Blog : Tax Debt

When you owe money to the Internal Revenue Service (IRS), one favorable option for resolving the tax debt is to set up an installment agreement, which allows you to pay the debt through affordable monthly payments over time. The IRS offers streamlined installment agreements with minimal financial disclosures for certain taxpayers who meet specific criteria. How do you know if you qualify for one of these more straightforward payment plans?

Who Qualifies for Streamlined Agreements?

The IRS has outlined clear guidelines allowing streamlined processing and acceptance of installment agreements for taxpayers who meet the following criteria:

Individuals:

• Your total tax debt is $50,000 or less, including all penalties and interest
• Your proposed monthly payment will pay off the debt within 6 years
• You agree to comply with federal tax filing and payment rules going forward
• You can provide proof of current income with paystubs/earnings statements

Businesses:

• Your total tax debt is $25,000 or less, including penalties/interest
• Your business has been operating for at least 2 years
• Your proposed monthly payment will pay off the debt within 2 years
• You agree to stay current on all tax deposit and filing requirements

For individual and business taxpayers meeting these criteria, the IRS will streamline the approval of a payment plan without requiring extensive financial documentation or wage/expense analysis.

Who Does Not Qualify?

While the streamlined installment agreement option is appealing, many taxpayers unfortunately don’t meet the qualification standards. Factors that would disqualify you include:

• Total tax debt exceeding $50,000 (individuals) or $25,000 (businesses)
• Inability to pay the debt in full within the 6-year (individual) or 2-year (business) window
• Not being current on all filing/payment responsibilities
• Prior histories of defaulted installment agreements
• Bankruptcy filings that impact eligibility

The IRS may require additional financial disclosures and substantiation beyond streamlined processing if you are a higher-income wage earner or have significant asset equity.

The Bottom Line

For individual taxpayers owing $50,000 or less or businesses with debts under $25,000, exploring eligibility for a streamlined IRS installment agreement could simplify establishing an affordable monthly payment plan.

Reviewing your full tax transcript and circumstances with a qualified professional can help determine if you meet the criteria for streamlined processing. While these types of agreements may be more limited, they provide relief for taxpayers resolving more modest IRS debts.

Schedule a call with me today to see if a streamlined installment agreement is right for you.

When you find yourself on the receiving end of IRS collection enforcement for unpaid tax debt, the situation can feel simultaneously urgent and overwhelming. The agency’s aggressive tactics, like wage garnishments, bank account levies, and tax refund offsets, put immense financial pressure on taxpayers to promptly pay what they owe. However, not everyone can immediately pay off their tax liability fully. Setting up a short-term installment agreement with the IRS can provide crucial breathing room and buy you valuable time.

Pause on Collection Enforcements

Perhaps the biggest benefit of a short-term payment plan is that it requires the IRS to temporarily halt any active collection efforts against you for the duration of the installment agreement. As long as you uphold your end of the plan by making the agreed-to monthly payments on time, the IRS cannot pursue garnishments, levies, or seize assets/property during this period. This enforcement pause provides immense relief from the constant threat of collections activity.

Opportunity to Improve Your Financial Situation

By entering into a short-term agreement for 120 days or less, you gain a window of several months to work on improving your financial position. This allows time to potentially pay down other debts, increase income sources, qualify for a consolidation loan, or liquidate assets to accumulate funds to resolve your total IRS balance. The short duration keeps the pressure on to rectify your tax situation but provides that necessary interim breathing room.

Bypass Extensive Financial Disclosures

To obtain a short-term payment plan, the IRS does not require the same level of extensive financial documentation and calculations that longer-term installment agreements demand. This allows you to bypass that administrative burden in the short run. The only requirement is that your total tax debt cannot exceed $100,000, including penalties and interest.

Option for Extensions or Alterations

Should you make your short-term monthly payments but still require more time at the end of the installment period, you can request an extension for another period or alter the plan entirely. The IRS is typically more amenable to such changes for taxpayers who uphold their end of the initial short-term agreement. This flexibility provides additional time to resolve your tax debt fully.

While short-term installment agreements with the IRS don’t eliminate your existing tax liability, they can buy you the necessary time to stabilize your financial footing and avoid disruptive collection enforcement. For taxpayers needing interim relief from the IRS’s aggressive collection tactics, a short-term payment plan is certainly worth exploring and taking advantage of the extra time it allows.

Schedule a call with me today to see if a short-term installment agreement is right for you.

