Tax debt can be stressful and overwhelming with no end in sight. There are many options to consider, some better than others given your particular set of circumstances. Sometimes you need professional help to see the best course and sometimes you have self-help options to explore yourself. Whatever the case may be, here are a list of possible considerations throughout your IRS journey.
- A 10-year statute of limitations is the period of time from which the IRS can collect from you. But remember, the statute of limitations can be extended by certain actions: filing an Offer in Compromise, filing Bankruptcy, during the pendency of a timely filed Collection Due Process IRS Appeals hearing, et al.
- The IRS will retain your future refunds and apply against your past-due tax debt, including keeping refundable credits, such as the Earned Income Tax Credit or the Additional Child Tax Credit.
- The IRS may file a Notice of Federal Tax Lien (NFTL), especially if you owe more than $10,000. Liens may affect your ability to borrow money and prohibit your ability to transfer real estate without first paying the tax debt or successfully obtaining a withdraw or satisfaction of the federal tax lien.
- IRS may levy your wages, bank accounts, investment accounts and Social Security (SS is limited to 15%). Under exceptional circumstances, the IRS may take your personal property (cars, boats, et al), real estate and levy on retirement accounts.
- In coordination with the State Department, the IRS may take action to have the State Department temporarily revoke your U.S. passport.
- You may submit an installment agreement request and if approved, pay your tax debt, penalties and interest over a period of time – like the IRS financing your tax debt. If your installment agreement is denied, you may appeal that denial to the Office of IRS Appeals.
- The IRS may place your collections case on hold if it determines you are Currently Not Collectible. Normally, special circumstances must exist – for example, you cannot meet your basic living expenses – to be placed in Currently Not Collectible status.
- An offer in compromise (OIC) is an IRS settlement with a taxpayer – where the taxpayer pays less than he or she owes, either in a cash settlement (lower amount) or paid over time (higher settlement). In reaching a settlement, the IRS will evaluate your Reasonable Collection Potential (RCP) by analyzing several financial factors. If an OIC is denied, the taxpayer may appeal that denial to the Office of IRS Appeals.
- You have a Right to Representation by a licensed attorney, a CPA or an Enrolled Agent.
- Know the TAXPAYER BILL OF RIGHTS.
Every taxpayer has these fundamental rights in their dealings with the IRS:
- The Right to Be Informed
- The Right to Quality Service
- The Right to Pay No More than the Correct Amount of Tax
- The Right to Challenge the IRS’s Position and Be Heard
- The Right to Appeal an IRS Decision in an Independent Forum
- The Right to Finality
- The Right to Privacy
- The Right to Confidentiality
- The Right to Retain Representation
- The Right to a Fair and Just Tax System