Strategies for Dealing with IRS Debt

By
Services for Real Estate Pros with Backoffice Squared

I represent taxpayers in Gainesville and the state of Florida who have tax issues with the IRS.

You owe the IRS a lot of money. What can you do to get your life back on track? Basically, it comes down one of three options:

  •          Convince the IRS that you are not in a position to pay
  •          Make a deal to make monthly payments over a period of time
  •          Make an Offer-in-Compromise in that the IRS will take some smaller amount and write off the debt balance.

Figuring out which of these three doors is the best option for you depends on your situation as defined by an IRS formula called the Reasonable Collection Potential or RCP. The RCP takes your monthly income and offsets that with “allowable” expenses to determine your disposable income (i.e., what you could pay the IRS monthly). This is the base line amount for negotiations with the IRS.

If your RCP is zero, then the IRS will check a box on your file as “Uncollectable” and go away for 18 to 24 months. They will revisit the case every couple of years until the Statute of Limitations expires at which time, they will write-off the balance.

If your RCP is a positive number, all is not lost. You can to some extent arrange your financial affairs so as to minimize the RCP calculation. Making these payments regularly usually means that the IRS will leave you alone until the Statute of Limitations date gets close. If a final check of your records does not show anything stupid like the purchase of Leer Jet, then they will likely write-off the balance.

Finally, there is the Offer-in-Compromise that is so famously shown on TV as “I only paid pennies on the dollar”. Frankly, that is hooey. Why would the organization with the most collection powers in the world just let someone go? The answer is that they don’t. Fully 80% of Offers are rejected by the IRS. The 20% that are accepted only happen because the taxpayer was able to demonstrate that this was the best deal that the IRS could expect to make.

There is a fourth option that makes sense in some cases – filing bankruptcy. The rules are a little complicated and you need to consider this with an experienced attorney who specializes in bankruptcy.

There are ways to navigate out of this mess. It takes a considerable amount of work to evaluate which is the best route to take.

If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email jim@taxrepgainesville.com.

 

Jim Payne, CPA

Backoffice2

Gainesville, FL

Cell (352) 317-5692

Office (352) 376-9401

Fax (352) 376-9440

jim@taxrepgainesville.com

https://taxrepgainesville.com

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Rainer
604,920
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Fighting IRS by yourelf alone is going to be challenging! So let a professional help you!

Reasonable Collection Potential or RCP takes your monthly income and offsets that with “allowable” expenses to determine your disposable income (i.e., what you could pay the IRS monthly). This is the base line amount for negotiations with the IRS.

Apr 21, 2020 04:22 AM #1
Rainmaker
1,938,237
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

The Bottom Line is the want you to pay it . They are usually flexible in what you can pay .

Apr 21, 2020 04:57 AM #2
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