In today’s post, we’ll conclude our ongoing discussion of how financially troubled individuals who owe a considerable tax debt to the Internal Revenue Service should take some solace in the fact that they have viable payment options at their disposal.
To recap, we’ve discussed how people could potentially tackle their tax debt via installment agreements, which are essentially arrangements whereby a person promises to pay the IRS a set amount of money every month for as long as is necessary.
Two other viable options for those people wanting to settle tax debts with the federal government, but who are limited in their ability to do so include offers in compromise and currently non-collectible status.
Offers in compromise
While it may seem hard to believe, the IRS may prove willing to settle your tax debt for less than the amount owed, something known as an offer in compromise.
It’s important to understand, however, that the agency won’t be the one making the offer. Indeed, anyone considering this option will be required to not only make the settlement proposal, but also file what is known as a Form 656 outlining the entirety of their assets, expenses, liabilities and income.
Furthermore, it’s important to keep the following in mind if considering an OIC:
- The IRS generally takes anywhere from six months to one year to reach a decision concerning an OIC, and the statute of limitations for collection will be extended by the amount of time the agency takes to make its determination.
- If the OIC is accepted by the IRS, the debt will be paid off via a lump sum or monthly installments.
- If the OIC is rejected by the IRS, collection actions will be accelerated.
Currently non-collectible status
If you’re either underemployed or unemployed, and owe a sizeable tax debt that you can scarcely afford to cover in any capacity, a viable option may be to request something known as “currently non-collectible status.”
CNC status means that all collection actions by the IRS will come to a halt and the statute of limitations for collection will continue to run.
As with everything, however, there’s a catch.
Specifically, the IRS treats CNC status as being only temporary and will therefore review your case on an annual basis. If it determines that you no longer qualify for CNC status, you will need to make alternate payment arrangements to cover your tax debt.
If you have any anxiety relating to tax debt, it’s important to consider speaking with an experienced legal professional who can answer your questions and explain the law as soon as possible.