Options When You Can't Afford to Pay IRS Debt

If you owe the IRS, there’s no time to lose. You need to pay, and fast! If you call the IRS directly you’ll learn they only want to talk about one thing, and that’s how soon you can pay in full. But that’s not your only option. You can pay the IRS in monthly installments or in partial payments.

IRS Installment Agreement
Much like how you pay on your credit card debts, you can pay the IRS in monthly payments. However, there are some key differences. You decide how much you pay creditors, but the IRS determines the amount you’ll pay them monthly. They do this by taking a close look at your financial situation and determining your disposable income. So making a valid case when you apply for an Installment Agreement is a must. Additionally, the amount you pay monthly must satisfy the entire tax debt within three years. In order to apply fill out IRS Form 9465, Installment Agreement Request.

IRS Partial Payment Installment Agreement
In a Partial Payment Installment Agreement, the taxpayer makes regular monthly payments to the IRS, but the payments do not pay off the tax debt in full like the classic Installment Agreement is intended to. After the terms of the Installment Agreement are fulfilled, the remainder of the IRS Tax Debt is forgiven. Although requesting a Partial Payment Installment Agreement with the IRS is easier than submitting an Offer in Compromise, it’s still tricky. First, you need to write a letter stating your request for a Partial Payment Installment Agreement and submit it to the IRS along with IRS Form 9465 and IRS Form 433-A. Consider consulting with a qualified professional to help you with these steps.

Paying in Full When you Don’t have the Cash
Taking out a loan at the bank to pay your IRS debt is a good way to stop interest from accruing on your account. Even if your credit is in trouble you can still qualify for a loan and decrease your Tax Debt. A Bank Loan is cheaper than an IRS Debt. Penalties and Interest on Tax Debt are a lot higher than a loan from a bank. A typical Bank Loan, if you can get one, is around 6.5% interest versus Penalties and Interest on an IRS Debt which is usually 8% compounded daily. If you have the option to pay your Debt in Full with a Bank Loan, you should consider this solution.

If there is any way possible for you to pay your Tax Debt in full, consider that solution as a priority. Remember, penalties and interest continues to accrue on your Tax Debt when you choose to pay with an Installment Agreement. You’ll be saving money in the long run if you borrow money to satisfy your debt.

Tax Settlement Secrets- See if you Qualify for an Offer in Compromise

Insider Tips: It's notoriously hard to have your IRS Offer in Compromise approved. After all, this is Uncle Sam's money we're talking about. And he's doesn't want to lose one red cent of it. But there is a secret way to crack the IRS's code. You may have read this all before, but here it is in plain English:

The Three Factors: The IRS may accept the offer based on any of the following.

1. Doubt as to Collectibility: This means you can't pay in full, no matter what. But remember, if you have assets these could be sold to satisfy your debt.

2. Doubt as to Liability: This means you're not liable for the debt. Don't apply unless you can prove it, and don't apply unless your reason is legitimate. Constitutional arguments and "it's just not fair" excuses won't cut it. According to the IRS, here's what qualifies as legitimate reasons:

(1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

3. Effective Tax Administration These are exceptional hardship cases like when an individual is recently handicapped or widowed with no income. Basically, you must demonstrate that the collection of the debt would create an unfair economic hardship for you. (Ex: If the IRS does not accept your Offer in compromise, you cannot afford to pay your medical bills.)

Don't forget: Getting your Offer approved is only the beginning. When your Offer is approved you are entering a 5 year contract with the IRS. This means you have to file your taxes on time for five years straight. If you default on a payment or fail to file, the IRS can charge you the original debt amount plus penalties and interest!

An Offer is not always the right answer for solving your Tax Debt issues. If you don't know which way to turn, consider consulting with a professional for the right answer.

Get IRS Penalty Abatement with Tax Help

If you’re facing penalties from the IRS because you fell behind on your taxes, you’re not alone. You are among hundreds of American who have the same exact problem. Did you know that if the IRS sticks you with penalties you have recourse? It’s called a Penalty Abatement and it can save you tons of money, and worry.

Stop the Fees! Penalty Abatement is when the IRS offers to forgive the taxpayer for paying the money owed and will remove some of the penalties that were assessed. I’ve even seen cases in which the IRS will completely revoke the penalties. With tax penalties, the IRS assumes that you owe them the money unless you can prove that you don’t deserve to be charged the penalty.

Their penalties are sometimes automatically added to a delinquent account without even considering individual circumstances. The IRS doesn’t even think about how you got into the problem in the first place and they just slap you with penalties for not paying. This means that even if you have a good reason for paying them late, the IRS doesn’t know and the system will continue to assess fees.

