Are you struggling to keep up with your tax payments, especially when finances are tight? Ignoring your tax debt is not the answer. Instead, taking action and getting into tax compliance should be your top priority. The good news is that the IRS is usually willing to work with taxpayers to resolve their tax debts. However, it's crucial to have a clear understanding of the collection alternatives available to you. In this blog post, we'll discuss what to do when you can't pay your taxes and how to resolve your tax debt.
Tax Compliance: The First Step to Resolving Your Tax Debt
The initial step in addressing your tax issue is to get into "tax compliance." This means filing all tax returns due for the last six years and making your current tax payments. Once you're in tax compliance, you can work on resolving your back-tax issue.
Collection Alternatives: Understanding Your Options
There are three main collection alternatives to resolve a back-tax debt: Installment Agreement, Uncollectable Status, and Offer-in-Compromise.
1. Installment Agreement
An installment agreement allows you to pay your taxes back over time. There are three variations of the installment agreement: Regular, Streamlined, and Partial-Pay. The type of agreement that works best for you will depend on your personal circumstances and is something that a tax professional can help you with when you're ready.
2. Uncollectable Status
Uncollectable status is when the IRS determines that you are unable to make current tax payments. When a taxpayer is deemed uncollectable, the IRS may still file a Notice of Federal Tax Lien to secure its position in the taxpayer's assets but will not take enforcement action to seize (or levy) the taxpayer's assets or income streams.
3. Offer-in-Compromise
An Offer-in-Compromise is an agreement where the IRS agrees to accept less than the total amount owed to it, and the taxpayer agrees to pay the negotiated amount while maintaining tax compliance for five years following the acceptance of the Offer-in-Compromise ("Offer"). The basis for an Offer is a formula referred to as "Reasonable Collection Potential" or "RCP." RCP is the net equity in assets plus the taxpayer's excess future income for 12 or 24 months, depending on how the Offer is structured. With careful planning, a taxpayer can maximize the potential for the Offer's acceptance.
Take Action and Get Tax Resolution Help Today
If you find yourself unable to pay your taxes, take action and get into tax compliance. While the IRS is not known for being lenient with taxpayers, they are often willing to work with those with outstanding tax debts to get them into compliance. Contact me directly at my office in Federal Way, WA, at (253) 327-6101, or email me at jason@mathistax.com to get the help you need. My team and I are ready to assist you and guide you towards resolving your tax debt.
33509B Pacific Highway S
Federal Way, WA 98003
Ph. (253) 327-6101
Email: jason@mathistax.com
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