The Internal Revenue Service (IRS) is tough on those who do not pay their taxes. If you owe money to the federal government, you can expect to receive notification of wage garnishments, tax levies, property liens, and inflated tax liability the longer you do not pay.
If you are in a difficult financial situation, you may be unable to pay back the taxes you owe. This can cause extreme stress for most people, as the IRS rarely makes taxpayers aware of their options to reduce their debt. However, there are options to get your IRS debt reduced, such as a payment plan, an offer in compromise (OIC), or currently not collectible status.
Getting your tax bill reduced requires taking matters into your own hands and hiring an experienced tax attorney. Tax professionals can advise you on whether you are entitled to tax relief, file relief applications for you, and negotiate with the IRS to ensure that you are treated fairly.
Ronald Arthur Stearns Sr. PLLC
Ronald Arthur Stearns Sr. PLLC has over 26 years of experience helping Texas citizens deal with the IRS. He has witnessed the tactics that they use to recover tax debt from ordinary citizens, and he dedicates his career to fighting against these unfair tactics. Our law firm cares about ordinary taxpayers and wants to do everything we can to protect your best interests.
We can help you try to settle your IRS debt for less than you owe and try to agree on a fair payment plan that will not put you into financial hardship. Ronald Arthur Stearns Sr. PLLC will negotiate with the IRS on your behalf, discuss your best options with you, and ensure that you have enough earnings while you pay back taxes.
Dealing with the IRS is challenging, and they know how to scare ordinary citizens into paying tax bills with added interest. Therefore, hiring a tax attorney with significant experience handling the IRS will benefit your case significantly.
Contact our law firm today to arrange an initial consultation at 210-853-2135.
Tax Debt Explained
Tax debts happen when the IRS decides you owe them money. All citizens are required to pay taxes each year, and the onus is on them to file tax returns. When you do not file your returns, or make a mistake in the process, the IRS can decide that you owe them taxes.
You could owe them because of a failure to file tax returns, a change in the tax rate, a mistake on your tax returns, or applying for tax credits or tax deductions you are not qualified for. Whatever the reason is, you can be sure that the IRS will come after you to pay back taxes.
Taxpayers will receive notification in the mail about taxes owed to the federal government, and there will be instructions on how to pay this back. If you do not contact the IRS regarding the debt you owe, you will be subject to tax penalties, including interest, federal tax liens, and wage garnishments.
Penalties For Unpaid Taxes
Tax payments are due to be paid by April 15 of each tax year. If you do not file a tax return or fail to pay your tax bill, fines and penalties will begin incurring from this date. The penalties vary depending on whether you filed your taxes and increase the longer you do not file or pay taxes.
- Failure to pay – The penalties for failing to pay taxes are 0.5% of the tax debt for each month or part of the month you failed to pay. The total maximum fine for failure to pay is 25% of your tax bill.
- Failure to file – The penalties for failing to file taxes are 5% of your tax debt for each month or part of the month that you failed to pay. The total maximum fine for failure to file is also 25% of your tax bill.
The penalties are significantly steeper for those who do not file their taxes. Filing your taxes on time is important, and failure to do so could lead to a substantial fine.
If you owe $10,000 in taxes and receive a maximum penalty of 25%, you could end up with a tax bill of $12,500. Taxpayers who cannot file their Form 1040 on time can request a six-month extension to avoid harsh penalties.
Taxpayers may also be subject to a 1% increase in penalties for failing to respond to IRS notification of unpaid tax, such as a Notice of Intent to Levy. You must respond to the IRS within 10 days of receiving notification in the mail.
Statute of Limitations on Tax Debt
Taxpayers should know there is a statute of limitations on all debt owed to the federal government, known as the Collection Statute Expiration Date (CSED). Once this date has passed, you no longer have a duty to pay back tax debt.
However, there are some ways that this time limit can be extended, such as entering an IRS payment plan, an offer in compromise, or a period of non-collectibility. The IRS is known for contacting taxpayers outside of the limitation period, requesting that they pay back taxes, and setting up a payment plan, which pauses the clock on the tax debt they owe.
