IRS TAX DEBT

IRS tax debt is a difficult obstacle to overcome especially for those taxpayers who have recently experienced a life altering events. Events such as unforeseen medical bills or even the loss of loved oned can place a financial burden on those looking to get back to normal. Other events such as a downtown in economic times can contribute greatly to a taxpayer’s tax problems. There is hope. The IRS has constructed various pay back programs that assist taxpayer’s in paying back all of their IRS tax debt. The programs include payment plans, requesting affordable installment agreements, reducing tax debts through an Offer in Compromise, or discharging your tax debts through bankruptcy.  The most important element though is that the taxpayer maintain a strong communication with the Internal Revenue Service as it becomes an important commodity to have down the road. Below is a detailed summary of each of the tax debt programs that are offered:

Tax Debt Options

Installment agreement:
The installment agreement is a negoatied monthly plan to paying off all a taxpayer’s debt to the IRS.  Its fairly easy to setup and only requires a brief phone call, filling out small amount of paperwork, or even the use of an online system.  There are also fees that will need to be paid including $52 for payments deducted directly from a bank account, $105 for new installment agreements without direct debit,  or $45 for reinstating or restructuring a defaulted installment agreement.  Below is a step by step instructions on what to do do for applying for this option

1. Learn how much tax debt is owed to the IRS. Call the IRS or get out copies of tax returns to clarify the amount of debt that is owed which includes original tax debt due, including penalties and interest.
2. Form 9465 will need to be filled out.
3. A date is to be chosen to pay your taxes on.  The date of the month can range anywhere from the first to the 28th day of each month.
4. You will need to consider how much you will be able to pay towards your tax debt each month.  The same amount or more must be paid each month or a taxpayer will incur the $45 reinstatement fee.
5. The taxpayer should hear a response within 30 business days.
6. It is extremely important that the taxpayer’ pay the minimum each month. A payment can be paid by check, money order, credit card, EFTPS or automatic withdrawals from a checking account.

Things to consider for the Installment Agreement:

1. Call the IRS at 1-800-829-1040 to set up a payment plan over the hone.
2. If certain criteria is met the IRS must agree to the agreemnt: total tax does not exceed $10,000 and the monthly payments will pay off irs tax debt in full within 3 years.
3. If certain criteria is not met it is recommended that the taxpayer utilize the services of a professional tax person.
4. All tax returns must be filed.

Partial payment installment agreement:
Similar to the installment agreement but is a longer term

Offer in Compromise:
Program where a reduced amount is negotiated to pay back tax debt and requires making a lump sum or a short term payment plan.

Not currently collectible:
Program where the IRS will voluntarily postpone the collection of the tax debt.

Filing bankruptcy:
Tax debts are discharged under the rules and regulatrions of Chapter 7 or 13.

There is no magic wand to paying off IRS tax debts.  Taxpayers will experience the scrutiny of the IRS’s ultra aggressive tax debt collection tactics.  When a taxpayer is counseling with a tax attorney they should be aware that any attorney promising you to pay a severely reduced debt with an offer in compromise more than likely does not have the taxpayer’s needs in mind.  Choose the attorney or Tax specialists who will take the time to map out the best course of action for you.

Related Links
IRS Tax Levy
IRS Tax Jobs