Taxpayers that are not currently in financial hardship, but may be very close to that threshold, may be able to qualify for an Offer In Compromise. This mostly applies to those who would be put into financial hardship if they added tax debt payments to their current list of expenses. In this situation, the IRS determines the maximum amount they would be able to get from a taxpayer without causing financial hardship. Then the remainder of the debt is forgiven and the individual is released from their liability as soon as the taxpayer meets the conditions of their agreement with the IRS. The IRS will factor in disposable income and any assets held by the taxpayer when making a determination for an offer in compromise. An offer in compromise can wipe the slate clean with the IRS for substantially less than what the taxpayer owes. Offers in Compromise are difficult to achieve, but offer a substantial benefit to struggling taxpayers if they qualify. CTR has tremendous experience in determining a taxpayer’s eligibility for an offer in compromise and also has tremendous success in negotiating our offers in compromise we submit for our clients.

The installment agreement is a method of tax debt resolution that allows an individual to pay off their balance over a period typically ranging from 6 months to ten years. Depending on the amount owed to the IRS or state tax agency, the period can vary. CTR determines the amount of each monthly payment based on the taxpayer’s personal assets, property and other financial information and negotiates with the IRS to achieve that payment. These agreements come in many forms to accommodate other financial obligations and the needs of the taxpayer while still satisfying IRS or state tax debt.

This form of Installment Agreement exists to allow taxpayers to finish payment on a large expense, such as a car loan or child support payments. This plan begins with a divided payment schedule in which the larger expense gets the main focus and small installments are collected on the unpaid tax balance. Once the outstanding balance on the initial expense is completed (usually within 12 months), the taxpayer switches the entire payment to the back taxes over the following 48-60 months. This program eases the stress of tax payments without causing other financial obligations to default.

This type of installment agreement comes with a couple of strict guidelines that determine an individual’s eligibility. There are some added benefits that make this program worthwhile, such as not having to disclose all of a taxpayer’s financial information to the federal or state tax agency. The assessed or actual tax balance owed must be less than or equal to $50,000. Additionally, the total balance, which includes accrued penalties and interest, must be paid to the IRS or state within a 60-72 month period. This arrangement is ideal for taxpayer’s with substantial assets or disposable income.

The PPIA is a bit more complicated to manage from a records perspective, but can save taxpayers a substantial amount on their tax balances. Taxpayers following this plan have to disclose all financial information and documents to the IRS to be accepted. CTR negotiates a hardship payment based off the taxpayer’s current financial information. This hardship payment is less than the monthly payment needed to satisfy the tax debt in full. The IRS has a 10-Year Statute of Limitations in which they can collect on past due tax debt. The PPIA payment will be made for the duration of that 10-year period, but will not pay the tax balance in full by the time the IRS can no longer collect on the tax debt.

As one of the more accommodating agreements, the CIA allows taxpayers to continue paying a long-term monthly bill or expense(s) while still addressing their tax debt problems. Those that qualify for this agreement must have a steady payment schedule for something like a 401k program or a credit card that they are required to keep. The CIA usually lasts for 60 months and pays the debt in full. During this time, the individual is required to do three things: make payments to the IRS in the agreed amount, continue to pay their conditional expense(s) with submitted proof to the tax agency, and give the IRS any required financial documents or records. This program allows a taxpayer to continue their current lifestyle without disruption while also paying back their IRS debt in full.

This straight-forward payment method is a simple installment plan in which the taxpayer settles their entire tax debt over many payments. The amount is divided into monthly installments over the 10-Year Statute of Limitations and is based off of the taxpayer’s current financial situation. This program removes the stress of trying to make a full one-time payment and grants the taxpayer peace of mind. This program allows the taxpayer to pay-off their tax debt obligations over time without being at risk for a levy or wage garnishment.

Taxpayers that are struggling with financial hardship may be able to find a way to be completely relieved of their IRS debt. Currently Not Collectible Status removes the taxpayer’s tax balances from active collections with the IRS. A taxpayer provides documentation of their current financial condition, and if such documentation shows that the taxpayer cannot meet their basic obligations, let alone their tax liability, the IRS will declare a financial hardship. As the Statute of Limitations on a tax debt is 10 years, the individual must continually file their tax returns and provide any requested information to the IRS in a timely manner. Anytime a taxpayer receives a raise or has their income to expense ratio change such that they are no longer in financial hardship, they may lose their Currently Not Collectible Status. At this point, a new payment plan may be drawn up to settle the balance with the IRS based on the new financial situation in which the taxpayer finds themselves. The Currently Non Collectible Status allows taxpayers some relief while they try to improve their financial condition.

Penalties can quickly turn a tax debt situation from bad to worse. With our penalty abatement assistance, the added penalties to tax obligations may be removed. Remember, a penalty abatement only applies to penalties. The IRS does not currently abate interest. To accomplish a penalty abatement, an individual can submit proof that they missed payments or filing deadlines or other noncompliant behavior for uncontrollable reasons. In addition, they must show that they are working to rectify the problem by filing any missing forms or returns and paying the required balances.