This article is for you if you have ever been told that you don’t qualify for an Offer in Compromise. There is another strategy for you to use in your tax relief toolkit.
If you are unable to pay your taxes when they are due, the IRS provides several options including paying your taxes over time in an installment plan. If you can afford to pay your tax liability in full over 72 months or less, the IRS will generally accept this automatically.
The IRS is in the business of collecting revenue to fund the government, and will continue collection activity if no installment agreement is initiated.
How it Works
If you can only afford to pay a portion of what you owe, you can claim hardship. In fact, if you can prove you only earn enough to cover your necessary and reasonable living expenses, you can pay nothing.
Just ‘claiming’ you cannot afford to pay is not enough. You need proof. This includes proof of expenses such as invoices or billing statements. It also includes proof of payments such as canceled checks or bank statements. Simply owing the expense is not enough.
The process begins with completing a collection information statement (IRS form 433-A, 433-F or 433-B). These forms are similar to loan applications. In addition to providing general information such as name, address and telephone number, you will also need to provide income, expense, asset and liability details. Your enrolled agent will discuss specific items on these sheets that can make a huge difference as to whether the IRS will accept the partial pay IA or not – the IRS prefers you work directly with them and pay as much of the tax liability as possible. We know workarounds that benefit you in two ways. First, by using our workarounds you gain personal benefits in your home and second, you lower your tax liability because your monthly take home pay is lower.
A skilled representative will also look into special circumstances that allow you to take more than the federal allowances for certain living expenses, so be sure to fully explain any disabilities, illnesses, family members living with you, special diets, etc. during your intake interview. Don’t hold anything back.
Partial Pay Installment Agreements vs Offers in Compromise
Offers in compromise allow you to settle your tax liability for an amount less than you owe. A partial pay installment agreement does the same. So why choose one over the other?
Offers in compromise are more expensive to implement. They also are harder to get accepted. On the other hand, partial pay installment agreements rely on the taxpayer remaining in a hardship condition over the entire collection period. This can be 10 years or more (see Offers in Compromise to see if you qualify).
Offers in compromise toll (freeze) the collection period for the time the offer is under consideration. If the collection period only has a few years remaining, the partial pay installment agreement is almost always the preferred solution.
If a taxpayer is in a tough spot financially but plans to be in a better position in a few years, an offer in compromise may be the better solution.
In short, available options must be weighed. This is where a seasoned professional is worth their weight in gold.
Get Help Now
Heritage Tax Representation and Services has successfully negotiated millions of tax debt relief to happy clients. Call us at (513) 900-9513 to immediately get protection from the IRS collections and begin the process of taking care of your tax problem! If you cannot discuss this over the phone, you can request an appointment via text to (937) 582-9277 24 hours a day, 7 days a week.