15 Dec 7 Options for Resolving Your Tax Debt
There are many reasons people fall behind on their tax debt: they’re too busy to file, they have gone through a life-altering event (divorce, death in the family) that caused them to miss deadlines, they didn’t have enough money to file, etc.
Tax debt can feel overwhelming and oppressive, and many people find it easiest to deal with it by running from it. The truth is, the longer you wait, the bigger the problem will become as interest and penalties continue to add up.
The best option is to face your tax debt head on, and fortunately, there are quite a few options for resolving it. Many people are surprised to find that they’re not in as much trouble as they think with the IRS and that the path to paying off their tax debts isn’t as painful as they had feared.
Below, you will find a chart with seven tax resolution options. Each option is compared and contrasted according to 15 different criteria (how to qualify, ease of submission, amount of financial disclosure required, etc.)
To get started with your tax resolution, familiarize yourself with these options and their pros and cons. Then, you may want to contact tax relief professionals to review your case and help you determine the best solution for your situation and apply for the needed relief. Though you may be new to tax resolution, these people are not. They know the ins and outs of IRS policies and practices and can help you get out of tax debt in the most advantageous way.
Read on to learn more about your tax resolution options and start on the path toward a life free of tax debt:
|Fresh Start Program||Offer in Compromise (OIC)||Currently Not Collectible (CNC)||Partial Payment Installment Agreement (PPIA)||Complex Installment Agreement (CIA)||Penalty Abatement||1040X Form|
|Qualification. How do you qualify for this program?||Anyone will qualify if balance is below 100K||Financial based. The IRS reviews your ability or inability to pay back your balance owed.||Financial based. The IRS reviews your ability or inability to pay back your balance owed.||Financial based. The IRS reviews your ability or inability to pay back your balance owed.||Anyone will qualify if balance is over 100K||Anyone will qualify||Anyone will qualify|
|Full Payment of Tax Debt. Will I be paying back my tax obligation in full?||Yes||No||No||No||Yes||No||It will depend on the amended tax return|
|Cooperation of the IRS. Is the IRS willing to work with me on this? What is the degree of difficulty when working with the IRS on this?||High||Low||Medium||Medium||Low||Low||Medium|
|Balance Threshholds. Do I need to owe a specific amount to the IRS in order to qualify for this program?||Up to 100K||10K and above||None||None||Over 100K||No||No|
|Ease of Submission. How difficult is it to prepare and make a proposal submission to the IRS?||Medium||High or Difficult||Medium||Medium||High or Difficult||High or Difficult||Medium|
|Financial Disclosure. To what degree do I need to disclose my personal financial situation when working with the IRS?||Low||High. A significant amount of personal financial information will need to be disclosed.||Medium. Personal financial information will be required.||Medium. Personal financial information will be required.||High||N/A||N/A|
|Marital Status. Does my marital status impact this program?||No||Yes||Yes||Yes||Yes||No||Yes|
|Opportunity for Savings. Is it possible to reduce my tax debt with this program?||No||High||High||High||No||Yes||It will depend on the amended tax return|
|Collection Expiration Date Considerations. Is it important to evaluate my CSED's when working with the IRS on this?||Yes. Older balances will create larger payments||Yes. CSED's will be a factor when determining whether to pursue this program.||Yes. CSED evaluation is critical with this program. Understanding CSED's provides a strong opportunity for tax savings.||Yes. CSED evaluation is critical with this program. Understanding CSED's provides a strong opportunity for tax savings.||Yes. Older balances will create larger payments||N/A||N/A|
|Timeline up to Acceptance. How long will it take the IRS to accept, process and review my initial proposal for resolution?||Up to 1 month||1 to 3 months||1 to 3 months||1 to 3 months||Up to 3 months||Up to 3 months||Up to 3 months|
|Timeline to Completion of Plan. Once my initial proposal is processed and reviewed, how long will it take to complete the process?||1 to 3 months||10 to 16 months||Up to 6 months||Up to 6 months||Up to 9 months||Up to 12 months||Up to 12 months|
|Lien Filings. Will tax liens be filed against me?||Liens can be filed if balances exceed 25K||Liens will be removed once the OIC is accepted||Liens Filed||Liens Filed||Liens Filed||N/A||N/A|
|Credit Rating. Will this resolution impact my credit rating?||If total balances exceed 25K, liens can be filed, which impact your credit rating.||Your credit rating can improve once this program is accepted and tax liens are removed.||Liens remain on the account until the balances expire. This could impact credit rating||Liens remain on the account until the balances expire. This could impact credit rating||Liens remain on the account until the balances expire. This could impact credit rating||No||No|
|Risk of Default. Once this resolution is accepted, is there risk for default?||High. Once accepted, this program can default if a future tax return is filed late or new balances are generated from filing that are not paid in full.||High. Once an OIC is accepted, a taxpayer must file all future tax returns on time and cannot generate future balances for the next five years.||Low. However, the IRS reserves the right to re-evaluate personal finances in the future if circumstances change.||Low. However, the IRS reserves the right to re-evaluate personal finances in the future if circumstances change.||High. Once accepted, this program can default if a future tax return is filed late or new balances are generated from filing that are not paid in full.||N/A||N/A|
|Future Refunds. Once this program is accepted, can the IRS take future refunds?||Yes||No||Yes||Yes||Yes||N/A||N/A|