Act Early: Don't toss those notices aside! Because when the Final Notice and Intent to levy notices comes and goes, it will be too late. The IRS will have the power to Garnish your Wages, Levy your bank account, or even Levy your assets. So what can you do? Get ready to fight! As soon as you know you owe the IRS, you have to get proactive about paying them off.
What Can I do? The IRS offers several programs to help those in debt. But they all have strict requirements that need to be met. See if any of these offers apply to you.
Innocent Spouse: When you marry someone, you marry their tax debt. But there are exceptions. If the debt was created by you ex-spouse, you may qualify to have your tax debt forgiven. But not if you filed jointly.
The Offer in Compromise: Settle your debt. The IRS allows you to pay less than you owe to satisfy your Tax Debt. But beware, only 2% of applicants get approved. You have to fill out a 44 page document detailing why you qualify, in addition to providing supporting documentation. Also keep in mind, an even smaller margin of that 2% qualify to be settled for “Pennies on the Dollar.” Debt is only settled for Pennies on the Dollar in Extreme cases.
The Installment Agreement: Pay monthly. The IRS allows you set up an installment agreement that let's you pay your debt in easy monthly payments. The catch, is that the amount you pay is determined by how much you can afford. You will only be allowed to pay for your basic needs (clothing, food, water, housing, and transportation) and the IRS will demand the rest goes to your IRS Tax Debt.
Currently Non Collectible: Will paying your debt make you go without the most basic of needs? Do you have no assets the IRS can go after? If you can prove this, the IRS may temporarily suspend collection activities. The IRS will check up on you every few months. And if your financial situation changes for the better, collection efforts can be renewed.
It's not over yet. Now you know there's hope. There are ways you can pay off your debt and keep the IRS from forcibly taking your money or your assets to pay your debt. But the hard part is proving you can't pay in full. Before applying for any of the programs above, make sure you fill out form 433a, which will detail your full financial situation. Also, round up any documents that support your case. Don't forget, if you don't get the response you wanted, you can always contact a Tax Professional who has a better chance of getting the results you want.