Struggling With IRS Debt? Talk To The IRS Yourself!

I owe, I owe, so off to work I go. We have all heard that little ditty before and for most of us it is true. For me, as many of you who have read my this blog often, know, I owe the IRS a small chunk of change. Small in the IRS' eyes that is. In my eyes it is a huge amount. So today, I thought, I would look to some of the experts and see what legal ways there are to handle IRS debt.

The first expert I looked to was the folks at Bills.com, where the first paragraph asks:

Do you owe the IRS? Are you struggling with IRS debts and cannot figure out what to do? Don’t despair, you are not alone. Many Americans owe back taxes, or cannot afford to pay their IRS debts. If you want to get IRS debt help, it’s important to understand the different IRS tax debt strategies.

I really like this website, at least on this issue, because their information is the most thorough. In fact they are the only website (I found) that even mentions the arrangement that I have with IRS. An arrangement, I tried to explain to one of my readers several months ago, but not where she understood. After my poor explanation, she told me that the IRS didn't make those arrangements, even though it was the IRS themselves who offered it to me.

In this post, we will take a look at all 5 payment arrangement methods, so if you are in the situation of owing the KGB, I mean the IRS, you will know what your options are. Which means, you will be ahead of me, when I got myself in this situation.

Compromise

1. The first and best option, is to offer a compromise. The IRS actually have a program where you can settle your tax debts for less than what you owe. Of course it's best to pay what you owe, but if you can't afford to, this is the next best alternative and will save you money over many of the others also. The concept requires the tax payer make a lump sum or short term payment plan to pay off the IRS at a reduced dollar amount.
   
   Installment
   
2. That brings me to installment agreements where the tax payer enters into an agreement to pay off the IRS with monthly payment plan. Keep in mind, the IRS will still charge you interest, during this time.
   Partial Payment
   
3. A somewhat new (according to Bills.com) debt management program is one where the taxpayer has a long term payment plan to pay off the IRS at a reduced dollar amount. To me this sounds a lot like number one.
   Not Currently Collectible
   
4. OK, this is the one the plan I am currently under, Not currently collectible is a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so. With this plan, the taxpayer is still charged interest and late fees, but the IRS recognize that the taxpayers income is not one they can collect the debt.
   

   
   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 client is placed in CNC status, the statute of limitations continues to run and the IRS will not pursue collection actions. However, if a taxpayer’s financial status improves, the IRS can remove the file from CNC status and return to active collection status.
   
   A. Taxpayer has income below allowable expenses and there is no indication that the financial situation will improve in the future;
   B. Due to high equity, the taxpayer does not qualify for an OIC and has more allowable expenses than income so an Installment Agreement is not an option; and,
   C. Taxpayer has more allowable expenses than income and the statute of limitations is getting close to expiring.
   
   

   
   Bankruptcy
   
5. Finally you can discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition. I really don't suggest this option.
   

   
   Statute of Limitations expiration, or bankruptcy relief but still seek resolution for their IRS liability. In these cases, it may be possible to negotiate long term IRS payment arrangements. The IRS allows “structuring” five primary types 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. Currently Not Collectible
   

   
   
   

It is important to know, as I first learned on the radio program Handle on the Law, and since found on the quoted website above, that there is actually a Statute of Limitation for IRS Tax Debt. This means that the IRS has 10-years to collect any 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, plus any penalties and interest. If the IRS doesn't collect the full amount in the 10-year period, then the remaining balance on the account disappears forever.

There you have it, I hope this information helps and lets all get our tax debts paid and taken care of. Remember, forget wasting your money to hire a tax lawyer, if you are proactive and don't procrastinate and try to hid from the IRS, you don't need one, as the IRS will be more then willing to work with you. You do however, have to be completely honest about everything with them.

Stay tuned on my article on Bankruptcy, to be posted in the next few days.