IRS Troubles: 3 Things You Probably Didn't Know You Could Do

Posted on: 6 June 2019


A letter from the IRS can strike fear in the hearts of many Americans. Before you panic about levies, fines, and frozen assets, call a tax professional. You may be surprised at how easy it is to come to a satisfactory resolution with the IRS. In fact, there are probably solutions to your tax problems that you have never even heard of. 

Innocent Spouse Tax Relief

The innocent spouse tax relief program is just what it sounds like — help for a spouse who had no idea what was erroneously reported or omitted from a tax return. The error could be as simple as a math mistake or it could be more serious, like intentionally trying to hide income from the government. The innocent spouse tax relief program is often used in cases of separation or divorce or when one party works as a homemaker or caregiver in the home. The IRS is more than willing to work out a fair arrangement for innocent spouses. Hire a tax expert with experience in this area, and he or she will help you file the correct forms with the IRS to get the process started.  

Installment Payments on IRS Debt

Even with good intentions, time can get away from you, and what was once a small tax debt can balloon out of control with interest and penalties. Rather than hide from the calls and leave the mail unopened, decide to approach the IRS tax debt head-on. Contact a CPA (certified public accountant) or other tax professional to assist you in negotiating a payment plan with the IRS. Usually, the IRS dictates the amount that you can pay, but be prepared with documentation regarding your current income and expenses. Agree to an installment plan that you can afford. Little by little, over the months, the debt will decrease, and you can move forward with your life knowing that it is under control rather than living in fear of what the IRS will do next. 

Offer in Compromise

When the debt is so large that you will never be able to pay it, you might want to consider an offer in compromise. Often called the "Fresh Start" plan with the IRS, this option lets you negotiate a settlement with the IRS. In other words, you can offer to pay them less than what you owe them for in back taxes, penalties, and interest. Your tax professional can help you with the formula that the IRS instructs you to use for calculating a payoff that is acceptable to everyone involved. The amount varies based on the original amount of the tax debt, your income and ability to repay the debt, and the length of time it would take. There are both lump sum options as well as payment plan options. 

Once you do the calculations, you are required to pay a filing fee and send in a payment based on the revised amount with your paperwork. The IRS will respond in one of three ways. They will deny your offer, accept your offer, or change your offer to an amount that they feel is suitable. Regardless of the outcome, they will deposit your check and apply it to your outstanding balance. 

An important factor to keep in mind when dealing with the IRS is that it is a huge organization and, as such, is very slow-moving. Whether you are an innocent spouse or looking to negotiate, the process will take weeks, if not months, to finalize. With the help of a good tax professional, you can deal with the IRS confidently and resolve any issues. 

Contact a company like Inside Out Tax Resolution Services for more information.