IF you just received the dreaded first letter from the IRS saying that you owe them money, don’t despair. Perhaps you had a balance owing on your last tax return (or returns from past years) that you couldn’t pay. Maybe you got audited and you didn’t have the chance to respond. Perhaps you took money out of your retirement plan and didn’t pay the taxes owed on the withdrawal. Who knows. There are a multitude of reasons how people end up in IRS hell. But one thing that I find in common in all the tax problems cases I handle is that the taxpayer has failed to do something in a timely manner. And now the IRS is on their tail. They want their money and they want it now.
There are ways to end your tax problems. The first step is to decide that you will finally do something about it because the longer you wait, those nasty penalties and interest will keep accruing. Even worse, if you own a home or other real property, the IRS may file a federal tax lien. This may hinder your ability to refinance your mortgage and may also affect your credit.
The fact is that the IRS will not go away until the 10-year statute of limitations for collections runs out. If you are close to the 10-year expiration date, you may be able to just wait it out provided there is no immediate legal threat. But for many taxpayers, the IRS has plenty of time left to collect and they can still do serious damage to you and your family’s welfare. Keep reading.
If you do not have the income and resources to pay the entire tax liability, you may qualify to significantly reduce what you owe through an Offer in Compromise. Not everyone qualifies to have their taxes reduced this way, but it is certainly worth looking into. The IRS will look at “reasonable collection potential” by reviewing your income and assets, and if you don’t have much to give to the IRS, they may accept just what you’re able to afford. And it doesn’t matter if you owe 10K, 100K or 500K. In an Offer in Compromise, the amount doesn’t even matter. The settlement is only based on your ability to pay.
Another way to get the IRS off your back is to negotiate an installment agreement. Depending on your income and assets, again, you may not even need to pay the full amount that you owe. But this requires a detailed analysis of your income and assets. The penalties and interest will still accrue, but you may be able to get the penalties reduced if you qualify.
Lastly, as a last resort, IRS taxes can also be wiped out in bankruptcy. If not, they can at least also be paid through a payment plan which is under the supervision of the bankruptcy court. For taxes to be wiped out in bankruptcy, you should have filed your tax returns timely, and they have to be more than 3 years old. Also, they should not have been assessed within the 240-day period prior to filing your bankruptcy case. The rules can be complex and confusing, but I am just trying to give you an idea of what might be possible. An experienced bankruptcy attorney can do a more thorough analysis and let you know if bankruptcy might be the best solution for you.
There is a way out of your tax difficulties. The further you get into the IRS collection trap, the harder it is to get out if the problem is getting worse every day that you wait because you may be putting everything you’ve worked hard for at risk. Why wait until the IRS intensifies its collection efforts against you? I understand that taking the first step is often the hardest. A lot of people procrastinate because they think that they don’t have the money to pay the IRS anyway so why deal with it now rather than later? Well, the fact that you currently don’t have the money may actually work in your favor because if you don’t have it, this may be the best time to deal with your IRS problems! If you owe more than $10,000 to the IRS, I provide a free consultation. Call my office so we can talk.
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The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of the Asian Journal, its management, editorial board and staff.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray J. Bulaon has successfully helped more than 6,000 clients in getting out of debt. For a free evaluation of your situation, please call his office at TOLL- FREE 1-866-477-7772.