Tax Debt Resolution
- The bad news? You owe the IRS a pile of cash.
- The good news? The IRS is willing to work with you to get it resolved.
What’s the catch? The IRS is a bureaucratic wasteland of forms, regulations, and traps for the unwary. Fortunately, The Law Office of Clark Daniel Dray is prepared to walk you through the tax resolution process from beginning to end, utilizing both experience working with the IRS and a thorough understanding of the interaction between tax debt and bankruptcy.
The IRS offers three primary tools for addressing your tax debt, Currently Not Collectible status, Installment Agreements, and Offers in Compromise.
Currently Not Collectible
Currently Not Collectible (CNC) status is the determination by the IRS that for some reason the tax debt should be removed from active collections. For most taxpayers, the inability to pay or some other hardship can qualify you for CNC status.
In attempting to qualify for Currently Not Collectable status, you’ll need to prove to the IRS that you have neither the money in your budget nor the assets available to pay your tax debt without it being a hardship to you and your family. The IRS makes this determination by closely examining your financial circumstances and comparing them to a set of internal guidelines. If you qualify you’ll get a letter that states “We have temporarily closed your collection case for the tax types and periods listed below. We have determined that you do not have the ability to pay the money you owe at this time.” The IRS will leave you alone as long as the hardship persists. CNC status is a great tool to use in aging your tax debts to make them eligible for discharge in bankruptcy, waiting out the statute of limitation (the time period in which the IRS can collect the tax debt), or to give you a chance to get back on your feet before you’re required to pay.
The IRS is willing to set up a formal payment plan with you, called an Installment Agreement. For income taxes, you can have as long as 72 months to repay the amount owed, including penalties and interest. While your Installment Agreement is in place, the IRS is prohibited from levying or garnishing your wages.
The difficulty of getting an Installment Agreement in place is based on how much you owed at the time the taxes were assessed. Some Installment agreements, called direct debit installment agreements or streamlined installment agreement, can be completed without disclosing anything to the IRS about your income and assets. For example, if you owed less than $25,000 at the time of assessment and can pay the debt off in 72 months, you can enter an Installment Agreement with little to no paperwork. You are also eligible for a direct debit installment agreement if you owed more than $25,000 but less than $50,000 upon assessment, can pay the debt off in 72 months, and agree to direct withdrawal from your bank account or paycheck.
If you can’t meet these conditions, the IRS is still willing to work out a payment plan with you. In a Partial Pay Installment Agreement (PPIA), you’ll be required to file some forms and supporting documents with the IRS so that it can determine what your payment must be. Regardless of whether you’re seeking a streamlined installment agreement or a PPIA, having an experienced tax resolution firm like The Law Office of Clark Daniel Dray working on your behalf will smooth the process with the IRS and help make sure that your payment is the best deal you can get.
Offer in Compromise
An Offer in Compromise (OIC) is the process by which your tax debts can be settled for a portion of what you owe. The settlement amount is the result of a complicated calculation based on your earnings and assets and how long the IRS can collect from you. The initial hurdle in the OIC process is showing to the IRS that you couldn’t possibly pay what you owe during the collection period (generally 10 years). After you’ve demonstrated some “Doubt as to Collectability”, the IRS creates a budget for you based on your income and an artificial set of standard deductions along with certain other allowable expenses. Finally, the IRS calculates the value of your assets and adds a portion of that total to your remaining monthly income
Because the Offer in Compromise is a very powerful tool that may result in a significant reduction of your tax debt, the IRS doesn’t make it easy. In 2014, over 60% of Offers were rejected. The description of the process above dramatically oversimplifies a complex process, the results of which are significantly dependant on the quality of advocacy on your behalf. As such, it’s of the utmost importance that you enlist the assistance of a dedicated tax professional to walk you through what can be a very long and intricate procedure and help you fully take advantage of the sophisticated OIC formula to ensure the best settlement possible.