If you find yourself owing money to the Internal Revenue Service (IRS) that you cannot pay in full, setting up an installment agreement allows you to pay off your tax debt through affordable monthly payments. The IRS offers several installment agreements depending on your financial circumstances and the total amount owed. Let’s look at the various options and how to choose the right installment plan for your needs.

Guaranteed Installment Agreements

The guaranteed installment agreement is an ideal option for many individuals with $10,000 or less in combined tax, penalties, and interest. As the name implies, the IRS must accept your proposed payment plan if it meets the agency’s streamlined criteria based on your income and tax debt balance. That removes much of the uncertainty and negotiation from the process.

Partial Pay Installment Agreements

In cases where the IRS deems you cannot fully pay off your tax debt before the 10-year collections statute expiration, they may agree to a partial payment installment plan. Under these terms, you pay as much as you can reasonably afford each month, satisfying the tax liability to the extent possible before the statutory period elapses. The remaining unpaid balance is forgiven at the end of the collection window.

Routine Installment Agreements

A routine installment agreement may be your only option for more significant outstanding balances above $50,000 or scenarios where you do not meet the guaranteed or partial pay plan criteria. In these plans, the IRS has broad discretion to set your payment amount, duration of payments, and other terms based on their analysis of your financial records. Negotiating reasonable terms can sometimes be difficult on your own.

Direct Debit or Payroll Deduction Plans

Regardless of the specific installment agreement type, taxpayers can have their monthly payments automatically deducted directly from a bank account or payroll disbursement. Setting up a direct debit plan can give you payment due date flexibility and prevent potential missed installments that could default the agreement.

Determining the Right Plan

In deciding which installment agreement option is most suitable, you’ll want to carefully review your full financial situation – income, expenses, equity in assets, and the total amount owed to the IRS, including projected accruals. Those meeting guaranteed or partial pay plan criteria should leverage those opportunities. For more significant balances, be prepared to negotiate payment amounts and terms you can realistically manage long-term.

Weighing factors like age, health, the likelihood of fluctuating future income and expenses, and the ability to obtain loans can also shape which installment agreement structure is optimal for your circumstances. The IRS generally aims to settle your debt as quickly as possible based on what you can pay each month.

Working with a qualified tax professional can ensure you make the most appropriate installment agreement choice aligned with your finances and abilities. With an affordable plan, you can methodically resolve your IRS debt over time while avoiding aggressive collections actions.

Schedule a call with me today to find out the best installment agreement option for you.

For most taxpayers, the mere thought of dealing with the Internal Revenue Service’s Collections division makes you want to crawl under a rock. The Collections branch represents the IRS’s enforcement arm – the team tasked with pursuing and retrieving unpaid tax debts through garnishments, levies, and property seizures. While indeed an unwelcome situation for any taxpayer, there are several common reasons why individuals and businesses, unfortunately, face Collections personnel.

Unfiled Tax Returns

One of the primary catalysts for the Collections division getting involved is failing to file required federal tax returns. Even if you cannot pay your total tax liability, filing on time each year is crucial. The IRS will eventually pursue collections enforcement for non-filers based on substitute returns and their income information.

Tax Debt Repayment Defaults

For those who do file but cannot pay everything they owe, Collections may initiate contact if established payment plans or installment agreements default. Missed payments or failing to adhere to agreement terms prompt the IRS to transfer the case to Collections to compel repayment through forcible means if necessary.

Audit Adjustments and Assessments

Tax audits that uncover underreported income or underpaid balances also frequently lead to Collections interventions. Once the IRS officially assesses additional taxes, penalties, and interest owed following an audit, outstanding amounts are routed to Collections to actively pursue payment.

Payroll Tax Deficiencies

The IRS takes businesses’ willful failure to pay payroll taxes properly extremely seriously and virtually guarantees Collection enforcement. Unpaid employment taxes are a major trigger for aggressive collection actions like levies and property seizures.

Lack of Response

The initial contact with Collections often stems from taxpayers simply not communicating with the IRS. Ignoring IRS notices or failing to respond to warnings about past-due tax debt adequately forces the agency to escalate matters to Collections personnel to compel resolution.

While facing the Collections division of the IRS is understandably concerning, being proactive about filing, pursuing payment plan options, and resolving outstanding assessments can help taxpayers avoid this fate. Communication and cooperation are the best defenses against the IRS’s aggressive collection tactics. However, once your tax issue reaches Collections personnel, their mission is enforcing payment through any means necessary – a burdensome prospect for any taxpayer.

