Settling Tax Debts
Are you receiving IRS collection notices for unpaid tax debts? Owing back-taxes can be stressful.
But it is a situation that many Americans find themselves in at one point or another. Some reasons for this include:
- Loss of employment
- Medical or health issues
- Relationship changes
- Personal or family health issues
- An increase in consumer debts
- Not understanding the consequences of non-payment
- Fear of IRS reprisal
IRS collections, generally.
The law affords the IRS with a number of ways to lawfully collect unpaid taxes. The IRS is often quick to pursue collections. It is also known for using subtle techniques and the IRS system to intimate, harass, and cajole taxpayers into paying more than they would otherwise pay.
The IRS collections function typically do not point out that the IRS has the power to settle tax debts for much less than the original amount owed. If the IRS believes that you are acting in good faith and simply cannot afford to pay, it may even settle on a surprisingly low amount. That’s why, when it comes to tax debts, it is up to you to pursue these collection alternatives. Here are a few collection alternatives that may be available to you:
Offer in compromise.
An IRS offer in compromise allows you to pay off your debt by paying something now, a lesser amount, to settle the debt. It is a final and total settlement that can come at a relatively low cost.
There are three different types of settlement offers that taxpayers can make through the offer in compromise program. Most offers are based on the inability to pay. These offers are evaluated based on your “reasonable collection potential,” whether the tax liability is actually owed, and whether not collecting the tax debt will discourage other taxpayers from paying their taxes.
The offer in compromise program can be an extremely effective tool for settling your debt at a surprisingly low rate–even 20% or less than the original amount. You can find out more about the IRS’s offer in compromise program here.
There are several different types of installment agreements you can enter into. The most favorable is typically the partial-pay installment agreement. You may qualify for this if your assets and income are low and you don’t qualify for non-collectable status (which is discussed next). This means that you would need to pay some amount each month towards your tax debt, but typically not as much as was initially required by the IRS. This may be a viable option for you if paying your unpaid taxes would force you into bankruptcy. You can find out more about the IRS’s installment agreements here.
Currently not collectible status.
The IRS is likely to forgive tax debts if you fall into a lower income bracket and have little in the way of assets. You may also qualify if you are dependent on government assistance, are unemployed, or can prove hardship in one form or another.
What this means is that the IRS simply will not collect from you. It is an account code that is placed on your IRS account that tells the IRS not to collect from you. If you qualify for and are approved for currently not collectable status, you will be relieved of making payments as long as your account remains in this status.
You can read more about the IRS’s currently not collectible status here.
Discharge taxes in bankruptcy.
You may be eligible for bankruptcy relief for unpaid taxes owed to the IRS if you have tax debts that are older and you filed the tax returns to report the taxes more than three years ago. There are a number of rules that apply here.
Bankruptcy cases can be particularly complex, and on top of that, bankruptcy tax laws are constantly changing. If you are seeking information about bankruptcy related to tax debt, you should seek the help of an experienced tax attorney.
You can find out more about discharging taxes in bankruptcy here.
Act now to settle your IRS debts.
Whether it means submitting an offer in compromise that is more likely to be accepted, helping you to establish a reasonable payment plan for the lowest amount possible, setting up a payment agreement you can afford, or filing an appeal, we can help you resolve issues with the IRS in a way that works for all parties.
Our work isn’t done until we help you obtain relief or exhaust all available remedies, including litigation when necessary and appropriate.
We are former IRS attorneys, appeals officers, and auditors who help taxpayers with unpaid tax debts. We offer compassionate, individualized service at manageable rates.
If you are in a situation where you cannot pay your debt owing, call today for a confidential consultation. Our number is 800-521-0230.
More About Settling Tax Debts
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