest, the IRS can file levies, liens, or wage garnishments. It’s best to contact the IRS or an experienced tax professional as soon as you receive a notice.

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