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By Sean A. Kelly
A growing number of wealthy people are calling for higher taxes on the rich to help restore the fiscal health of the nation. Many have signed open petitions calling for the end of tax cuts adopted since 2001. These people are saying, ‘Tax me more’. For the majority of people, tax hike is unpopular and many are buried under mounting tax debt problems. People are turning to debt IRS tax solution providers for help.
Many of these debt IRS tax solution providers claim that they can help you save the most money while resolving your tax issues with their expertise and resources. They normally provide free consultation to determine if their services are suitable for your needs. It is important to consult with licensed IRS representative tax attorneys, enrolled agents (EA), and certified public accountants (CPA) as most IRS tax debt solutions involve direct negotiations with IRS. These professionals are familiar with all the issues and procedures and know how to navigate the IRS tax collection process.
You might be one of those who owed IRS tax debt due many reasons such as failure to file tax returns, did not know how to file self-employed returns, or underestimated taxes due from 401k withdrawals. Whatever the reasons, it is in your best interest to take action and resolve the problem quickly to avoid interest and penalty.
The IRS can only collect tax debts, plus any penalties and interest, within a 10-years time frame and after that the remaining balance on the account disappears forever. However, waiting for the 10 years to pass is not a recommended solution. The IRS can employ tax collection activities which can bring negative impact on your financial situation.
There are several options available to settle your IRS tax debt:
Offer in Compromise (OIC): a program to settle tax debt with the IRS for less than is owed via a lump sum payment or a brief installment plan. To qualify for an OIC, a taxpayer must be in a financial hardship with proof based on examination of household income, monthly IRS allowable living expenses, and the assets in the taxpayer’s name. Taxpayer must also demonstrate to the IRS an inability to repay the debt within the remaining time the IRS has to collect on the debt. The amount that the IRS will accept in a settlement depends on how accurately the OIC documentation is prepared.
Installment agreement: a monthly payment plan for the full balance of the IRS debt. This plan allows a taxpayer to spread the repayment of the tax debt over a period as long as 5 years. Individuals who owe less than $25,000 can often apply for these themselves, if they are able to pay all debts (and the interest that will be added on) in full, within five years. Once the tax debt is over $25,000, the IRS no longer offers the option of paying the debt within five years.
Partial payment installment agreement: a monthly payment plan for a portion of the tax debt if your tax debt is over $25,000.
Currently not collectible (CNC): an agreement with the IRS not to seek collection of a tax debt for a specific period of time. If the IRS grants you CNC status, they are going to file a tax lien against you. The IRS will periodically review your finances with you. If your financial situation improves, the IRS will revoke the CNC status and resume active collection efforts.
Bankruptcy: an order to discharge all or part of your IRS debts under Chapter 7 or to make payments or not, per the ruling of the bankruptcy court in Chapter 13. In order for an IRS tax debt to be discharged it needs to meet three basic rules. The tax debt has to be due for three years, the tax filing has to be filed for two years, and the tax assessment has to be in place for at least 240 days.
Most IRS tax debt process is complex and requires certain skills and expertise. It involves proper documentation and negotiation with IRS. You may consider engaging a licensed IRS representative to help you with the process. You may look for someone with years of experience in IRS collection matters, especially experienced in dealing with revenue officers, the Automated Collection Systems division, and the complex IRS process. You may explore all of your options and understand the full extent of your tax problem. By being fully informed about all IRS collection efforts, you can protect yourself as best as possible from IRS levies, liens, or wage garnishments. And most importantly, you can take action to solve your tax debt quickly.
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