If you are facing an IRS collection issue, schedule a call with me today to resolve your tax debt.

When you owe money to the Internal Revenue Service (IRS) that you cannot afford to pay, one potential form of relief is having your account placed into uncollectible status. This status temporarily suspends collection activity from the IRS due to financial hardship. Here’s a closer look at what uncollectible status means and how to potentially qualify.

What is Uncollectible Status?

Uncollectible status effectively hits the pause button on IRS collections against you for an outstanding tax debt. If the IRS determines you cannot afford any payments due to your financial situation, it will code your account as temporarily uncollectible. This means:

• Active collection efforts stop (garnishments, levies, etc.)
• You don’t have to make any payments
• Penalties are suspended
• The statute of limitations continues running

However, interest will still accrue on the unpaid balance. And once your financial situation improves or a set period of time passes, the IRS can resume collections on the still-outstanding debt.

Qualifying for Uncollectible Status

To be considered for uncollectible status, you must demonstrate to the IRS that paying your tax debt would create a financial hardship by not allowing you to pay for necessary living expenses. The IRS uses allowable expense standards to evaluate if making any payment would be an undue burden.

You must complete Form 433-A (individuals) or 433-B (businesses) to disclose your monthly income, assets, and allowable living expenses like housing, utilities, transportation, taxes, child care, and more. If your income does not exceed your allowable expenses by a certain threshold, collections may be suspended.

The IRS will also examine your asset equity, non-wage household income sources, and ability to obtain a loan to pay the tax debt. Any “allowable” assets beyond expense coverage may be expected to offset your unpaid balance.

If approved for uncollectible status, the IRS will re-evaluate your situation every 1-2 years to reassess if collections can resume based on your finances.

Providing Relief from Collections

While not a permanent solution, achieving uncollectible status allows taxpayers with no means to pay their tax debt the chance to avoid aggressive collection actions during periods of financial hardship. It provides crucial breathing room to stabilize your situation without the constant threat of levies, garnishments, or asset seizures.

If you cannot pay your tax debt, explore your eligibility and properly submit for uncollectible status consideration with the IRS. The relief can help get you back on stable financial footing.

Get help resolving your tax debt – schedule a call with me today.

If you find yourself owing money to the IRS, it’s important to know that you have options for resolving that tax debt. Three potential paths include having your debt placed in uncollectible status, setting up an installment agreement, or negotiating an offer in compromise. Here’s a breakdown of what each option includes and the key differences:

Uncollectible Status

The IRS can categorize certain tax debts as temporarily uncollectible based on a taxpayer’s financial situation and inability to pay. To qualify for uncollectible status, you must demonstrate that any payment towards the debt would create a hardship by not allowing you to meet necessary living expenses.

If approved, uncollectible status places your debt on hold. The IRS will temporarily cease active collection efforts, and penalties/interest are suspended. However, statutory interest continues to accrue, and the debt remains due in full.

Uncollectible status lasts for a defined period based on your financial records. Once that period expires or if your financial situation improves sufficiently, collection activity resumes unless the statute of limitations expires in the interim. This option doesn’t forgive the debt but provides temporary relief.

Installment Agreement

As the name implies, an IRS installment agreement is a payment plan that allows you to pay off your full tax liability through affordable monthly installments over time. To get on a plan, you must prove your current income and confirm your ability to make the scheduled payments.

Installment agreements include a setup fee and continue accruing penalties and interest until your balance is paid in full. However, the IRS won’t pursue further collection action so long as you honor the installment terms.

Negotiating the appropriate payment amount and duration based on your resources is flexible. Installment plans can provide taxpayers with an extended runway to fully pay what is owed.

Offer in Compromise

The Offer in Compromise option is an agreement with the IRS to pay less than the total amount of tax debt you owe. It is only approved in situations where the IRS doubts its ability to collect the entire outstanding balance.

To qualify, you must disclose all relevant financial information and demonstrate an inability to pay your debt in full based on income, assets, and expenses. The offer amount is based on your available resources to pay toward the tax liability. Certain fees also apply.

If accepted, an Offer in Compromise provides a path for settling your IRS debt at a reduced amount and avoiding further collections. It’s ideal when it does not appear you’ll ever be able to get up from under the debt, but it requires meeting strict criteria to participate.

