IRS Tax Problem Help

Every week someone calls me and tells me they owe the IRS, but do not have the money to pay the back tax.  Many of them are frustrated because the IRS notices keep coming and they feel threatened.  They want to pay their tax, but they are not able.  Does that sound familiar?

There are 6 main options available if you owe the IRS.

1. The first option is to full pay the tax.  Most people do not have the money sitting around in their checking account.  Do you?  Some other options if you do not have the money sitting in your checking account or in your mattress are as follows:  Refinance your home.  If the IRS has filed a lien on you, they will release the lien to get paid on a refinance or sale of a home.  Look around your home do you have a car, boat, motorcycle, 4 wheeler or other play-toy you can sell and payoff the IRS?
2. Pay the IRS back with an installment agreement is the second option.  Many times the IRS will work with you to set up an installment agreement if it will help them get paid.  Most people are not aware the IRS will allow an installment agreement.
3. If the money you are making is just enough to pay your basic living expenses (based upon the IRS standards) and your current year taxes, the IRS will set you up as “Currently Not Collectable”.  This is not a miracle!  The taxes do not go away, and penalties and interest continue to accrue.  However, if you truly cannot make payments, this gets the IRS off your back, and lets you go on with your life.  The IRS is not going to require you to make payments at this time.  However, they may come back later and ask you to update your financial information, so they can determine if you are still not collectable.
4. Offer in Compromise – This is the program where the IRS will settle your IRS tax debt for pennies on the dollar, if you qualify under the IRS standards.  Beware, a lot of companies promise to help you settle with the IRS for pennies on the dollar, if you pay their fee.  Many times they do not ask enough questions to find out if you qualify for an offer in compromise.  The IRS requires you to give them detailed financial information to determine what is your ability to pay them.  This process is very detailed and can take up to a year or longer for the IRS to make a decision.
5. In some circumstances IRS income taxes can be discharged in Bankruptcy.  Many people are surprised to find out taxes can be discharged in bankruptcy.  To find out if your situation qualifies for Bankruptcy, you need to consult with a qualified Bankruptcy Attorney.
6. The IRS does not have forever to collect back taxes.  Many people believe once they owe the IRS if they do not pay the tax, it will follow them until they die.  The Statute of Limitation for collections of the IRS debt is 10 years.  If the IRS does not collect the tax within 10 years, they lose it. Some actions can extend the 10-year period of collection.  The filing of an Appeal or Offer in Compromise will extend the collection period.  Filing Bankruptcy will also extend the collection period.

In future post I will discuss each option in more detail.

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