| If you owe money to the IRS, you have many options | | | | If there is no doubt about your liability or collectibility, but |
| legally available to you, to help you solve your tax | | | | an exceptional circumstance exists, then the IRS may |
| problems. | | | | still consider an offer in compromise. To be eligible on |
| Full Payment | | | | this basis, you must demonstrate that collection of the |
| The first option is the simplest and most | | | | tax will create an economic hardship or will be unfair |
| straight-forward. You can simply pay off the | | | | and inequitable. |
| outstanding tax balance. This assumes you have the | | | | Currently-not-Collectible |
| resources to do so. You could either pay from current | | | | Currently-not-Collectible status means the taxpayer |
| funds on hand or from borrowed funds. Once your | | | | does not presently have the ability to pay their tax |
| account is paid in full, all collection activity will cease. | | | | debts. The IRS uses this status to protect taxpayers |
| Any outstanding liens and levies will be automatically | | | | from hardships that can be caused by collection |
| removed. Unfortunately, not everyone can afford to | | | | activity. To qualify for Currently-not-Collectible status, |
| make full payment. If you were able to make full | | | | your allowable expenses must exceed or come close |
| payment to the IRS, you probably wouldn't have a tax | | | | to exceeding your income. The IRS will also consider |
| problem . | | | | your assets before placing your account into |
| Installment Agreement | | | | Currently-not-Collectible status. |
| If you cannot afford to pay in full your past tax liability, | | | | Once your account in placed in Currently-not-Collectible |
| you can request for an Installment Agreement. An | | | | status, the IRS will stop all collection activity including |
| installment agreement is effectively a loan from the | | | | levies and garnishments. The IRS will send you an |
| IRS. There is no credit check although penalties and | | | | annual statement stating the amount of tax still owed. |
| interest will continue to be charged until the balance is | | | | Your account will be reviewed periodically to |
| paid off. This will allow you to pay off your tax liability | | | | determine if your financial situation has changed and |
| through monthly installments. | | | | whether you still qualify to be classified as |
| The installment agreement may pay all (Full Pay) or | | | | Currently-not-Collectible. |
| part (Partial Pay) of your past tax liability. | | | | While your account is in Currently-not-Collectible status, |
| If your total tax debt is less than $25,000 the IRS may | | | | the IRS will continue to add interest and penalties but it |
| consider you for a streamlined installment agreement | | | | will not try to collect the taxes from you. When your |
| under which you must complete the payment of your | | | | account is placed in Currently-not-Collectible status, you |
| tax within 60 months. This type of installment | | | | must continue to file your returns each year to remain |
| agreement typically does not require as much financial | | | | eligible for the status. |
| disclosure. If you cannot pay the amount within 60 | | | | Bankruptcy |
| months, you must make full financial disclosure of your | | | | Bankruptcy proceedings discharge certain taxes |
| income, expenses and assets. These Installment | | | | including federal income taxes. Federal income taxes |
| Agreements can be much more difficult to obtain. | | | | can be discharged in a Chapter 7 bankruptcy |
| You must file Form 433-A or 433-B (or both). The IRS | | | | proceeding. Many penalties and other assessments |
| will analyze your Form 433-A or 433-B and use the | | | | can be discharged through a Chapter 13 payment |
| information to determine the amount you can pay | | | | arrangement. Payroll tax liabilities cannot be discharged |
| monthly. Your monthly income is compared to actual | | | | in bankruptcy. |
| expenses and the amount of expenses considered | | | | Statute of Limitations |
| "allowable" by the IRS. These allowable expenses may | | | | The IRS does not have forever to collect the money |
| be much lower than what you are actually paying. The | | | | that you owe them. They cannot chase after you for |
| IRS ultimately has the discretion to decide on the | | | | the rest of your life. There is a 10 year statute of |
| payment amount. | | | | limitation for collecting tax (6 years for assessments of |
| Offer-in-Compromise | | | | tax or levy made on or before November 5, 1990). |
| In certain limited circumstances, the IRS has the | | | | This 10 year period begins to run on the day after the |
| authority to settle, or compromise, federal tax liabilities | | | | date of assessment. The statute is extended for the |
| by accepting less than full payment. This is what is | | | | period of time you have a Bankruptcy filed and |
| known as an offer-in-compromise. By making an | | | | pending. The statute is also extended during the time |
| offer-in-compromise, you agree to pay less than the | | | | you have submitted an offer-in-compromise and are |
| full amount of the taxes owed by you. The IRS has | | | | waiting for an approval. This 10 year statute of |
| the discretion to accept less than the full amount of | | | | limitation can be extended by mutual agreement if the |
| taxed owed by you based upon doubt as to your | | | | agreement is made within the 10 year period. |
| liability (whether you actually owe the taxes) or based | | | | If the IRS doesn't collect the full amount in the 10 year |
| upon collectibility (you do not have the resources to | | | | period, then the remaining balance on the account |
| pay the amount owed). | | | | disappears forever. |