If you believe that the statute of limitations has passed on the initial debt that you owe to the IRS, contact a tax professional. They can assess whether you are required to pay back tax debt and can help get your debt partially absolved if you are coming close to the end date.
Does The IRS Forgive Debt?
The Internal Revenue Service (IRS) is the organization responsible for collecting taxes from US citizens. If IRS agents determine, through a tax assessment or otherwise, that you have not paid enough tax and you have an outstanding balance, you will owe tax debt. In rare circumstances, however, the IRS may forgive your tax debt.
The onus is on taxpayers to assess whether they have tax debt relief options and whether there is an option for them to get their debt forgiven. The IRS is tough on taxpayers and may use harsh methods to recover tax debt, including wage garnishment and property liens. Hiring a tax professional is the best way to ensure that your rights are protected, and they can assess whether you are eligible for tax debt forgiveness.
Tax Debt Relief Options
Most people that owe a tax debt to the IRS must pay it back within a 10-year period. If taxpayers cannot pay this debt in one lump sum upfront, they will receive additional penalties and fines.
Most taxpayers that owe debt do not have sufficient money or capital to pay back their tax debts in a lump-sum payment. This can lead to money being taken from your bank account, a tax levy, or wage garnishment.
The IRS has different methods of recovering debt from you, including wage garnishments, federal liens on your property, and levies. These methods can put you in a desperate financial situation, and many clients are left struggling to pay for day-to-day bills because of their tax debt.
Most times, the IRS does not tell taxpayers about ways they can reduce their tax debt. However, there are several ways for taxpayers to reduce their tax debt and avoid paying the full amount.
To qualify for tax relief, you must meet certain requirements and prove that you are in financial hardship. An experienced tax attorney can advise you on whether you are entitled to tax relief and help apply to get your tax reduced.
In 2011, the IRS introduced a Fresh Start Program, which is available to some citizens that have experienced a significant drop in their income or do not earn enough to pay back their entire tax debt. The Fresh Start Program comprises multiple tax resolution programs that citizens can sign up for, including:
Offer in Compromise
Offer in compromise (OIC) is an agreement between the taxpayer and the IRS to pay back less tax than you originally owed. The aim of this program is to ease the tax burden and allow taxpayers to reduce the tax they owe. To qualify for this program, you must prove that paying back the tax debt would cause you economic hardship.
The requirements for qualifying for this program are stringent. Taxpayers must show that their income annually has decreased substantially, they have unusual expenses because of a family illness or other unforeseen circumstances, they have a limited amount of assets, or there is doubt as to their tax liability.
In this program, you offer a lower payment plan that you can afford and hope that the IRS accepts it. If they determine you otherwise could not pay your tax or that doing so would put you in financial hardship, they may accept your offer in compromise. It is mandatory that you be up to date on all tax returns, have paid your yearly taxes, and filed taxes each year before applying for an offer in compromise.
Getting accepted for an offer in compromise is difficult and the IRS will only consider your application if you are in a serious financial situation. You must have the funds to make an initial lump sum cash payment of 20% and prove that you can pay the rest of the tax bill in monthly installments within 6-24 months.
If you are a low-income applicant, meaning that your adjusted gross income is 250% at or below the federal poverty level, you may get the initial payment reimbursed. You cannot get an offer in compromise if you are in an open bankruptcy proceeding.
Installment Agreements
Installment agreements, or payment plans, allow those who owe a tax debt to pay back their debt in a periodic payment plan over a certain amount of time. An Installation Agreement allows taxpayers owing up to $50,000 in debt to take out a long-term payment plan while having their financial information protected. People can pay back less money each month over a longer period, which can be a more sustainable tax burden for many people.
Unfortunately, an installment agreement does not reduce the debt that you owe, however, it gives you more time to pay it back. Interest and penalties will still be added to the tax you owe under a payment plan, and you may end up paying more. However, it can buy you some time to avoid a tax levy or property lien.
Partial Payment Installment Agreement
A partial payment installment agreement (PPIA) is an agreement with the IRS to pay back tax debt in smaller payments over an extended period. It is required that you first use all of your assets and equity to pay the debt that you owe before applying for a PPIA.
