Owing back taxes to the IRS and getting those threatening letters can be very frightening. For what it’s worth, take some comfort in knowing that you are not alone. There are millions of Americans in similar situations, dealing with debt hanging over their heads and concerned about how it will affect their future.
The good news is that you have many options. To fully understand and take advantage of your options, I urge you to see a qualified tax resolution professional. They will take a close look at your previous returns, looking for mistakes that may have resulted in an inflated tax debt amount. This process alone could substantially lower your IRS debt.
Once you and your qualified tax professional have analyzed your previous returns, the next step is to negotiate a resolution with the IRS. You will most likely be looking at one of two options — the Offer in Compromise or the Installment Agreement.
The Offer in Compromise was created for people who owe a substantial amount to the IRS but who, for whatever reason, are unable to pay their tax debt off, even over time. The Offer in Compromise allows taxpayers to negotiate a settlement amount that will take care of the entire tax debt once and for all, if they qualify. This settlement agreement can lower the tax debt by a significant amount. If you do not qualify for the Offer in Compromise – and to do so you must be able to prove eligibility – then you may consider the Installment Agreement, which allows you to pay off your debt by making manageable monthly payments.
This is your financial life and the stakes are very high. If you needed heart surgery, would you shop around the least expensive surgeon or would you get the very best you can find. The same holds true for dealing with the Internal Revenue Service. Having IRS problems can ruin all aspects of your life, your marriage, relationships with your children and family members, your employment, ability to buy a house, a car, money for retirement or even have a bank account. You want the best person for the job, not the cheapest.
Your IRS debt doubles every 8 years due to the daily compounding of interest and penalties so to ignore this problem is probably not a wise decision. Generally, you’ll never have to speak or meet with the IRS once you retain a Tax Resolution Specialist for your case. You’ll be able to sleep at night knowing that they are working hard to get you the best possible resolution with the IRS!
Generally speaking, the IRS will file a tax lien if the aggregate amount your unpaid assessed balance is $10,000 or more. A Notice of Federal Tax Lien (NFTL) is public record and is generally filed with the County Recorder where you reside. Since a federal tax lien is public record, the Lien filing is also reflected on your credit report. It is notice to all your other creditors that the IRS has secured interest in your real and personal property.
A federal tax lien will make it very difficult to get credit. It may also prevent you from accessing the equity in your home that you may have built over the years. However, the IRS has several different collection alternatives that deal with resolving a NFTL, if you qualify. You can resolve a federal tax lien by paying it in full or if that is not an option you can find out if you qualify for a “Release of Lien”, a “Lien Subordination”, a “Lien Discharge” or “Lien Withdrawal”. It is important to keep in mind that IRS problems didn’t just happen overnight and will take some time to resolve. It’s important to consult with a tax professional to see what Lien relief programs you may be eligible for before the IRS starts enforcing aggressive collection against you. Remember, for every tax problem there is a solution.
Constant W. Watson III, CPA, CTRS, is both a Certified Public Accountant and a Certified Tax Resolution Specialist. He is only one of six Certified Tax Resolution Specialist in the State of Illinois that is certified by The American Society of Tax Problem Solvers. With more than 30 years of income tax and accounting experience, he has a reputation for excellence and client satisfaction. For a Free Consultation, call him at (708) 206-9900.