Owing the IRS back taxes is a stressful situation to find yourself in. If you owe the IRS it is important to understand your rights and options for getting out of tax debt. The good news is that there are ways to get tax debt relief and there are plenty of knowledgeable tax experts out there that can help. Of course they do so for a fee - so let's take a look at the subject of tax debt relief and you'll also want to consult our article titled "Can you settle tax debt on your own or do you need to hire a tax professional?" before you get started.
Offer in Compromise
One of the most common and effective forms of tax debt relief is known as an "Offer in Compromise" or OIC. An OIC is a complex legal agreement between an individual and the IRS which should only be attempted by a tax attorney or registered agent. In the early 1990s the OIC was created through section 7122 of the tax code. In the years since, the OIC has become a popular way to seek relief from delinquent taxes. The popularity of the OIC is because of its effectiveness. The IRS has reported that accepted OIC's have carried an average discount to the taxpayer of about 85%. In other words, the IRS is getting an average of 15 cents on the dollar when an OIC is accepted. The catch is that only about half of all OICs submitted are accepted. The thing to remember about an OIC is that the burden of proof falls completely on the shoulders of the taxpayer. You must be able to prove beyond doubt that you do not have the means to pay the debt or that the debt was erroneous to begin with. The technical names for these two types of OICs are "doubt as to collectability" and "doubt as to liability". Pretty self explanatory really - you must prove that you cannot pay or that you didn't really owe the tax. Since an OIC is a complicated legal agreement and many taxpayers don't qualify, you will definitely need to enlist the help of a tax professional to get started. We discuss the usage of paid tax professionals in great detail in our article - "Can you settle tax debt on your own or do you need to hire a tax professional?"
Installment Agreement and Online Payment Agreement
Since a large percentage of taxpayers do not qualify for an OIC, it is important to look at the other tax debt relief options that are available. Another common option is an "installment agreement". An installment agreement is essentially a long term payment plan that is agreed upon by the taxpayer and the IRS. There are several different types of plans and once again you will find that this is complicated territory that is best navigated with the help of a seasoned tax professional. If you owe $25,000 or less in taxes and penalties you may qualify for an online payment agreement (OPA). This is a relatively simple process that can be tackled without the help of a tax professional. You simply go to www.IRS.gov and fill out an online payment agreement application. Although you do not necessarily need the help of a tax professional to complete this application it would be wise to consult with one before getting started. Each situation is unique and before turning over all kinds of information to the IRS you will want to make sure that you are embarking on the best course of action for your situation. Installment agreements and online payment agreements can be a great way to get your tax debt paid off while working within your existing budget.
Tax Levy and Garnishment Release
If you owe the IRS back taxes they have a number of tools at their disposal that can get your attention very quickly. One of the most effective actions the IRS can take is to file a levy against certain tax payer assets. Common examples are bank account levy, wage levy / garnishment and brokerage account levy. Having the IRS levy your assets or garnish your wages is one of the most stressful situations that can arise as a result of having delinquent tax debt. For example, a wage garnishment can leave you unable to pay for basic expenses and lead to a debt spiral that can be financially devastating. Such situations are not to be taken lightly and it is wise to immediately contact a tax attorney for help. An experienced tax attorney can obtain a tax levy or garnishment release within days. This can give the taxpayer and their attorney the opportunity to work out an acceptable solution with the IRS while alleviating the financial pressure that can accompany a levy or garnishment.
Tax debt and tax debt relief are extremely complicated subjects. Anyone who has attempted to do their own taxes knows first hand that the U.S. tax code is very complex and confusing without the help of a trained professional. Before attempting to solve tax debt issues on your own, it is prudent to seek advice from a trained professional.