No one likes dealing with the IRS, but sometimes it’s unavoidable. If you’re owing taxes or have other problems with the IRS, you need to take action. The good news is that there are 7 main resolution options available to you.
The IRS is one of the most feared organizations in the United States. But it doesn’t have to be. This post will give you an overview of the 7 main IRS resolution options so that you can pick the best one for your specific situation. Each option has its pros and cons, so read on to find out which one is right for you!
Let’s take a look at what an IRS resolution is, and how you know if you need one.
IRS resolutions: what is an IRS resolution?
The term IRS resolution describes the various types of tax-related relief available. From abating penalties to settling balances with no payments, these relief options are available to taxpayers in a number of different ways.
Each resolution requires a unique set of paperwork and qualifications for that type of relief. The IRS looks at your current financial situation and financial circumstances to determine which options are right for you.
It’s important to find a tax-resolution service that works with your current financial situation and meets the requirements of your case.
How do you know if you need an IRS resolution?
Whether your tax liability is large or small, there are a few key indicators to show if you may need to seek IRS assistance. If you have a relatively low amount of back taxes, the best option is probably to file for currently non-collectible status. This will prevent the IRS from taking any further collection action against you.
However, if your back taxes are substantial, you may want to pursue other resolution options.
How to measure the value of tax relief
While the price of tax relief is hard to measure, there are a few metrics to consider. One of these is the value you’ll receive. Tax resolutions should be priced according to the value they will save you.
The value they’ll bring is a good indicator, and a tax resolution firm should be able to show you how much you’ll save. You can compare prices online and in person.
Keep your paper trail documented and organized
Before you contact the IRS, you should first read the IRS correspondence carefully. Make sure to save it in a safe place so you can refer to it when you need it. It will explain why the IRS is writing to you, what you need to do, and when to reply.
Make sure you have all the information you need to make an informed decision and get the best possible IRS resolution. If you’re unsure of whether or not you need an IRS resolution, contact an experienced tax attorney.
Keeping records of all of your correspondence is a great way to stay organized and make the best decision for your situation. In addition to that, being organized can save you later on.
What happens if you don’t resolve your tax debt
If you do not resolve your tax debt, you may have to pay higher taxes or pay penalties. The IRS has little patience with taxpayers who do not stick to their payment plans.
If you don’t make your payments on time, the IRS will quickly impose penalties and back interest. This could include actions like a wage garnishment or other tax penalties. You could lose your home or other assets, and the IRS will take your money.
If you can’t afford to pay the full balance, you may want to consider an installment plan or an installment agreement.
Different IRS resolution options available
If you are facing tax debt, you might be wondering what are the different IRS resolution options available to you. Depending on your financial situation, you may have more options available to you than you think.
Innocent spouse relief
This does not apply to all situations – however, if you and your spouse file jointly and one of the parties involved do not feel like they are accurately represented or there is important information missing, they can claim innocent spouse relief.
Check out our blog on innocent spouse relief that goes into more detail on the subject matter.
One of the primary requirements for innocent spouse relief is that the party trying to claim it should have, not only, not knowing what was going on to cause this tax liability, but they also should have no reason as to why they would’ve known.
Offer In Compromise
An Offer In Compromise (OIC) can be a great option. Basically, you offer to pay a certain amount of the tax liability to the Internal Revenue Service (IRS) and it can eliminate your tax debt. Once an OIC is accepted, the total offered amount must be paid within certain time periods (depending on the offer itself) and this time period of monthly payments can range from 5 months to 24 months.
When the tax liability is paid in full, all tax liens will be removed, and the taxpayer will remain on probation for 5 years.
Check out our blog on Offers in Compromise that offers a more thorough explanation.
An important thing to note about Offers in Compromise is that during the time period following one, you need to be sure to pay all of your taxes owed and file your returns on time. If not, it could turn out to be a bigger issue later on.
