February 1, 2017

Denver Tax Attorney   9 Ways to Resolve Your IRS Tax Debt for Less Than You OweAre you struggling to pay off your tax debts? Though the IRS can appear very intimidating, the reality is that the agency can be very patient and understanding if it knows you have every intention of paying off your outstanding debts.

Here are some ways you can settle your tax debt with the IRS for less than you owe:

1. Installment agreement

An installment agreement is a monthly payment plan designed for taxpayers who are financially unable to pay their tax debt immediately. An installment agreement may eliminate or reduce your payment of interest, penalties, and other additional fees provided that you pay your debt in full.

2. Partial payment installment agreement

A partial payment installment agreement is a long-term payment plan that allows you to pay the IRS in installments, based on what you can afford after taking your essential living expenses into consideration. This type of installment agreement is an ideal option if the minimum payments for the streamlined or guaranteed installment agreements do not fit your budget.

3. Offer in compromise

An offer in compromise is a program that enables you to resolve your tax debt for an amount less than what is owed through a lump sum or short term payment plan. Simply put, an OIC provides you the opportunity to pay a lower amount as your full and final payment, potentially saving you thousands of dollars in taxes, interest, and penalties. Note, however, that most taxpayers do not qualify for the offer in compromise program.

4. Penalty abatement

The abatement of penalties is another way to reduce the total amount of taxes to pay to the IRS. Penalties accumulate daily once you have passed your payment due date, and penalty abatement reduces or eliminates the penalties to be added to your total balance. This can be a significant reduction to the total amount as penalties can account for as much as 15% to 25% of the total tax balance.

5. Currently not collectible

Currently not collectible is a status declared by the IRS that means that the agency voluntarily agrees not to perform any collection action on the tax debt for a specific period of time. The IRS can proclaim a taxpayer as currently not collectible if the taxpayer provides evidence to the IRS showing that he or she is unable to pay.

6. Bankruptcy

Filing for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code is another way you can obtain tax debt relief, but only if you meet the criteria for discharging your taxes. Chapter 7 bankruptcy provides for the full discharge of allowable debts, while Chapter 13 bankruptcy provides a payment plan for a portion of the debts and discharges the remaining debt.

7. Innocent spouse relief

Innocent spouse relief can provide you relief from payment of interest, penalty and tax if your current or former spouse improperly reported or omitted items in his or her tax return. You may be released from paying this tax obligation if you can establish that you meet the guidelines set by the IRS for innocent spouse relief.

8. Check the statute of limitations

Not everyone knows that as a general rule, the IRS has 10 years from the date of tax assessment to collect all interest, penalties, and taxes from a taxpayer. Except for some special circumstances, the IRS has to stop all its collection efforts after 10 years have passed.

9. Consult with a Tax Attorney

If you owe $10,000 or more in back taxes to the IRS you’d probably benefit from a consultation with an experienced IRS tax lawyer who can walk you through your options and recommend the best strategy for you in your specific situation. A tax attorney can also act on your behalf to work with and negotiate with the IRS.

Categories: IRS, Tax Tips