The IRS is one of the most powerful collection agencies in the world and has numerous powerful tactics that they use to collect tax debt. Taxpayers will be relieved to know that they also have a number of options to resolve their tax debts. Below are some of the tax debt relief options to get a solution in place:
1) Offer in Compromise (OIC)
An Offer in Compromise or OIC is an agreement between the IRS and a taxpayer that would effectively resolve the tax liability for a reduced amount. The IRS accepts less than full payment under special circumstances. These circumstances could be one or more of the following:
- Doubt as to what the tax liability is. There must be a genuine dispute as to the amount owed.
- Doubt as to whether the taxpayer could ever pay. This is based on the taxpayer’s value of assets versus the full tax liability.
2) Installment Agreements (IA):
In most cases, taxpayers who owe large tax debt are unable to pay a lump sum to settle their debt. An Installment Agreement can provide the taxpayer the opportunity to make a payment towards their tax debt in smaller, more manageable amounts.
It is important to review other options because there may be better solutions than a payment plan.
The ideal payment plan would be a Partial Payment Plan agreement where a low amount is paid monthly and the debt expires due to the statute of limitations for collections.
There is a Fresh Start Payment Plan typically available for up to $50,000 of tax debt where installments are made over 72 months. Another type of agreement is a full payment installment agreement which is an agreement between the IRS and the taxpayer to pay the full amount over a period of time, usually 10 years or less.
A few different installment agreement options are available:
- Streamline Installment Agreement (SIA);
- Complex Installment Agreement (CIA); and
- Staggered Installment Agreement (SIA)
3) Penalty Abatements (PA)
Penalty abatements are typically available to first-time taxpayers. This is usually tied to an installment agreement. It is not possible to abate interest unless interest is on the abated penalties.
Penalties can only be abated if the debt is paid in full or paid in full through monthly installments. Taxpayers must show just cause as well as show due diligence in resolving debt and being compliant.
4) Currently-Non-Collectible (CNC)
If the taxpayer is experiencing extreme conditions such as economic or personal hardship where expenses exceed income, then this may be taken into account by the IRS to halt collections.
5) Collection Statute Expiration Date (CSED)
The IRS applies an expiration date that the tax debt must be collected by. This is usually 10 years from the day after the date of assessment. This statute expiration ends the government’s right to continue the collection of the liability.
6) Tax Lien Subordination
Tax lien subordination is used to get money out of an asset to pay tax debt owed.
7) Custom Solutions
CuraDebt Tax has an extensive amount of experience providing custom tax solutions to resolve different tax issues. If you have a situation, even if not listed above, we are likely able to help you (and have probably helped many others with the same or very similar scenario).