QUESTION: I owe a lot in back taxes. I’m constantly getting threatening letters from the IRS. This has become a big problem that I have no idea how to solve. What can I do?
Answer: For what it’s worth, take some comfort in knowing that you are not alone. There are millions of Americans in similar situations, dealing with debt hanging over their heads and concerned about how it will affect their future.
The good news: You have many options. To fully understand and take advantage of your options, we urge you to see a qualified tax resolution professional. He or she will take a close look at your previous returns, looking for mistakes that may have resulted in an inflated tax debt amount. This process alone can substantially lower your IRS debt.
Once you and your qualified tax professional have analyzed your previous returns, the next step is to negotiate a resolution with the IRS. You will most likely be looking at one of two options – the Offer in Compromise or the Installment Agreement.
The Offer in Compromise was created for people who owe a substantial amount to the IRS but who, for whatever reason, are unable to pay off their tax debt, even over time. The Offer in Compromise allows taxpayers to negotiate a settlement amount that will take care of the entire tax debt once and for all. This settlement agreement can lower the tax debt by a significant amount.
Unfortunately, the Offer in Compromise program is often misunderstood, partly because people see a lot of ads on TV and the internet promising them that they can simply settle their tax debt “for pennies on the dollar.” They make it sound too easy. Don’t be fooled. While this is true for people who qualify, what the advertisers don’t tell you is that this is based on a formula used by the IRS in determining eligibility. A lot of offers are rejected because they fail to consider the formula in making offers that stand no chance of acceptance from the time they are filed. Buyer beware. If it sounds too good to be true, maybe it is. Again, I am not saying that it doesn’t work. All I am saying is that what you should offer the IRS must be based on the IRS’s calculation of what is acceptable given your own unique circumstances.
If you do not qualify for the Offer in Compromise – and to do so you must be able to prove eligibility – then you may consider the Installment Agreement, which allows you to pay off your debt by making manageable monthly payments.
The IRS has different types of installment agreements depending on how much you owe, the value of your assets, your income, and how much time the IRS has to collect what you owe over the 10-year collection period imposed by law.
If you have no available equity in assets and your income is not sufficient to cover your monthly living expenses, the IRS can also put you in uncollectible status. That means that the IRS will not take any collection actions as long as you remain in this status and your financial circumstances do not change. Yes, the interest continues to run on the outstanding debt, but it could be a way to buy time. Example: Remember what I said about the 10-year collection statute? The IRS has 10 years to collect from the date of assessment. If you are close to the expiration of the 10-year period, being put in uncollectible status does not stop the running of the statute. So, it may be possible to remain in uncollectible status until the 10-year period expires. This could be one way of getting rid of your IRS tax problems.
If you owe the IRS, the State, EDD or State Board of Equalization, my office can help you find the best solution to resolve your tax liability. You will never have to speak with the IRS again. I will review your case and help you make the best decision for yourself and family.
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The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of 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 over 6,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-471-8272.
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