10 Ways IRS Will Let You Pay Less Than You Owe in Taxes
by Richard Fonfrias,
J.D. Chicago’s Financial Rescue &
Fonfrias Law Group, LLC
Owing money to IRS scares many people. IRS depends on this because that fear motivates people to pay their taxes.
And that fear is warranted because IRS can do many things to get the money you owe them in taxes. To name a few, IRS can seize your assets, garnish your wages and place a lien against your property.
Even so, IRS will usually work with you to settle your tax bill as long as you contact IRS and discuss your circumstances. Many people don’t know that IRS can be very patient. IRS wants to get paid, but it realizes that your situation might have to improve before you can erase your debt.
Here are ten ways you can settle with the IRS for less than the amount you owe.
1. Monthly Installment Agreement
If you have constant income and the ability to pay, IRS will allow you to enter into a monthly payment plan. Often, these agreements can be set up over the telephone by simply talking with a computer voice and responding to questions by pushing numbers on your phone’s keypad. This is efficient for IRS and very simply for the taxpayer.
Fraudulent Investment Scheme:
If you believe you are the victim of a Ponzi Scheme, where you have lost a good sum of money, you could be eligible to recoup 30% to 40% of your losses under a provision in the U.S. Tax Code. The law allows you to reduce taxes you paid previously by giving you a refund along with interest.
2. Part-Payment Installment Agreement
IRS allows you to enter into a payment arrangement and pay off your taxes at a lower amount than what you owe. Also, it can allow you to pay off your back taxes in payments, rather than in one lump sum. You can hire a skilled tax professional to negotiate a low monthly payment to fit your situation.
3. Offer in Compromise
IRS allows you to make a one-time lump sum payment – or enter into a short-term payment plan – to pay your taxes for less than you owe. This program allows you to pay one small amount to settle your entire tax debt. Many taxpayers save thousands of dollars in this program that they would otherwise pay in taxes, penalties and interest.
4. “Currently Not Collectible”
In this instance, IRS agrees not to pursue collection efforts on your tax bill for a specific period of time. This is done when IRS receives proof that the taxpayer cannot pay his tax bill now, but will be able to pay it in the future. This label is particularly helpful because it gives you time to file an appeal to stop other IRS actions, such as a lien, seizure, or denial of an installment agreement.
5. Credit Card Debt Settlement
Lower Your Debt With Credit Card Debt Settlement:
There are two methods of credit card debt consolidation
credit card debt consolidation: through a credit card debt settlement company or on your own. Credit card debt settlement companies should be avoided. They collect your payments for months before making a settlement offer – if they make an offer at all. Meanwhile, you continue receiving collection calls and negative payment marks on your credit report. You’ll get better and faster results settling debts on your own. Final credit card debt settlement agreements should be in writing. Either draft an agreement of your own or have your credit card company send you an agreement. Make sure you and someone from your credit card company have both signed the agreement before you send payment.
Some tax debts may be discharged in Chapter 7 or Chapter 13 bankruptcy. Under Chapter 7, your income tax debt can be completely erased. Under Chapter 13, you make payments under the plan approved by the bankruptcy trustee. At the end of your payment plan, the amount of taxes not yet paid is discharged.
7. Wage Garnishments Released
IRS has the power to levy your wages, salary or government payments until (1) IRS releases the levy, (2) your taxes have been paid in full, or (3) the time allowed to collect the tax has expired. If you don’t have enough money to live on, you or your representative can negotiate with IRS to release or modify the terms of your wage garnishment.
8. Bank Account Levy Stopped
The IRS, through a “bank levy”, can take cash from your checking and savings accounts to collect unpaid taxes. When this happens, the bank must take whatever money is in your account, not exceeding the levy, and send it to IRS. In an effort to reduce your tax debt, you or your representative can negotiate with the IRS to release the levy on your accounts.
9. Innocent Spouse Relief
IRS has guidelines that allow an innocent spouse, whose tax problems are really those of the person’s spouse or ex-spouse, to be free from liability for back taxes. If your situation meets IRS’s criteria, then you may not be responsible to pay your spouse’s or ex-spouse’s tax debt.
10. Statute of Limitations Expired
Federal law gives IRS 10 years from the date your taxes are assessed to collect money from you. This includes all taxes, penalties and interest. You can work with a skilled attorney or CPA to come up with a plan that takes advantage of the 10-year expiration date, after which IRS can not collect taxes, penalties or interest from you.