The IRS has a statute of limitations on back taxes and tax debt of ten years. But what if you have tax debt and you don’t want to deal with it for a decade? Are there any other options for tax debt relief that work?
Actually, there are several. Here are a few common tax relief options you can explore in this situation.
The first thing you can do is request that your past tax returns be reviewed to ensure that your tax burden is both completely accurate and not reducible. If there were mistakes in those returns, rectifying them might change the tax amount in your favor. Or if you didn’t file a return and the IRS filed it for you, they may not have claimed deductions that you qualified for. This tactic may not turn anything up, but it’s potentially worth a look.
There are also a number of tax debt relief claims or requests that you can file with the IRS depending on your situation. If you owe a large sum of money and can’t pay it all at once, for instance, you can ask for an installment agreement that spreads the taxes owed out over a period of years rather than having it all due immediately. This doesn’t reduce the debt, nor does it remove any interest or penalties, but it does make the debt more manageable.
If you are willing to pay some amount but can’t afford the full amount, you can request an offer in compromise, which allows you to settle your tax debt for a smaller amount than you owe. Offers in compromise aren’t easy to get, as you have to prove that you aren’t bankrupt but also are unable to afford the tax payment, but they aren’t impossible. The IRS will always prefer getting some money over getting no money, so this option could have some merit.
If there are or were extenuating circumstances around your inability to pay back taxes, you can request a penalty abatement to prevent or remove any interest, fines or other penalties the IRS has levied on your tax debt. Circumstances where you might qualify for a penalty abatement include death, serious illness or injury, loss of a job/income or being imprisoned.
If your spouse has significant tax debt because they didn’t report income to the IRS, and you’re on the hook for it because you filed a joint tax return, you can file for an innocent spouse relief action, where you are removed from the equation and that debt no longer applies to you. This can work whether you’re currently married, separated or divorced, as long as you file within two years of the taxes coming due.
Finally, if you just can’t pay and none of these other options are workable or apply to you, you can request “currently not collectible” status. By proving you have no income or other resources with which to pay your tax debt, you can have collections procedures for your tax debt put on hold until you’re back on your feet and able to start paying again.
Each of these strategies can work for people in different circumstances. It’s likely that at least one will work for you. Talk to your tax services provider to learn more about which one that might be.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.