Two Ways To Settle With The IRS
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Hi, I'm tax resolution attorney Tony Ramos, speaking to you today about two ways that you can settle with the IRS when you don't really have enough to pay them 100%. Today, we're going to talk about the partial payment installment agreement, and currently not collectible status. Remember, I'm not giving you legal advice right now, make sure you consult with with an attorney. But there's good general information for you. So in the situation where you owe the IRS money, and either you can't pay anything right now, because you're out of work, you're sick, you just, you started a new job, your pays and good. Or you can pay something, but you can't pay all of it, you have these two alternatives. Both of them require you to prove to the IRS that you can
afford to pay 100%. So you have to prepare what's called collection information statements. This is what the IRS uses to look at your income, your expenses, your assets and your liabilities in order to determine your ability to pay. So that's something good about if there's anything good about owing money to the IRS, it's not based on the amount of money that you owe, it's based on your ability to pay. Now, if this is something that interests you, give us give us a call, we'll set you up for a free consultation. Now the for example, I'm speaking to you from San Antonio, Texas, the IRS has national and local standards, what the IRS considers reasonable living expenses.
For example, a car payment they'll go up to $508 a month.
And that's national standards. But for operating, you know, oil tires, maintenance, car insurance. In bear County, Texas, where I'm at is only $281 a month.
You're also allowed without proof out of pocket medical expenses, in addition to your your medical insurance premiums of $55 or 114. If you're over 65 years of age, and for family for food, clothing, miscellaneous $1,943 allowed in this part of the of the country. Those are just examples, the IRS has standards as to what they consider reasonable and necessary living expenses and expenses to make a living livelihood.
Now, let's talk about a partial payment installment agreement. The reason is partial payment is that the IRS only has 10 years to collect any debt tax penalties and interest that you might owe to them. And whatever they don't collect within those 10 years gets written off gets forgiven. So let's say for example, After you submit collection information statements, the financial disclosures to the IRS, you can satisfy them that you can only afford to pay $300 a month. And assuming there's only three years left 36 months on the 10 year collection statute, you would multiply $300 times 36 payments, it would add up to $10,800. So the $50,000 that you owed, forget about even adding interest over time, you would pay less than 40,000 you would pay 10,800 which is
40, almost $40,000 less than what you owe the IRS. That's why it's called a partial payment installment agreement. Now, related to that is what's called currently not collectible status. I have plants who are sick, they lost their job. They're getting you started all over again. And they can't afford to pay anything and they're receiving threatening letters from the IRS well, but by providing your financial disclosures about your income, your expenses, your assets and liabilities. Sometimes you can satisfy them that you can't pay anything at all. So what they will do is they will review your tax returns after a couple of years to see if you can afford to start paying anything. Likewise, when you have a partial payment installment agreement, they'll review you in two years as well to see if you can afford to pay more. The good news is if you can afford if you can't even afford to pay what you had offered to begin, you can even lower your payments after you show your tax returns indicate you can't even pay what you had already agreed to. So in both of these cases, you have to remain in compliance. After you make your your partial payment assignment agreement are obtained currently not collectible status. You have to be filing your tax returns on time. You have to pay the taxes if you default, then the deals are often you have to start all over again. If this applies not only to individus, but also to businesses, and if you have employees, his business, you got to continue to make your payroll taxes estimated tax payments. But in both of these cases, the good news is, like I said at the beginning it's not
on how much you owe is what you can afford to pay. Now, sometimes the IRS will ask you to apply for a loan to borrow on the equity in your assets. But oftentimes they won't do that. And you won't be have to sell your home. You don't have to sell your cars. Every case is different. So if if either the partial payment installment agreement or the currently not collectible status is of interest to you, give me a call and we'll set you up for a free consultation. We'll talk to you soon