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Tax Debt Relief Advice and Information
How to Get Tax Debt Relief
Back tax debt is a dark cloud that hovers over many Americans. These taxpayers find themselves searching for tax debt relief because they failed to file their tax returns, did not know how to file self-employed returns, or underestimated taxes due from 401k withdrawals, among other reasons. Whatever the reason for the debt, it is important for action to be taken and for the situation to be resolved.
Tax Debt Collection and You
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 of tax debts, plus any penalties and interest. If the IRS doesn't collect the full amount in the 10-year statute of limitations period, then the remaining balance on the account disappears forever. However, waiting for the 10 years to pass is not a recommended tax debt solution because the IRS has the authority to employ tax collection activities that will negatively affect the debtor.
As the IRS increases tax collection efforts, those who owe will seek relief from tax liens, bank levies, and wage garnishments. Each of these IRS tax collection activities can negatively impact an individual’s financial situation and, in some cases, can make paying monthly bills difficult. It is important to deal with the tax debt quickly to avoid interest and late payment fees.
Tax Debt Solutions that Help
Resolving IRS tax debt involves examining the debtor’s current financial situation. In most cases the IRS will require the debtor to list out monthly income, monthly expenses, and total assets. Common forms of IRS tax debt relief include installment agreement payment plans and offers in compromise. For taxpayers who can afford to pay the entire amount over a period of time, an installment agreement is likely the solution. Under this plan, the taxpayer would make monthly payments to the IRS until the tax debts are paid in full (including interest charges).
For those taxpayers who cannot afford to pay off all of the tax debts through an installment agreement, the offer in compromise may be the best way to get relief. The offer in compromise program is designed to help taxpayers who owe more tax debts than they can afford to pay. In some cases, the IRS will accept a reduced settlement that is based on the taxpayer’s ability to pay off the debts. The reduced amount is a function of assets, income, and expenses.
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 taxpayer 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.
Seek Help for Tax Debt
Because most of the IRS tax debt solutions involve negotiations with the IRS directly, it is important to consult with a licensed IRS representative. Tax attorneys, enrolled agents (EA), and certified public accountants (CPA) are all licensed to represent taxpayers before the IRS and will be able to provide options for tax debt. These professionals are familiar with back tax debt problems and know how to navigate the IRS tax collection process.
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