If you owe the Internal Revenue Service a significant amount of money in back taxes, you may be wondering what your options are to resolve this debt. It is important to know that the IRS does offer a number of tax relief programs for those in situations such as yours and are now more amenable to working with you to collect the debt.
The services of an experienced Florida tax lawyer at this stage will prove invaluable as he or she can help you better understand your current financial situation. Your tax attorney will also determine your present ability to pay the amount that you owe the IRS and advise you regarding the relief program that is best suited for your specific case. Choosing the relief program that is appropriate will certainly save you a lot of time, money as well as worry in the long run.
Common Options Available to Settle IRS Debt
There are a few choices that taxpayers may consider when it comes to settling IRS tax debt. Here are the alternatives to evaluate:
Offer in Compromise: This is an IRS program that allows taxpayers to settle their liabilities for much less than what they owe. Typically, the IRS will accept an Offer in Compromise when the likelihood of collecting the full amount over 10 years from the date of assessment is low. In order to be eligible for an Offer in Compromise, the following requirements must be met:
- You must show evidence that it is impossible for you to pay your tax debt given your income, liabilities and assets.
- You must offer to pay the maximum amount you can afford. This is done by calculating your monthly disposable income and reasonable collection potential or RCP, which is the amount of money the IRS thinks they can collect from you over 10 years, which is the statute period.
- The IRS must approve that your offer amount is what it could reasonably collect from you. In such cases, the IRS agrees to lower your tax debt so it is in line with what you can afford to pay.
- The amount that is agreed upon under the Offer in Compromise is paid as a lump sum to settle the tax debt. The IRS will remove all tax liens and you will have an opportunity for a fresh start.
An Offer in Compromise may be pursued if there are doubts as to whether you can pay the entire tax debt, if there are doubts as to whether the tax was assessed accurately and if the collection of the tax debt would create a significant financial hardship for the taxpayer. It is important to note that the IRS has strict guidelines regarding eligibility for an Offer in Compromise. The IRS makes a determination based on your income, expenses and assets as to whether you can or cannot pay the tax debt. If it becomes apparent that paying the tax debt will cause you a financial hardship then, there is a very good chance that you will be eligible for an Offer in Compromise settlement.
Installment Agreements: This is another good strategy to employ when tackling your IRS debt. An IRS installment agreement will give you the flexibility to pay off your debt with monthly payments. There are a variety of installment agreements that the IRS offers and your tax attorney will be able to guide you regarding which one might be best suited for your situation. In order to qualify for the installment agreement without having to provide all your financial information, you must owe at least $50,000 in back taxes. If your tax debt is below that amount, all is not lost. You may still qualify for a “guaranteed installment agreement” (if tax debt is under $10,000) or a “streamlined installment agreement” (if debt is under $50,000).
But, if you owe over $50,000 in back taxes and are unable to pay the amount that is owed in six years or less, you will have to submit financial documents showing income, assets, bank accounts, expenses and liabilities. In such cases you may be able to qualify for a Partial Payment Installment Agreement. This option is somewhere between an installment agreement and an Offer in Compromise. Under this option, the IRS will agree to take less then the full amount you owe and allow you to pay that amount in monthly installments.
Penalty Abatement: By filing for Penalty Abatement, you may be able to get rid of amounts owed because of fines and penalties, which could make up a substantial portion of your tax debt.
Tips to Negotiate with the IRS
Here are a few tips regarding how to negotiate with the IRS and what to be aware of when you are assessing your options:
- Make sure the statements you make and the information you provide to the IRS are accurate. Any inconsistencies will raise red flag and the outcome of your negotiation may be jeopardized. Some inaccuracies or misstatements may also lead to criminal charges. So, it is important to be extremely careful. It is best to have a knowledgeable tax attorney on your side who can help make the process much more comfortable for you.
- Learn about all the deadlines. If you pay attention to crucial deadlines, you may be able to stop certain collection actions even before they occur. If you miss deadlines, you may simply be at the IRS’s mercy.
- Always remain calm and composed. You will achieve little by raising your voice at the IRS agent. You may experience long waits on the phone or have trouble getting in contact with an agent. While this can be frustrating, it is important to take deep breaths and avoid confrontation so you have the best possible shot at debt resolution.
- Only make promises that you can keep. If you believe that you won’t be able to make a certain monthly payment, let the agent know that you cannot do so. Don’t set yourself up for failure by agreeing to pay an amount that you cannot afford. Once you default on your monthly payments, the IRS may impose more stringent conditions.
- Be proactive. When you initiate contact and approach them first, it shows that you are willing to resolve the tax debt. The IRS may even show leniency if they see that you are eager to pay off your tax debt.
Contact an Experienced Tax Lawyer
Finally, it is important to know when to get help. Negotiating with the IRS and dealing with government bureaucracy can be complicated and frustrating to say the least. Before it gets too overwhelming, please contact an experienced Florida tax attorney who can help resolve your IRS tax debt, allowing you to rebuild your financial future.