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Tax Debt Installment Agreements

December 23rd

There are generally considered to be five different ways of approaching a tax debt situation with the IRS, but the most common is to set up an installment agreement or repayment plan. Underneath the heading of installment agreements, there are four different types. What follows is a snapshot overview of the four different installment agreements people usually pursue when looking to pay off IRS debt.

Guaranteed Installment Agreements

If financially able, the best way to pay off IRS debt is through a guaranteed plan. The biggest benefit of using a guaranteed installment agreement is that the IRS will not be able to file a federal tax lien against you. Because of this, credit bureaus will not have any knowledge of your situation and it will not adversely affect your ability to obtain credit.

Streamlined Installment Agreements

If you can agree to pay off your tax debt balance in 72 months or less, and have a balance less than $50,000, the IRS will approve you for a streamlined installment agreement. Again, in this situation a federal tax lien will not be placed on you because of your tax debt.

Partial Payment Installment Agreements

This agreement is good for people who are not financially able to meet the minimum payments in the previous two agreements to pay off their IRS debt. Under this plan, you will be able to set up a longer payment period with monthly payments based on what you can afford.

Non-Streamlined Installment Agreements

Non-streamlined installment agreements are available if you cannot meet the requirements of the other three agreements. You will need to speak with an IRS agent to discuss your tax debt and financial situation and should seek out a tax lawyer to speak with the IRS on your behalf.


Installment Agreement for Repaying Back Taxes

September 18th

Many people faced with huge mountains of back taxes are seeking solutions. Most are just ordinary citizens who have found themselves saddled with a burden they cannot afford to pay back; most are looking for a way to compromise and get out of their debt. Many people see offers on television claiming to settle back taxes for pennies on the dollar, an enticing prospect. Retaining the services of a tax debt lawyer is the best first step toward eliminating your debt due to back taxes.

Installment Agreement vs. Offer in Compromise

The television ads are referring to a repayment scheme for back taxes called the offer in compromise. The offer in compromise is a negotiation strategy where a tax debt lawyer presents a repayment plan to the IRS, usually a lump sum payment at a reduced amount. This strategy can work, but has many limitations, and rarely results in the ‘pennies on the dollar’ amount advertised.

Alternatively, offering an installment arrangement to the IRS can still result in a reduced payment for your back taxes over time, and is more likely to be accepted than the offer in compromise. An installment agreement is a renegotiated payment plan which stops the IRS from pursuing you as a noncompliant account, while reducing the principal owed and showing good faith. The principal will continue to accrue interest during repayment, so this is an option for those who can afford to make payments that cover the interest and part of the principal.

A tax debt lawyer will help you determine how best to approach your IRS debt and pay off your back taxes.


Owe Back Taxes? Make an Offer in Compromise

April 1st

Approximately 11 million Americans owe back taxes and continue accruing tax debt with the IRS. Regardless of the case of back taxes, the experience is a stressful one for many taxpayers, as dealing with the IRS can be a daunting process. Fortunately, there are many options available for taxpayers to seek relief and settle their debt. While some will try to eliminate their back taxes through an installment agreement, partial payment installment agreement, or bankruptcy, there’s an incredible option for those in dire financial circumstances.

Eliminate IRS Debt with an Offer in Compromise

An Offer in Compromise is an enormous discount for those who owe back taxes. It’s so large that some people only pay as little as 1% of their back taxes once approved. However, getting approved is a difficult process, as only 34% of applicants are accepted each year.

Qualifying for an Offer in Compromise to tackle IRS debt is typically reserved for those who have little to no wealth, assets, and income. To be considered you will be judged on your:

• Ability to pay
• Current income
• Expenses
• Total asset value

Though the Offer in Compromise program has expanded to help more Americans, the qualifying standards are still stringent. Proving an “economic hardship” or “inequitable” situation is what determines qualification. Tax attorneys and experts can help people applying to an Offer in Compromise. Since there are fees involved in the application process, ensure that you understand the process and seek all guidance needed. Unfortunately, all applications fees to the IRS are nonrefundable and the chances of being approved for an Offer in Compromise are slim. However, with the help of a professional tax attorney, eliminating back taxes and solving IRS debt problems is possible.


Little Known Ways to Eliminate Tax Debt

March 15th

Tax debt is no different from any other kind of debt – it can lead to a host of financial complications that can ruin your credit score, such as bankruptcy. Even worse is that you have to deal directly with the IRS! Fortunately, eliminating tax debt doesn’t need to be as stressful as it often is. In fact, several tax debt elimination strategies can even help taxpayers in the long run. By working with a tax debt lawyer, taxpayers can regain their financial footing.