Currently-Not-Collectible (CNC) status
If you have no, or very little, income coming in, and you only make enough to just barely cover your living expenses, you may be able to qualify for a Currently Not Collectible Status. This is when the IRS temporarily suspends levies, tax liens, threatening letters, and collections enforcement until your financial hardship ends and your situation improves.
Claiming a currently non-collectible status can suspend collections for up to two years. This can give a person time to get back on their feet and into a different financial situation.
Full-pay installment agreement
This option is where you have to pay all of the tax debts you owe, but it is spread out over different time periods or installment agreements. There are two different kinds of full-pay installment agreements available, they include:
1. Streamlined installed agreement
To qualify for this kind of installment agreement, your tax liability must be less than $50,000. The primary difference between streamlined versus non-streamlined agreements is that the IRS does not file a tax lien or require a financial disclosure form.
2. Non-streamlined installment agreement
A non-streamlined installment agreement, on the other hand, does require a financial disclosure form. This form is used to assess your ability to pay and determine the terms of your payment plan.
If you owe more than $50,000, you’ll also need to provide additional documentation, such as bank statements and tax returns. The process of setting up a non-streamlined installment agreement can be more time-consuming, but it may be the best option if you can’t afford to pay your debt in full within 120 days.
This agreement can cover tax liabilities up to one million dollars.
Partial-pay installment agreement
If you cannot pay your tax liability within the 10 -year period, you can try to opt for a partial payment plan.
Simply put, it’s an agreement between you and the IRS that allows you to pay off your debt in small installments over time. This can be a great option if you’re facing financial hardship but still want to make a dent in your debt.
The downside is that it will take longer to pay off your debt this way, and you’ll also accrue interest and penalties on the unpaid balance. But if you’re struggling to make ends meet, a partial payment installment agreement may be just what you need to get back on track.
In order to qualify for a partial-pay installment agreement, will have to submit financial documents.
10-year collection statute expires
The IRS has 10 years to collect on the taxes that you owe. There are certain things that can extend this time period. For example, leaving the country for ten years or filing for bankruptcy.
Other than factors that might extend this time period, it is important to note that the statute of limitations for collections begins after the tax return is filed.
However, as a general rule of thumb – if it has been longer than 10 years and the IRS has not attempted to collect the money, you do not have to worry about it.
Filing for bankruptcy
Bankruptcy can help eliminate different kinds of debt, including some kinds of tax debt. The tax debt must be income taxes and they must be owed 3 years from their due date to qualify.
Check out our blog for more information regarding what happens to your tax liability after filing for bankruptcy.
Filing for bankruptcy can affect many aspects of your financials and it is advised that you have the full picture of your financial situation and understand all of your options before doing so.
When to hire tax professionals
When to hire a tax attorney for IRS debt resolutions depends on your specific situation. A tax resolution attorney is highly qualified, but they are not magicians. You should get clear on what you expect from a tax attorney. If you can agree to a potential solution, a tax attorney is a great option for you.
Not all tax liability cases are equal
This deals a lot with the complexity of the case. The IRS may threaten to take legal action if you’re delinquent. A tax attorney can explain the laws and procedures that will protect you and minimize the consequences.
In some cases, the IRS can be a difficult organization to work with. You may be dealing with large tax debt, or you may have a difficult financial situation.
Talk to an experienced tax attorney today
When it comes to resolving your IRS tax debt, you have a few different options. You can try to work out a payment plan with the IRS, or you can negotiate an offer in compromise. If you’re not sure what to do, or if you’re having trouble resolving your tax debt on your own, it might be time to talk to a tax attorney.
An experienced tax attorney can help you understand your options and figure out the best way to resolve your tax debt. They can also negotiate with the IRS on your behalf and help you take advantage of any relief programs that might be available. If you’re struggling to resolve your tax debt, don’t wait any longer – talk to a tax attorney today.
For more information, talk to the tax professionals at Damiens Law. For over two decades they have been helping people resolve their tax liability and corresponding with the Internal Revenue Service on their client’s behalf.