IRS Debt Help:
Do you owe money to the IRS? You have debts to the IRS, but you don't know what to do. Don't despair, you are not alone. Many Americans are behind on their taxes or can't pay what they owe to the IRS. If you want help from the IRS with your tax debt, you need to know the different IRS tax debt strategies.
There are five ways to get out of tax debt with the IRS.
- If you file for bankruptcy, you can get rid of your tax debts as long as you follow the strict rules of Chapter 7 or Chapter 13 bankruptcy.
- An instalment agreement is a plan for making payments to the IRS every month.
- Offer in Compromise is a programme that lets you pay off your tax debts for less than what you owe. To pay off the IRS for less money, you must pay all at once or set up a short-term payment plan.
- Not currently collectible: A programme in which the IRS agrees not to try to collect a tax debt for about a year.
- A partial payment instalment agreement is a relatively new way to deal with debt. It gives you a long-term payment plan to pay off the IRS for less money.
Offer to Make a Deal
Many people who owe money to the IRS might be interested in the first option, "Offer in Compromise" ("OIC"). Offer in Compromise can be the best solution for those who are eligible, but it is important to remember that not everyone is eligible. Only about 15% of people who apply to the OIC programme are able to get their debts reduced. Because of this and the fact that it's hard to file an Offer in Compromise, a lot of people hire a Tax Professional who has a good track record of negotiating with the IRS. This Tax Professional will not only be able to tell you if you are eligible for an OIC to lower your IRS debts, but they will also help you get what you want out of the complicated IRS system.
The process of making an Offer in Compromise is long and takes a lot of time. Most people have to wait anywhere from 12 to 24 months to get a positive answer on their offer application. Through an Offer in Compromise, taxpayers agree to pay the IRS only the amount that is likely to be collected 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 don't meet the requirements for an Offer in Compromise, the expiration of the Statute of Limitations, or bankruptcy relief, but they still want to get rid of their IRS debt. In these situations, it may be possible to work out a long-term payment plan with the IRS. The IRS lets you "structure" five main kinds 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.
Not Collectible Right Now
If a taxpayer doesn't qualify for an Offer in Compromise and can't pay an Installment Agreement, Currently Not Collectible (CNC) status may be an option. If a client is put in CNC status, the statute of limitations keeps running, and the IRS won't try to collect. But if a taxpayer's financial situation gets better, the IRS can take the file out of the CNC status and put it back into the active collection status.
Why you should try to get CNC status:
- The taxpayer doesn't qualify for an OIC because he or she has a lot of equity, and an Installment Agreement isn't an option because the taxpayer has more allowable expenses than income.
- Taxpayer's income is less than the amount of expenses that can be deducted, and there's no sign that things will get better in the future.
- The taxpayer has more expenses that can be deducted than income, and the time limit for filing is almost up.
IRS Tax Debt: How Long You Have to Pay
The IRS has 10 years to collect taxes that haven't been paid. This is based on the date that a tax bill was paid in full. There are different ways to settle a tax debt. It could be a tax return balance, an audit assessment, or a proposed assessment that has now become final. From that day on, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn't get the full amount within 10 years, the balance on the account goes away for good. The limit on when the tax could be collected has passed.
Choosing a tax pro to handle your tax debts with the IRS
Because the Offer in Compromise and other IRS tax debt processes are complicated, many taxpayers hire a tax professional to prepare their IRS paperwork and talk with the IRS directly. Tax experts charge anywhere from $1,500 to $6,000 or more to represent you before the IRS in a correct and thorough way. Most IRS tax debt solutions involve negotiating with the IRS, so your tax pro should be allowed to work with the IRS. For help with your Offer in Compromise, you should look for a Tax Attorney, an Enrolled Agent (EA), or a Certified Public Accountant (CPA). The tax professional must know the laws that tell the IRS how to collect tax debts, how the IRS decides whether or not to accept an offer, and all the ways to solve tax debt problems. Jim Brown, the managing tax attorney at Freedom Tax Relief, says that taxpayers should look for a tax professional with years of experience in dealing with revenue officers, the Automated Collection Systems division, and the complicated IRS process.
Please keep in mind that even the most successful tax professionals have lost Offer in Compromise cases. This means that not every consumer who wants help from the IRS with debt is guaranteed to save the most. It's important to know that your Offer in Compromise will be decided based on how your finances are different from everyone else's. If you do need IRS debt help, having a tax professional represent you in front of the IRS will help make sure that all letters and phone calls from the IRS are handled quickly and professionally. But in the end, the IRS will decide what to do with your case.
You should know that, like death and taxes, your IRS tax debt problem won't just go away, so you should get help before the IRS steps up its collection efforts or you get hit with more fees and interest.
