If you, like many others, have found yourself faced with tax debt with the Internal Revenue Service (IRS), it is important to understand your options, especially if you are unable to repay your debts by their due date.
In the event that you owe money to the IRS, but are currently unable to make the necessary payments, you have a few options.
Installment Agreement (Full) – An installment agreement allows you to pay off your debt in monthly installments. These installment plans range anywhere from a few months to five years.
Installment Agreement (Partial) – Partial installment agreements can also be arranged, in which only a portion of the total debt is repaid to the IRS. If you wish to apply for a partial installment agreement, you should contact an agency or law firm with tax professionals who can help you apply.
Offer in Compromise (OIC) – If you qualify, this option lets you settle your debt with the IRS for less money than you actually owe. Simple, successful OICs, however, are not common. If you think you qualify for OIC based on financial hardship, you can contact a tax professional or the IRS directly.
Bankruptcy – Chapter 7 and Chapter 13 bankruptcy are options for those people in serious debt with the IRS. If you are considering this option, you should contact an agency or law firm with tax professionals who can help you navigate the bankruptcy filing process.
Currently Not Collectable (CNC) – This is an option for people in debt who currently have a small income, but who have valuable assets. Cars or property with equity, or savings accounts are all considered valuable assets which make it difficult to qualify for an OIC, but are not considered in applications for CNC status.
Debt settlement can be grouped into two broad categories: Professional Debt Settlement and Do-it-yourself Debt Settlement. There are, of course, advantages and disadvantages to each of these options.
Professional Debt Settlement
Pros: Professional agencies and firms are better equipped to deal with large sums of debt. For people who owe over $15,000 to the IRS, professional debt settlement is often the best choice.
Cons: Firms and agencies will charge legal fees for their services.
DIY Debt Settlement
Pros: You can avoid the necessity of paying legal fees to a firm or agency.
Cons: IRS regulations can be difficult to navigate. Settling your own debt requires a great deal of research, organization and self-education.
Contacting the IRS directly by phone, email, post or in person at an IRS office, is an option. Customer service agents may be able to assist in finding a suitable solution for repaying debts, but you should keep in mind that your interests are not the IRS’s top priority.
Once you understand your options, it will likely be necessary for you to seek out an authorized tax professional through an agency or law firm. A Certified Public Accountant (CPA), a tax attorney, or an Enrolled Agent can provide assistance and advice on how best to tackle your case, and they can help develop an IRS debt relief plan for you that meets IRS regulations.