These three options provide unique opportunities for resolving unpaid tax debts with the IRS. Depending on your circumstances, one path may prove more viable and advantageous than the others in resolving your financial situation. It’s essential to work with someone who understands your entire financial situation and can help you identify the option that will work best for you.

If you need help resolving your tax debt, schedule a call with me today.

When dealing with tax matters, few documents are as critical as tax transcripts from the Internal Revenue Service (IRS). Tax transcripts provide an official summary of your tax return information for a given year or years. While they may seem like a mundane government record, reviewing your tax transcripts is important for several reasons.

Verifying Information for Loans and Other Finance Needs

One of the primary reasons tax transcripts are so important is because they allow you to verify your income and other tax details when applying for loans, mortgages, student aid, or other types of financing. Most lenders require official tax transcripts rather than simply your personal copy of the return. The transcript confirms the information you provided on your taxes matches what the IRS has on file.

Catching Errors and Discrepancies

Reviewing your tax transcripts each year is crucial for catching any errors, discrepancies, or missing information compared to what you actually filed. Everything from income sources and deductions to taxes owed could potentially have mistakes that don’t match your original return. Having the transcript allows you to identify and resolve those issues.

Substantiating Information for Legal/Tax Matters

In many legal situations and tax-related matters, providing official IRS transcripts substantiates your income, credits, deductions, and overall tax information. This documentation may be required for tax audits, amended returns, bankruptcy filings, divorce/family law cases, filing tax returns for previous years, and more.

Applying for Income-Based Government Assistance

Need-based government assistance programs like subsidized housing, Medicaid, or Social Security often require tax transcript documentation to verify your household’s income and other financial details. Access to these transcripts is vital when applying for and maintaining program eligibility.

Tracking Tax Account Activity

Beyond each year’s tax return information, IRS transcripts also provide a records trail of any changes, transactions, or activity impacting your overall tax account. This includes updates on payments made, penalties assessed, adjustments submitted, and more. Maintaining these records helps taxpayers stay organized and informed.

Understanding Tax Debt and Options for Resolving It

An IRS tax transcript can be invaluable for understanding your overall tax liability and navigating options to resolve any outstanding debts. The transcript provides a comprehensive record of your income, deductions, credits, and the total taxes owed for a given year. By reviewing this official documentation, you can verify the accuracy of the IRS’s assessment and identify any potential discrepancies. Additionally, the transcript outlines critical dates related to your tax debt, such as when penalties and interest began accruing. This timeline is critical for determining your position in relation to the 10-year statute of limitations for collecting IRS debts. With a full grasp of your tax liability from the transcript, you can explore appropriate resolution options like installment agreements, offers in compromise, or other settlement methods if you cannot pay the total amount owed.

While simply text-based transcripts, these documents from the IRS contain powerfully important official information. Obtaining and carefully examining your IRS tax transcripts lays the groundwork for making informed decisions about managing and resolving your tax situation.

Schedule your tax transcript assessment today!

If you owe back taxes to the Internal Revenue Service (IRS), one of the most critical things to be aware of is the 10-year collection statutory expiration date. This regulation places a strict time limit on how long the IRS can attempt to collect the tax debt from you.

Here’s why the 10-year collection statute is vitally important when dealing with an outstanding IRS tax liability:

Defines the Collection Window

The 10-year statute of limitations sets a finite timeline for the IRS to collect the taxes you owe. It begins on the date the IRS officially assesses the debt, either when you e-filed your return or when you received a demand for payment if you filed your return by mail. From that point, the agency has ten years to pursue collection through means like wage garnishments, tax refund offsets, bank or asset seizures, and tax liens. Once the ten years expire, the IRS is essentially barred from collecting that specific debt.

Provides an Endpoint for Financial Obligations

Knowing there is a defined endpoint for your repayment responsibilities provides clarity in financial planning. Open-ended tax bills can feel like a grey cloud indefinitely hanging over your finances. However, with the 10-year statute, you can map out a window for full repayment or develop strategies to have the debt forgiven if you cannot reasonably pay it off by the expiration date.

Prevents Excessive Dragout of Debt Repayment

In addition to defining a finish line for your financial obligations, the statute prevents the IRS from excessively dragging out the collection process on old debts. It protects taxpayers by ensuring the agency diligently pursues what you owe in that 10-year frame rather than casually making collection efforts over an indefinite duration.

