What Are My Options?
Are you burdened by overwhelming tax debt? Don’t worry you are not alone. Over 11 million US taxpayers owe money to the IRS. Due to this, the IRS released something known as The Fresh Start Program. This initiative marked a turn in the IRS attitude as they now look to “rehabilitate” taxpayers who have fallen behind. The goal is to make it easier for taxpayers to resolve their past issues and stay current on their taxes in the future. It expanded the Offer In Comprise program and increased those who are eligible for Installment Agreements and Penalty Abatements with fewer paperwork requirements. The IRS Fresh Start Program offers a glimmer of hope for individuals and businesses struggling to meet their tax obligations. Let’s go over a few of the most common resolution options.
1. Offer in Compromise (OIC) :
This is by far the most sought-after program. Settle my debt for pennies on the dollar? Yes, please! However, it is not as simple as some would make it out to be. In fact, in 2021 the IRS only accepted 30.7% of the offers it received. Why? Because most offers were too low or the paperwork was not done correctly. This is why it is important to consult with an experienced professional before you submit anything to the IRS. Don’t be discouraged though, when done correctly the Offer in Compromise program can save you a pretty penny. We have helped settle millions in tax debt through this method. When considering an offer the IRS will not consider the amount you actually owe, but the validity of the tax debt, if being forced to pay it would cause you a hardship, and your ability to pay it over time. They will look at your income, assets, and expenses to determine what amount they will settle for. If you want to know if this is a program you might qualify for give us a call for a quick and free consultation.
2. Installment Agreement (IA):
An installment agreement is pretty much exactly what it sounds like. You pay a certain amount over time until the debt is paid off. But what if you can afford the payments the IRS is asking for? That’s where we come in. There is a specific agreement called a Partial Pay Installment Agreement. We like to think of this as the Easy OIC (Offer in Compromise) because like an OIC you don’t actually end up paying the debt in full. Instead, the IRS will compare your income and expenses to see what you can reasonably pay each month. You will then pay that amount each month until the debt expires, after that you’re in the clear!
3. Currently Not Collectible (CNC):
This is another hardship program that only certain people will qualify for. If accepted the taxpayer will not be required to pay the amount owed. However, the debt stays on the books and the IRS will send you a reminder every year about the interest and penalties still accruing. If you are unemployed, have major health conditions, or only collect social security income then this option may be good for you.
4. Penalty Abatement (PA):
Many taxpayers are shocked to find out that a significant portion of their debt is not actually for the tax they owed but the hefty penalties associated with not paying for filing on time. In certain circumstances, Penalties can be removed, reducing your tax debt significantly.
These are just a few of the solutions the IRS offers to help taxpayers resolve their debt. It is important for you to understand that each program has specific eligibility criteria and requirements. The application processes can be complex and daunting. Seeking professional advice is highly recommended to determine the most suitable program for individual circumstances. A knowledgeable professional can help you determine the best course of action, guide you through the application process, and increase your chances of securing a favorable outcome.
We offer free consultations, so if you have any questions or think you might be a good fit for one of these programs give us a call today!