Seven Strategies to Help Settle Your IRS Tax Debts
Owing money to the Internal Revenue Service (IRS) can be extremely stressful and intimidating. There are also very real consequences when it comes to owing money to the IRS. This is a federal agency with a lot of power. They can garnish your wages, seize your assets, and even place a lien on your property to get the money you owe. You can either face this frightening situation on your own or get an experienced IRS tax attorney on your side who can help you figure out how to minimize your taxes and develop a clear plan to pay back the IRS what you owe. We can help you put this nightmare behind you and communicate with the IRS on your behalf so you wouldn’t have to.
The IRS is not as inflexible as one might imagine. What many don’t understand is that they are often willing to work with taxpayers. You may have several options available to help resolve your debt issues. When IRS officials know you are going to pay them, they often tend to be patient and wait for you to pay them back. Of course, the other side of the coin is that the longer you take to pay off the debt, the more money you will owe the IRS. And that is never a good situation to be in.
Here are seven ways in which you can clear your IRS tax debt:
- Create a payment plan. This is basically a monthly payment plan to pay off a tax debt. For example, if you enter into a partial payment installment agreement program, you basically have a long-term payment plan to help pay off the IRS. This works pretty much like a monthly credit card payment where you pay off your debt in installments as opposed to a lump-sum payment. An experienced tax relief lawyer can help negotiate the lowest possible monthly payments so you have the time and breathing room to resolve your tax debt while taking charge of your financial situation.
- Offer in Compromise (OIC): This refers to a program where you can essentially settle your tax debts for less than what you owe. If you owe the IRS much more than what you can reasonably afford to pay, this might be the route for you. An Offer in Compromise gives you the option to pay a smaller amount as a complete and final payment, settling the debt. However, in order to qualify for an OIC, you must prove that you cannot pay the total balance owed before the collection statute expires, using net equity in assets plus any future income. The IRS computes future income as the amount it can collect on a monthly basis before the collection statute expires. If you do qualify for this program, you could potentially save thousands of dollars not only in taxes, but also in penalties and interest.
- Currently Not Collectible: This is a program where the IRS voluntarily agrees not to collect on the tax debt for a year provided you don’t have the ability to pay off your debt. This could occur after the IRS receives evidence that you have no ability to pay. You could also use this as a tool to stop an IRS levy, lien or seizure.
- Filing for Bankruptcy: Income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code. Filing for bankruptcy is one of several ways to get relief from tax debt. You should consider bankruptcy only if you meet the requirements for discharging your tax debt. You can wipe out federal income tax debt in Chapter 7 bankruptcy if you meet the following conditions:
- The taxes are income taxes. Certain types of taxes such as payroll taxes or fraud penalties cannot be discharged in bankruptcy.
- You did not commit tax fraud or tax evasion.
- The debt is at least three years old.
- You should have filed a tax return. If you didn’t do so, you cannot discharge the tax.
- The IRS should have assessed the income tax debt at least 240 days before you file your bankruptcy petition.
- Stopping Wage Garnishment: When you owe the IRS money, they can garnish your salary or wages until your debt has been fully paid or the time expires for legally collecting the tax. Your tax relief lawyer will be able to bargain for a release or modification to the garnishment if you don’t have sufficient funds.
- Stop IRS from Levying Bank Accounts: The IRS also has the power to take your savings and checking accounts to collect unpaid debt. When you account is levied by the IRS, your bank is required to remove whatever amount is available in your account on that given day and send it to the IRS. A knowledgeable lawyer can stop this by getting a release of the levy from the IRS.
- Innocent Spouse Relief: You may also have a way out of IRS debt if you inherited your spouse’s tax debts. If you can show evidence that you qualify for such tax relief, you may not be subject to these taxes. You are eligible for tax relief if you:
- Filed a joint return on which there was an understatement of tax due to inaccurate items relating to your spouse.
- Didn’t know or had no reason to know about this understatement when you signed the return.
- Applied for relief under this provision within two years after the IRS began attempting to collect the tax debt from you.
You may be able to avoid paying the IRS anything by allowing the statute of limitations to expire. The IRS has 10 years from the date of assessment to collect all taxes, penalties and interest. Sometimes, the best strategy might be to wait out the 10-year expiration date.
If you owe the IRS back taxes and you are facing levies on your home, motor vehicles, stocks or other valuable assets, please do not panic. Call the experienced Arizona tax lawyers at the Pew Law Center. We will serve as strong advocates and help you assess your options.