Did you know that federal tax debt can only be collected for 10 years? Due to this expiration of debt, there are many avenues that can be used for resolving your tax liability, depending upon your circumstances, the amount of the tax debt, how old the debt is, and your end goals. Those possible avenues include:
- Currently Non-Collectible: This status is used to designate when a taxpayer does not have enough money and assets to enter into a payment plan with the IRS. Financial information is disclosed to the IRS in order to qualify a taxpayer as non-collectible, at which point the IRS discontinues new collection efforts. The liability still remains but is not being actively collected.
- Installment Agreement: This is used when a taxpayer wants or has the ability to make a monthly payment to pay down the tax liability. Depending on the amounts, financial information may not be required. Typically, we can negotiate payment plans that extend 60-84 months. In some instances, taxpayers can qualify for a partial-pay installment agreement, where the monthly payments are paid until the debt expires, but the taxpayer will have only paid a portion of the total debt.
- Offer in Compromise: An offer in compromise is effective when a taxpayer does not have assets and income stream to full-pay the tax liability before the debt expires. We negotiate the total repayment amount based on the taxpayer’s circumstances. It works best for taxpayers who have minimal home equity, very little retirement assets, and an income stream that does not significantly exceed basic monthly expenses.
- Bankruptcy: Some tax liability can be included in a bankruptcy. An intricate analysis will have to be done to determine if your tax debt qualifies for this; however, it is limited to income tax debt and cannot include the most recent 2-3 years of tax debt.
Do not wait until you have turned around your financial circumstances before you pursue the resolution of your tax debt. Some of the best resolution options will only be available while your financial circumstances are difficult. To determine which resolution option(s) may be available to you, you will need to consult with a tax resolution attorney.
Jenna graduated from BYU with a BA in English Literature in 2006 and received her law degree from BYU in 2010. She grew up in Maine and Kentucky and loves to travel and explore. Her favorite place in the whole world is Prague, followed closely by London and Boston. Her life motto? Work hard, play hard. And she sure does. After six years in family law, Jenna has shifted her professional focus to helping clients resolve tax debt with the IRS.
Contact a Tax Lawyer Today
Look into Pearson Butler, an established law firm known for its legal expertise. If you have any questions regarding IRS tax resolution or our services or our firm, feel free to contact Jenna Hatch at (800) 265-2314.