IRS Resolution | An Overview of the 7 Main Options
Tony Ramos here, and today I'm going to talk to you about all the resolution options, you have to get your tax debt settled with the IRS.
This covers almost everything that you will encounter. There are some exceptions, but I won't deal with them today.
So when somebody owes taxes they can't pay currently, here are different ways you can make a deal with the IRS.
1. Full-Pay Installment Agreement
The first one is full pay installment agreement. Here, you have to pay all that you owe over a certain amount of time.
The Two Types of Full-Pay Agreements
Within full-pay, there are streamlined and non streamlined agreements.
Streamlined Installment Agreement
The difference with streamlined is they don't file a tax lien against you or require financials. You must owe less than $50,000 to qualify.
Non-Streamlined Installment Agreement
Non-streamlined agreements can go up to a million dollars.
If you owe $250,000 or less, not counting penalties and interest, you can qualify for this type of Installment Agreement.
No financial disclosures are required but a federal tax lien will be filed to protect the government’s interest.
You can extend payments until the Collection Statute Expiration Date (CSED, the 10-year collection period the IRS has to enforce payment).
If you owe more than $250,000 as described above(and up to $1,000,000), you can still qualify for a payment plan but will have to submit financial information and fully pay your tax debt.
Federal tax liens will also be filed. If you cannot fully pay your IRS debt, then you can negotiate a Regular Installment Agreement based on your “ability to pay”.
Besides full-pay, there's partial pay installment agreements when you can't pay it off in full, ever. And I'll talk about the 10 year collection statute in a minute.
2. Partial-Pay Installment Agreement
If you can't pay it within the 10-year period, it's a partial payment (not full) based on your ability to pay. But you have to do a financial statement to prove what you can afford.
3. Currently Not Collectible Status (CNC)
Let's say you've lost your job, you have no income. Or so little income where you just barely have enough for living expenses.
And they'll give you zero payments for up to two years, at which time they'll review your file to see if you're making more money as you file your returns
A lot of people ask me about offers in compromise.
This is a procedure where if you offer the IRS a certain amount of money and they accept, the tax debt is gone forever. So long as in the following five years, you:
- file and pay your tax,
- file your tax returns on time and
- pay the taxes too
Otherwise they come back to haunt you.
5. The 10-year collection statute expires
The IRS has a 10-year period to collect the taxes.
Now sometimes this doesn't start until you file your return. So that's when you get assessed.
There are some things that can extend the statute like filing bankruptcy, leaving the country for more than 10 years, appealing a threatened levy that sort of thing.
But as a general rule: if the IRS hasn't collected 10 years you don't owe the money anymore.
Some people don't know that you can actually discharge taxes in bankruptcy.
Here are the conditions:
- They must be income taxes. Other types of taxes don't apply.
- Have to have owed the taxes for 3 years from their due date, or
- If you filed for an extension, 3 years from the extension date.
- Filed them on time in some jurisdictions.
Other circuits allow you to file tax returns late. In that case you have to:
- you have to have owed them for 3 years, and
- wait at least 2 years from the time you file them.
And in that case, you have to have wait at least two years after you file them late. And again, you have to have owed them for three years.
7. Innocent Spouse Relief
This doesn't apply to a lot of cases. This is when spouses file jointly, but one of the spouses thinks it's not fair.
And there's a lot of there's a lot of details in that. Check out this post on innocent spouse relief for more.
And in a later post, I'll go into each one individually.
So for now, that's the different ways you can resolve your taxes with the IRS.
If you owe less than 15k to the IRS, it's best to talk to your tax return preparer or the Taxpayer Advocate (find your local advocate at IRS.gov). IRS Taxpayer Advocate Page
When we have our first conversation, I do not charge you and I will ask you about:
- How much you think you owe
- Which years you owe tax for
- What type of tax (income, employment, etc.)
- Who is in your household
- What is your financial condition (assets, liabilities, income and expenses)
- For business owners, I will ask about your gross and net income, number of employees and whether you operate as a sole proprietor or have an entity (corporation, LLC, etc.)
- Other information that I think I need to know about as our conversation develops
After I find out the information above, I can give you general parameters of a possible resolution. As well as the strategy to use. I will clarify and answer any questions about this.
Then, I am ready to quote an Investigation fee. In order to understand the details of your tax debt. And your financial condition in the way that the IRS will view it.