If You’re in Tax Debt, You Can Escape

First and foremost, when facing financial difficulties, taxpayers should still continue to pay as much of their tax debt as possible. By paying what they can now, they can avoid higher penalties and interest rates. Once a financial hardship makes itself apparent, taxpayers should take a pro-active approach and visit their closest IRS office to explain their predicament. Typically, the IRS is willing to work with these taxpayers and can set up a short-term agreement ranging from 60 to 120 days to allow the taxpayer to regain the ability to pay.

Other options include:

Paying back tax debt with an installment agreement. These payment plans allow taxpayers to pay back debts according to what they afford. Both the taxpayer and IRS agree upon the amount per month.
Qualifying for a temporary delay. If facing a significant hardship, the taxpayer could ask for a temporary delay where they won’t be penalized for late payments. This time period allows the taxpayer to recover financially.
Offering a compromise. By settling for a tax debt amount that is less than they owe, taxpayers can save money. However, you must be able to document your ability to pay, income, and asset equity to be considered for this option.

By pursuing these options, taxpayers can avoid defaulting on their tax debt, thereby protecting their credit scores from significant damage. Seeking the advice of a tax debt lawyer can help you negotiate with the IRS as well as determine what strategy is best for you.


5 Tax Debt Rules When Filing for Bankruptcy

March 1st

For those struggling with tax debt, filing for bankruptcy is an appealing option. When individuals choose to discharge under Chapter 7 or Chapter 13, filing for bankruptcy is one of the five ways for individuals to escape tax debt. However, tax debt must meet certain requirements to be discharged. Unless all of the following conditions are met, individuals will continue to owe tax debt past Chapter 7 and Chapter 13 bankruptcy.

 Tax Debt and Bankruptcy

To be able to file for bankruptcy and discharge income tax debt, an individual must:

  • Ensure the taxes are income taxes. Any taxes such as state or payroll tax are not eligible for elimination.
  • Have a tax assessment at least 240 days old. Before bankruptcy can be filed, the IRS must have assessed the tax at least 240 days prior to the filing.
  • Be a lawful citizen. In other words, the individual must have not committed fraud or willfully evaded tax payments. Anything such as using a false social security number on a tax return or other fraudulent activities void the bankruptcy option.
  • Have tax debt that was due 3 years ago. If you are in debt from taxes either this year or last year, you are not eligible to file for bankruptcy to eliminate tax debt. Unpaid taxes must have been due a minimum of 3 years ago.
  • File a tax return. Individuals must not only file a tax return, but it must have been filed at least 2 years before filing for bankruptcy.

Unless all five of these conditions are met, an individual struggling with outstanding tax debt cannot file for bankruptcy to eliminate it. Fortunately,  tax debt lawyers have the experience and wisdom needed to help individuals overcome their financial struggles.


Struggling To Pay Back Taxes, Get A Fresh Start

December 12th

Instituted to help distressed middle class Americans still caught in the crunch of the lingering recession, the IRS implemented a Fresh Start initiative. The goal is to make it easier for individual and small business taxpayers to pay back taxes and avoid tax liens. It helps people get back on their feet by addressing their delinquent income tax debts and taking full advantage of the special program.

Streamlined Installment Agreements

The Fresh Start provisions now open the door to a larger portion of distressed taxpayers to resolve their problem of owing back income taxes. Making sure the door stays open means that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes. Under the Fresh Start initiative, the maximum dollar criteria for streamlined installment agreements has been raised from $25,000 to $50,000 and the maximum term has been raised from 60 months to 72 months.

These installment agreements generally do not require a financial statement, but a limited amount of financial information may be required in the application process. As a direct result, more taxpayers will have the ability to use IRS installment agreements to catch up on back IRS income taxes owed. Taxpayers who owe up to $50,000 will now be able to enter into an installment agreement with the IRS.

What is necessary for a distressed taxpayer to connect the dots in a tax resolution case and obtain an expanded installment agreement should be guided by the help of an experienced tax debt lawyer. The question remains whether the majority of distressed American taxpayers will take advantage of the opportunities presented by the IRS Fresh Start Initiative.


