If you owe the IRS money you have 6 basic options. Here is a quick rundown:
- Pay them in full. If you have the money this is normally the best option as it stops the accumulation of penalties and interest.
- Pay them in installments. If you are short on money this is a good option as it will normally stop the IRS’ bank levies and let you get your finances in order. If you look at all your creditors the IRS has the most power to attach your bank account and assets. They are not all powerful but the laws back them up.
- Can’t pay anything, go into Currently Not Collectible (CNC). You will have to prove that you don’t have the funds to pay them at all. This is common after a job loss and you simply don’t have enough income or savings left after meeting your minimal living expenses. This doesn’t make the bill go away or stop the penalties and interest but it gets the IRS off your back for some time.
- Bankruptcy. I’m not an attorney, but this can be an option if the debt is overwhelming. However IRS debt is difficult to eliminate. Some tax debts are not bankrupt-able and normally the debt needs to be 3 years old. If you haven’t filed a tax return the clock hasn’t started to run on that debt.
- Run out the Statue of Limitations. Normally the statue of limitations is 10 years, but there are exemptions. Again you need to have filed your tax return for the clock to start. If you don’t have the money and will never have the money this can be a good option.
- Offer in Compromise. This is the one you hear on all the TV and radio commercials. It’s all based on what money you have, your current income, expected income and how much time is left on the statue of limitations. Yes the IRS cuts deals all the time, but don’t expect to get rid of a $10,000 debt when you are making $70,000 and the IRS has 7 years to collect that debt. It’s actually pretty common sense, the IRS wants the money and to move one, but they don’t want to leave money on the table either.
With all these options the devil is in the details. If you are in collections with the IRS give us a call we can take a look at your situation and see how we can help. Normally when you get a professional involved the IRS will stand down until a plan can be worked out.