What are the Collection Alternatives?
There are various collection alternatives available to taxpayers who are current with all tax returns and have paid estimated taxes and/or federal tax deposits. This last part is important. Until you are current with all tax filings and tax payments, these alternatives are not available to you. The IRS will generally encourage you to pay the entire amount that you owe in a lump sum. Don’t let the IRS push you into an alternative that doesn’t take into account the totality of your situation. This is where I will help you.
Common Collection Alternatives:
Payment in Full: IRS will generally encourage you to pay the entire amount of your liability at once, using funds from savings, loans against retirement accounts, selling assets, deferring debt payments, or borrowing against assets. The IRS doesn’t always consider the impact on you of paying the entire amount, often leaving you with other financial and tax problems from having complied with their request to full pay the balance.
Installment Agreement: There are a number of different types of installment agreement depending on the balance you owe, the type of tax you owe, the amount you are able to pay, and the amount of time remaining on the collection statute. Some installment agreements require financial documentation, and some do not. Some installment agreements involve the filing of a Notice of Federal Tax Lien, and some do not. Some installment agreements require payment of the entire balance, and some do not. To get the best possible deal, call Straightline Tax Resolutions for help.
Offer in Compromise: An offer in compromise allows you to settle your tax debt for less than the full amount you owe. The IRS will generally approve an offer in compromise when the amount offered is more than it thinks it can collect by other means. In considering an offer in compromise, the IRS will look at the following: Ability to pay, income, expenses, and assets. Offers are complicated, and they require expertise in handling the negotiations with the IRS. There are fees and deposits associated with most offers that are generally not refundable. Therefore, it is wise to have a qualified tax professional assist you with the application.
Hardship Deferral: By law, if paying your tax liability would cause you an economic hardship, the IRS is required to defer collection until such time as the hardship has passed. To secure a hardship deferral, you are required to cooperate with the IRS and provide financial information to establish the hardship.
