Tax Resolution Pathways....
If you are one of the millions of taxpayers that have a federal tax debt outstanding, here’s some helpful info on options you have and ways to get tax debt resolved and life moving forward...
Options for taxpayers to resolve tax debt:
Installment Agreement, A payment plan, generally monthly, that allows the taxpayer to pay back their tax, penalties, and interest, over time.
Offer in Compromise (OIC): For taxpayers with minimal or no assets and minimal disposable income, the IRS may accept whatever monthly the taxpayer has to pay the taxes, penalties, and interest owed. This option gets a lot of attention from major tax debt resolution firms, but in reality, very few qualify for the OIC. Less than 1% of tax debt cases are resolved through the OIC, The IRS has a formula to settle the debt depending on your assets, income, and expenses, only if you qualify, can you settle your tax debt for "pennies on the dollar."
Currently Not Collectible (CNC): If a taxpayer has NO money, then this may be an option for a tax debtor. Full financial disclosure is required, and the taxpayer has to be essentially broke, living paycheck to paycheck if they do have income. This stops the collection enforcement from the IRS for typically a year or more before the IRS revisits your case and reassesses your ability to pay.
The IRS has 10 years generally to collect tax debt aka. CSED (Collection Statute Expiration Date). If the IRS fails to collect the tax debt within that time, the tax debt is considered expired and the taxpayer is not required to pay.
Some actions that can extend the CSED:
1. Bankruptcy filing
2. CDP (Collection Due Process) appeal filing
3. OIC (Offer in Compromise) filing
4. Taxpayer overseas for >6 months
Don't despair if you have tax debt, a tax professional can help you. Please contact us to get your tax trouble behind you, we will represent you before the IRS and work with you on resolving your tax debt permanently.
Matt Smith, CPA Lighthouse CPA