The IRS reserves the ability to monitor and review your finances, and if they determine that your financial situation has improved, they may order you to increase your payments. They may also use other measures to collect the original debt.
It is easier to get accepted for a PPIA than an offer in compromise. However, it is not guaranteed. Getting help from an experienced tax advisor can increase your chances of being accepted for a PPIA as they can help you with submitting documentation and meeting the requirements.
Innocent Spouse Relief
Innocent spouse relief allows certain taxpayers to get their debt completely forgiven. Debt forgiveness means that the person does not have to pay back taxes to the federal government, and is completely relieved of their tax burden. With the innocent spouse program, a spouse that is innocent of the bad tax practices of their ex-spouse can apply for forgiveness.
To qualify under this program, you must prove the following:
- You filed taxes jointly.
- The other person committed the error(s).
- You are innocent.
- You have compelling circumstances.
- You applied for innocent spouse relief within 2 years after debt collectors came after you and your spouse or ex-spouse.
When assessing whether you are entitled to innocent spouse relief, the IRS will look at whether you benefited from the tax evasion or error, how much of a part you played in the act, and fairness. If you did not file a joint tax return but are liable because of Texas’ community property rules, you may apply for equitable relief.
To get your debt forgiven under the innocent spouse relief program, you must apply within 2 years of the IRS pursuing the tax errors and have enough evidence to prove your innocence.
Currently Not Collectible Status
Currently not collectible (CNC) status is granted to those who cannot pay for both their tax debt and essential living expenses. If you qualify for this status, the IRS cannot garnish your wages, introduce tax liens, or other harsh measures to recover the tax that you owe.
This program offers taxpayers immediate relief from paying back taxes until they can increase their income or gain more assets to pay back taxes. However, it does not reduce the tax debt or eliminate the money that you owe to the government. While you are in CNC status, penalties and interest may still apply to the tax you owe.
Does The IRS Forgive Debt?
The Internal Revenue Service (IRS) is the organization responsible for collecting taxes from US citizens. If IRS agents determine, through a tax assessment or otherwise, that you have not paid enough tax and you have an outstanding balance, you will owe tax debt. In rare circumstances, however, the IRS may forgive your tax debt.
The onus is on taxpayers to assess whether they have tax debt relief options and whether there is an option for them to get their debt forgiven. The IRS is tough on taxpayers and may use harsh methods to recover tax debt, includingwage garnishment and property liens. Hiring a tax professional is the best way to ensure that your rights are protected, and they can assess whether you are eligible for tax debt forgiveness.
Does The IRS Forgive Tax Debt After Ten Years?
With all IRS debt, there is a statute of limitations of ten years. This means that if you have not paid back the entire debt that you owe within this time period, your debt will be forgiven and you will not have to pay it back.
The IRS will never let people know about this limitation and it is up to you to assess whether the time has passed. Unfortunately, the ten-year limitation is not as straightforward as it sounds, and there may be factors that cause your limitation to be increased.
We recommend contacting a tax professional to help figure out whether you have been paying your debt for over ten years and whether you are entitled to forgiveness.
Extending The Statute of Limitations
To know whether you have passed the statute of limitations, you need to figure out the collection statute expiration date. Although you may just look at your Notice of Deficiency and calculate 10 years from that date, it is usually not that simple.
There are certain factors that can pause the timer and extend the statute of limitations. Ultimately, whenever the IRS cannot collect unpaid tax debt from you, the timer will be paused.
Filing For Bankruptcy
Filing for bankruptcy prevents the IRS from recovering tax debt from you. When you file for bankruptcy, the process can last from four months up to a year, depending on the situation. The IRS must then wait 6 months after the process is complete before collecting tax debt from you.
This process stops the statute of limitations timer. So, if your bankruptcy process took 6 months, the statute of limitation for debt forgiveness will be extended by one year.
Collection Due Process Hearing Request
If you have received a federal tax lien on your property to recover unpaid tax debt, you reserve the right to submit a hearing request to an IRS officer. Federal tax liens are claims by the government to your property when you have unpaid taxes. You have 30 days to file a hearing requesting that the levy or lien be stopped.