How to Qualify:

1. You must provide a sound reason as to why you think you qualify. You must provide all the details of the circumstance that prevented you from paying your taxes on time.

2. The RS requires that you send all notices showing the penalty that you received, along with all documentation showing reasonable cause for being late.

3. You must fill our Form 843 (a request for abatement form)

Your Case Matters! Everyone’s specific case is different and what the IRS deems as acceptable depends entirely on the individual case. As an IRS-Hitman, I can tell you there is no magic formula in getting penalty abatement. The IRS will make the decision after looking at your situation. In most cases I’ve seen, it could take professional help to get tax penalties removed.

Play the Game! Once you have filed the proper paperwork, you will need to wait. If you do not hear from the IRS within 45 days or so, you will need to send another request. You don’t have to reinvent the wheel on this one; all you have to do is change the date on your request. The IRS should ideally respond within two months. If you did not get the response that you were hoping to get, your next recourse is to get professional assistance to see what else you can do.

No Harm in Trying: Above all else, it is important you try everything you can to get out from under your tax debt. You aren’t going to be doing anything wrong if you apply for penalty abatement and you get rejected. But if you are looking to apply, make sure you meet the above requirements

Bankruptcy Doesn't Discharge Tax Debt- Get the Scoop

I receive tons of e-mails throughout the day from people in desperate need of Tax Help. I never mind answering questions, feel free to drop me a line if you have specific questions. But I never usually share them along with my answers with the readers. But now, I'm sharing the answer to one pressing questions about Bankruptcy:

I filed for chapter 7 on 1/31/09 and obtained a discharge on 5/19/2009. At the time of my filing for chapter 7, I had IRS debts for the following tax periods;

Years 2000, and 2004 both filed on 12/5/2005
and year 2005 filed on 10/30/2006

I thought that I could wipe out the 2000 and 2004 tax liabilities since it's been more than 3 years from the time they were due, but when I spoke to the IRS today I was told the debts are not dischargeble. Is there something here that I'm missing? The person that I spoke to had a typical IRS response? what can I do? Is it better to write to them and if so to whom?

My Reply:
There are a couple of factors that could rule you out of having your tax debt discharged.

1. You had to have personally filed the return, if a Substitute for Return or SFR was filed, that tax year will not qualify

2. The Tax Return has to have been filed and accessed more than 24 months to filing for bankruptcy. This means the returns were filed AND processed and you were billed for tax debt 24 months before applying for bankruptcy.

Most taxpayers can’t clear those hurtles to have their tax debt discharged, and unfortunately it seems a lot of bankruptcy attorneys will erroneously claim tax debt can universally be removed. And about the “typical IRS response,” if the person you spoke with had the, “Yeah right, you owe it” attitude, that’s the culture of the organization. Typically, the Taxpayer does owe the IRS, and this makes them particularly difficult to communicate with.

The IRS Announces Easier Tax Settlements

Recent Tax Settlement Announcements: IRS Commissioner Doug Shulman recently announced that the IRS is loosening it's rules for negotiating Tax Settlements (Offer in Compromise) to allow taxpayers hit by the recession to pay less than they owe.

Why the change? IRS Commissioner Doug Shulman claims that IRS Agents will be more lenient for those who have had a drop or loss of income due to the current economic recession.

The IRS will process over 100 million tax returns this year, and most people who file will quality for Tax Refunds. However, with the loss of more than 8 million jobs since the start of the U.S Economic Recession, many taxpayers will not be able to make payments toward their tax debt.

But is it true? This goes along with what the IRS announced last year. There was talk of a "kinder" and "gentler" IRS all while they ramped up their collection efforts behind the scenes. If the IRS is trying to have more mercy, why do I keep getting hundreds of emails and calls from taxpayer that needs help fighting the IRS?

About Tax Debt Settlements: These new announcements might give people the wrong idea about Tax Debt Settlements. I want to go ahead and rebuke some of the common myths surrounding Tax Debt Settlements, actually known as an IRS Offer in Compromise.

1. First of all, few will quality for "Pennies on the Dollar" settlement amounts proclaimed by shady tax companies and as seen in commercials.

2. Second, it's very hard to qualify for an Offer in Compromise. Only those who truly cannot afford to pay the IRS will qualify to have a Tax Debt Settlement with the IRS.

3. Unemployment alone will not help you qualify to Settle your Tax Debt with an Offer in Compromise. The IRS will evaluate your financial situation, they will predict the amount of money you stand to make when you become employed again.

I'm not convinced by the IRS's sudden announcement that they will make Tax Settlements easier for taxpayers in need. I think they'll continue to do the same thing they always have, fiercely collect no matter what that means to taxpayers.