Back Tax Negotiation Tactics

November 2nd

Owing the IRS money is serious business. In fact, the IRS is notorious for steep consequences on those who dodge their tax debt liabilities. Wage garnishment, asset seizure and even tax liens are all fair game when it comes time to collect. Ignoring collection efforts will only get you into further trouble. The best defense is negotiation for repayment.

Finding An Agreement

First, understand that your power in negotiating with the IRS is limited. Why? Because your tax liabilities are your civic duty. However, the IRS does understand that people experience financial hardships, which is why they are willing to offer some assistance.

When looking to negotiate your tax debts there are really two forms of help offered by the IRS; a payment plan that spreads out payments over the course of a few years or a settlement plan that allows for the taxpayer to pay less than is actually owed. The qualification standards for each of these options varies, which is why knowing your options ahead of time can save you time and money in penalty fees. It is a good idea to determine how much you can afford to pay each month, and whether you have the ability to settle with a lump sum payment before you contact the IRS to discuss your options.

Anyone considering negotiations with the IRS should contact a tax debt lawyer. Having a professional represent you in negotiations can boost your chances at success and keep you from having more serious consequences applied due to lack of payment.


Certain Tax Cuts Set To Expire

October 3rd

Some tax cuts enacted in early 2000 are expected to end this year. When they do, the additional taxes and related payments are estimated to cost some Americans almost $5,700 per year. Understandably, many are speculating on how the expiry of these cuts will affect their financial standing. Median household income decreased sharply after 2008, and although it’s improving, it’s still below the levels of the year 2003.

Paying Your Debt As Quickly As Possible

No matter how large your amount of back taxes, the IRS will work with you, assuming you have come forward in good faith and can demonstrate your inability to pay your tax debt. The IRS has processes in place to set up payment plans and reduce the amount you owe.

First, consult with a qualified tax debt lawyer to analyze your previous returns closely. It’s not uncommon to discover that due to errors in previous filings, you may actually owe less than you think.

Once you know exactly how much you owe, it’s time to consider options. If you owe so much that you cannot pay off the debt now, then you should look at the Offer in Compromise. Designed for taxpayers who are experiencing financial hardship, the Offer in Compromise can reduce your tax debt by a significant amount based on income criteria.

However, let’s say you can pay off your tax debt — but only over time. Then the Installment Agreement is likely your best option. With the Installment Agreement, you’ll make a monthly payment that over time will satisfy your tax debt.


Tax Debt Relief Options

September 12th

Although tax season is long gone this year, tax debt collections are just now beginning. If you owe the IRS money, don’t avoid them. Instead, contact them right away to discuss one of the following options:

  • Installment Plan — is a repayment option that allows you to repay your back taxes in a series of smaller payments. The average installment plan will spread out payments over the course of two to three years. This program is only available for tax bills less than $25,000. In some cases, penalties and interest may still be added to the total tax bill.
  • Offer In Compromise — is a type of IRS debt settlement, in which the IRS may allow you to pay less than is owed. This program is available for those experiencing a significant financial hardship. OICs can be difficult to obtain and may require that the reduced tax bill be paid in full.
  • Currently Not Collectible— is essentially a forbearance agreement between you and the IRS. When your tax debt is “currently not collectible” you are given a temporary break from the payment requirement. In other words, you do not have to pay for a specified period of time, at which your debt will become collectible and expected to be paid.

Eliminate Back Taxes With Offer-in-Compromise

June 27th

Owing back taxes to the IRS can be a financial drain and an added stress.  However, when you take advantage of the Offer-in-Compromise (OIC) program – one of several tax debt payment plans the IRS offers – you can move on past your tax debt sooner than you may have thought possible!  Let’s take a look at some of the basic information surrounding the Offer-in-Compromise tax debt payment plan!

Is It For You?

You’re probably wondering if Offer-in-Compromise is right for you.  Of course, there are many tax debt payment plans, and you should seek counsel to determine which is the right path for you.  The Offer-in-Compromise program is most suitable for people who owe more back taxes than they could ever pay.

When you apply for OIC, you should expect to reveal all the details of your personal financial situation.  As with any of the IRS’s tax debt payment plans, this one requires a lot of transparency on your part.

When you apply for settling your back taxes this way, the IRS will consider your application based on four factors: your ability to pay, income, assets, and expenses.  If you are determined to be eligible, then you will be allowed to pay less than the full amount of back taxes you actually owe.

For everything you need to know about the Offer-in-Compromise program, see the Form 656 Booklet.


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