During a Collection Due Process (CDP) hearing, your attorney will explain why you will face hardship with a lien and submit an alternative method to pay taxes you owe, such as an installment agreement. While awaiting a CDP hearing and until a decision is reached, the IRS will pause the clock on your statute of limitations. This extends the collection period before debt forgiveness.
Leaving The Country
If you leave the country for over 6 months, the statute of limitation clock will be stalled temporarily. When you return home, the clock will begin again. So, it is not possible to leave the country while waiting for your tax debts to pass.
What Happens If I Don’t Pay Back Taxes?
Taxpayers are often tempted to ignore notifications from the IRS and try to avoid paying back debt. However, it is vital that you reply to any notification from the IRS about a debt that you have. If you try to ignore your IRS debt or do not take steps to pay it back, through tax relief or a payment plan, you may be subject to a tax lien or levy, which can cause significant financial hardship.
Tax Lien
Liens affect your property, credit rating, and any business assets that you have. A lien over your assets or property means that the IRS reserves the right to take any money you make from selling or dealing with these assets to pay back your debt.
A lien on your assets can seriously affect your ability to earn credit, and you may struggle to get a credit card or apply for a loan. Landlords and employers will also notice any liens that you have, which can affect your rental and employment contracts. The only way to completely clear a lien is by paying back the debt you owe.
Tax Levy
A tax levy is more severe than a lien. With a levy, the government can seize your property or assets to pay back the debt you owe. Depending on the situation, the IRS may place a levy on your property, bank accounts, or, most commonly, wages.
With wage garnishment, the IRS takes money from your paycheck each month to pay back taxes, reducing your monthly income. They may also garnish federal payments, including social security payments and your tax refund. If the levy is on your financial accounts, you may see your retirement account, investments, bank account, and life insurance reduced to pay back debt.
In occasional circumstances, the IRS may also seize your property, including your home residence, to pay taxes you owe. You may remove a levy by demonstrating that it causes you severe economic hardship. An attorney can help you negotiate with the IRS to set up a payment plan, reduce your tax debt, and prevent a levy from being introduced.
Contact a Tax Professional For Help!
Owing tax to the federal government can be overwhelming. Most taxpayers that owe debt do not have the means to pay back a lump sum payment and must negotiate with the IRS to set up a fair plan. However, doing this without legal representation can be problematic, and the IRS makes it difficult for taxpayers to get their debt reduced.
The best way to get your tax debt reduced and set up a payment plan that works for you is by hiring an experienced tax lawyer. A tax lawyer can help you by applying for relief programs on your behalf, ensuring that you have the correct documentation and proof, explaining confusing legal jargon, and advising you on what relief program is best for you.
Most importantly, a tax professional can speak with the IRS on your behalf to ensure that you are treated fairly. They can prevent you from signing up for an unfair monthly installment payment agreement and ensure that you get the best outcome possible for the debt that you owe.
Ronald Arthur Stearns Sr. PLLC – How Can Tax Debt Be Reduced?
Getting your tax debt reduced through tax relief measures can offer immense support to ordinary taxpayers. Applying for tax debt relief can be quite difficult, however, and the IRS is often reluctant to grant relief to taxpayers. If you cannot pay for basic living expenses because of your tax debt or need to get your tax debt reduced for other reasons, seek help from an experienced tax lawyer.
Ronald Arthur Stearns Sr. PLLC has the relevant understanding and skill set necessary to get your tax debt reduced. Dealing with the IRS alone is difficult, and they often use tactics to manipulate citizens into paying back taxes. However, if you qualify for a tax relief program, Ronald Arthur Stearns Sr. PLLC will do everything in his power to ensure you get accepted.
Our law firm cares about protecting your best interests and ensuring you have enough monthly income. We offer aggressive legal representation for each case that comes through our doors and we will do everything to ensure the best income for your case. We can use our experience with tax law to set up a fair payment plan or installment agreement that does not put you in financial difficulty.
Call our law firm today at 210-853-2135 to schedule an initial consultation.