Are you in debt to the IRS?
If you owe money to the IRS, you are not alone! It is estimated that 19% of taxpayers are in debt to our government. The one thing that is certain about tax debt is that it never goes away. If left unattended and unpaid, tax debt will consume your life. As a result of your debt you may be declined for a loan, lose your job or worse — you could be fined or even arrested!
The IRS is a beast, an unstoppable machine. In 2003, they issued over $19 billion in penalties alone. The IRS doesn’t care how you pay, or what you have to sacrifice as long as they get their money. In fact, on the IRS website they offer a few “suggestions” to help you pay your taxes:
- Cash advances on credit cards
- Bank loans
- Borrowing against 401(k), Life Insurance, etc.
- Liquidating savings accounts, savings bonds, stocks, etc.
So let’s get this straight…The IRS wants you to go farther into debt or drain your savings just to pay them off? That’s plain un-American! What the IRS doesn’t want you to know is that you actually have more options!
Do NOT pay the IRS until you talk to us!
Statute of Limitations (SOL)
If your debt is old, it may be subject to dismissal due to the statute of limitations. The statue of limitation on IRS debt is 10 years after the date of assessment of tax or levy. For more information refer to Section 6502(a)(1) of the Internal Revenue Code.
Offer in Compromise
An Offer in Compromise — or OIC — is essentially an agreement whereby a person with unpaid taxes is able to settle the debt by paying less than the original amount. Depending on many factors, you may be able to settle for as little as 10% of your original debt. The problem with an OIC is that it’s very hard to qualify. In fact, only about 15% of the people who apply are approved. It’s also long, drawn-out and has a very complicated filing process. If approved, you should expect to spend at least 12-24 months dealing with this mess. Since it is an extremely difficult process, many people decide to get professional help when filing for an offer in compromise.
Installment Agreement
If you are current on this year’s tax return and owe less than $25,000 then you may be able to setup an installment agreement — or installment plan — where you pay your debt over the course of five years. The payment plans, however, aren’t as sweet and innocent as you may think. The whole time that you are paying down your debt, interest and penalties are accruing. If you aren’t careful you may end up owing more in a few years than when you started!
Currently Not Collectible
If a person doesn’t have the means necessary to pay their debt then the IRS may declare that person as Currently Not Collectible or CNC. Once a person is deemed CNC the IRS must stop all attempts to collect the debt including levies and garnishments. If the persons financial outlook improves then the IRS may again attempt to collect the debt. One thing to note about being CNC is that the statute of limitations is still in effect for that debt. If the IRS cannot collect the debt within 10 years then they must dismiss it.
Filing Bankruptcy
If you have no other alternative and if you qualify you can file chapter 7 or chapter 13 bankruptcy on your tax debt. There are five requirements to being able to file bankruptcy on your taxes:
- The tax return in question must be at least three years old
- You must have filed this tax return at least two years ago
- The tax assessment must be at least 240 days old
- The tax return cannot be fraudulent
- You cannot be guilty of tax evasion
Get Help!
Dealing with the IRS is very stressful and difficult. The main reason is because you have no idea what you are doing (or what you are even allowed to do.) If you are not sure how to handle your problems with the IRS then you should seriously consider getting some professional help. It may cost you some money up front, but it could save you thousands of dollars down the road!
End your tax problems with our help!