Incentivizes IRS to Maintain Accurate Records

The statutory timeline incentivizes the IRS to maintain organized, accurate records around when debts began and accrued to ensure it does not inadvertently let viable collectible accounts expire before receiving payment. While extensions can be granted under certain circumstances, the agency aims to avoid having outstanding debts ruled uncollectible by missing the 10-year window.

Provides Possible Path for Debt Elimination

For those unable to reasonably repay what they owe the IRS within the 10-year period, the statute’s expiration provides a path for resolving the debt. While it is not advisable to simply try to run out the clock if you can reasonably pay, if your financial situation is such that the tax bill will realistically never be paid off, the expiration provides a mechanism for eliminating the debt after the date passes.

In summary, the 10-year collection statute places a critical time limit around how long the IRS has to collect outstanding tax debts from individuals and businesses. Understanding this regulation is critical, as it impacts financial planning, defines repayment obligations, protects against endless collection efforts, and can potentially provide a path for debt elimination in extreme circumstances.

If you need help resolving your tax debt, schedule a call with me today.

If you have outstanding federal tax debt, the IRS wants to see that you fully comply with your current tax filings and payment obligations. Demonstrating a renewed commitment to tax compliance is essential for resolving old debts favorably.

The IRS’s primary concern in collections cases is ensuring you won’t fall behind again on current and future taxes while paying off an old balance. After all, letting new liabilities accrue defeats the purpose of finally paying off past debts. Tax compliance reassures the IRS that you are getting and staying current.

Being tax compliant means:

• Filing all required returns on time
• Paying any current taxes owed in full when filing
• Making all required estimated tax payments if you have income not subject to withholding

When you meet these obligations for a period of time, the IRS is much more amenable to allowing you to pay old debts through an installment plan, accepting an Offer in Compromise to settle for less than owed, or even providing temporary relief from collections until your financial situation improves.

On the other hand, a lack of tax compliance while trying to resolve an existing debt is a red flag for the IRS. If you aren’t paying current taxes, they have little incentive to go easy on the past amounts you owe. The collections process tends to stall or become much more problematic if new delinquencies keep accruing.

Maintaining tax compliance also strengthens your negotiating position with the IRS. You can leverage your pattern of staying current to request lower user fees, penalty abatements, longer installment timelines, or a reduced offer amount. The IRS judges your future compliance risk, in part, based on how responsibly you meet your ongoing tax obligations.

At the end of the day, the IRS wants to see you value compliance and remain diligent about fulfilling your annual tax responsibilities going forward. Doing so builds trust and makes the IRS more willing to work with you to resolve old debts through affordable payments or settlement options. Tax compliance is the foundation for controlling your overall tax situation.

If you need help resolving your tax debt, schedule a call with me today.

Getting an IRS Final Notice of Intent to Levy (Notice LT11 or LT39) in the mail can be scary and stressful. This is the agency’s last warning before taking your money or property to satisfy an unpaid tax debt. However, you still have some options at this stage to prevent enforced collection action. Here’s what to do:

Don’t Panic

The Final Notice doesn’t mean all hope is lost. The IRS must follow set procedures before levying bank accounts or garnishing wages. You have a short window to take action and avoid enforced collection.

Call the IRS Immediately

As soon as you receive the Final Notice, call the number listed. Have your tax information ready, including notice numbers, tax periods, and the amount owed. Simply calling and getting a case opened can buy you some extra time while you explore resolution options.

Request a Brief Extension

On the call, you can request a brief pause on collections, generally 30-60 days. Explain that you need time to explore options for paying what you owe. A momentary halt on enforced collections gives you breathing room to make a plan.

Consider an Installment Agreement

One way to prevent levies or garnishments is to set up a monthly payment plan with the IRS. If you can’t pay the total amount you owe right away, you may qualify for an installment agreement. Establishing a monthly payment based on your income and assets prevents enforced collections as long as you make the minimum payments on time.

Request Relief as a Last Resort

If you legitimately cannot pay the tax debt due to financial hardship, you can request temporarily delaying collection or an Offer in Compromise to settle for less than owed. However, the IRS strictly evaluates qualifications and requires substantiating documentation.

The key message is that receiving the Final Notice does not mean all is lost. As long as you take prompt action and demonstrate a willingness to resolve the debt through available payment options, you may be able to avoid the IRS garnishing your wages or seizing your property or bank funds. The worst mistake is doing nothing after getting the Final Notice.

If you need help resolving your tax debt, schedule a call with me today to learn about your options.