IRS Tax Settlement Options

If you owe back taxes to the IRS, no matter how large your debt, it can be stressful and intimidating. The situation can get out of hand quickly if you don't take steps to resolve it. The IRS offers a few options to settle your debt, depending on the amount you owe and your disposable income. By working with a tax attorney, you can examine which options will work best for you.

Connect with a tax attorney today and take the first step to resolve your tax debt. Simply fill out the free tax case evaluation form below to connect with a tax attorney near you.

If you want to eliminate your tax debt, you have five options. These are the only options that the IRS will consider, although a tax attorney should know if the IRS is likely to accept each option in your case.

The five options are:

Installment Agreement

If all of your tax returns are filed and you have an appropriate amount of disposable income, a tax attorney may be able to arrange a monthly payment plan with the IRS. The IRS, not you, decides if your disposable income is appropriate by assessing your finances. If your income is too high or too low, the IRS may reject your payment plan. Interest and penalties may continue to accrue during a payment plan, and you may need to waive the statute of limitations, meaning the IRS can keep collecting for as long as it takes you to pay them back.

Partial Payment Installment Agreement

It is possible, though not easy, to arrange a payment plan of a portion of the amount owed. If your disposable income is too low to pay back the full amount, or if you have no assets to liquidate, the IRS may agree to accept a portion of the debt paid back over time. Again, the statute of limitations may no longer apply if you agree to a partial payment plan.

Offer in Compromise:

The most desirable judgment, and also the most difficult to receive, an Offer in Compromise is a settlement to immediately pay a portion of the total debt. The IRS may consider an Offer in Compromise if the debtor is otherwise unable to pay, such as having no assets that could be levied. However, the IRS is very conservative about accepting Offers in Compromise.

Currently not Collectible:

This temporary status can be achieved by proving a complete inability to pay back taxes owed. The IRS will stop all liens and levies against a debtor, and will assess a debtor's status yearly. The 10-year statute of limitations will continue to be in effect while Currently not Collectible, meaning if you have this status for 10 years, your debt will be waived. You will need to inform the IRS of any changes in income that could alter this status.

Bankruptcy:

Chapter 7 bankruptcy discharges most debts, and may discharges tax debt owed to the IRS or state. However, the rules that govern bankruptcy are complex, especially regarding tax debt. Bankruptcy may only eliminate tax debts older than three years. Additionally, bankruptcy laws try to prevent bankruptcy abuse, and a judge may decline your bankruptcy petition. For more information about filing bankruptcy, connect with a bankruptcy attorney.

The Internal Revenue Code establishes statutes of limitations for taxpayers and for the IRS itself.

As a taxpayer, you have three years to claim a tax refund. If you haven't filed a tax return, but are owed money by the government, you can file up to three years late and still receive your refund.

The IRS has three years to audit your returns. So it's a good idea to hang on to your old tax forms. If you are currently being audited, any new tax returns you file can also be audited. And if the IRS suspects criminal tax fraud, they may be able to go back even further.

The IRS has 10 years to collect outstanding taxes. Once the IRS has established that you owe the government for back taxes, they can collect, and asses penalties and interest, for up to 10 years. Any balance you owe after 10 years is usually wiped clean.

No matter which option you pursue to settle you tax debt, dealing with the IRS is a complex process. There will be lots of paperwork to file, deadlines to meet, and time waiting for the IRS to respond. A tax attorney can help ease this process by dealing directly with IRS agents assigned to your case.

Connect with a tax attorney today. Simply fill out our free tax case evaluation form. The sooner you discuss your case with a tax attorney, the sooner you can begin resolving your tax debt.

The above summary of tax settlement options is by no means all-inclusive and is not legal advice. Laws may have changed since our last update. For the latest information on tax laws, speak to a tax attorney in your area.