The four major tax problem resolution collection case alternatives include:
- Offers in Compromise
- Installment Agreements
- Currently Not Collectible Status
- Penalty Abatement
An offer in compromise is exactly what it sounds like. In a “compromise,” everybody goes away a little bruised. An OIC is a legal and binding contract between you and the IRS that settles your debt for less than the full amount owed. The IRS will not accept an offer in compromise is it believes your tax liability can be paid in full as a lump sum or through an installment payment plan arrangement. The IRS looks at your income and assets to determine your reasonable collection potential. Full financial disclosure is required as well as proof that you can’t pay back what’s owed. An OIC settles the debt for good. For example, if you hit the lottery the day after the OIC is accepted as settled, the IRS can’t come back and attach any newfound money.
Only 35% of OIC’s are accepted. Why? Because 65% of the practitioners don’t know what they’re doing!
Our data tells us that just over two-thirds of our clients won’t qualify for an offer in compromise. We’ll let you know if you qualify BEFORE you spend your time and treasure.
Instead, you can use an installment agreement to pay the IRS in full over time, giving you financial room to breathe. We negotiate a payment amount that’s reasonable for the IRS AND you. If you’re currently paying on an installment agreement that’s more than you can afford, it’s time to re-negotiate!
In many cases, the IRS will accept partial payment of your past-due taxes over time. This is known as a “partial-pay installment agreement.” Often, this option is better than an OIC because the IRS is not as intrusive in installment agreements. You can even settle with the IRS for a lot less than in an OIC if the 10-year collection statute expiration date is less than 5 years out.
You can also have the IRS classify your account as Currently Not Collectible, known as “CNC”. This is where the IRS deems the account uncollectable. Although penalties and interest continue to accrue, the IRS does not require you to make monthly payments.
What you’ve probably overlooked is penalties. If your taxes are past due, penalties are likely a substantial part of what you owe. The IRS has 148 different ways to assess penalties against you, and there are a number of ways to get penalties abated and removed. You should consider this, even if you’re currently paying on an existing installment agreement.