Stopping and Preventing IRS Collection
It is an absolute certainty that in the months to come, thousands of taxpayers will find themselves financially wiped out because of IRS collection. The real tragedy lies in the fact that perfectly legal and highly effective defense tactics could have shielded the taxpayer from rabid IRS employees.
My observation is that people fail to act because the get wrong information from the wrong people. Or people are fearful the IRS and buy into the false belief that they need to beg for mercy. And there are the folks who fool themselves into believing the problem will go away - but it doesn't go away and the taxpayer is slammed down between the pavement and the hard ground.
That's not what I want for you.
As this chapter explains, you don’t have to gravel on your hands and knees before the IRS. Learn how to: [A] Prevent IRS Collection from Starting or [B] Stop IRS Collection Already in Progress. While you read this chapter, keep in mind that there is often more than one way to resolve a tax problem, and the solution you choose will depend on the set of facts unique to you.
Proven Collection Defense Solutions
Keep in mind that not all of these solutions may apply to you.
Form 1127 - Extension of Time to Pay Tax without Penalty. Acceptance of Form 1127, known as an Application for Extension of Time for Payment of Tax, permits a citizen to file his or her return and be granted an extra six months to pay the tax liability without penalty. The IRS will grant the extension upon a showing that the citizen exercised reasonable care and the tax cannot be paid due to circumstances beyond the citizen’s control. However, if the tax is not paid at the end of six months, penalties will be assessed.
Extension of Time to File. Perhaps you already know about this. Virtually anyone can get an automatic 6-month period to file an extension by completing Form 4846. However, a penalty is assessed for paying late and for not paying the tax due. Filing an extension buys time, but it’s a short-term and often expensive solution.
Partial Pay Installment Agreement. This is covered in detail in another library article. The concept is to pay only what you can afford every month, even if the monthly payments will never repay the tax. Once the IRS agrees to a partial pay plan, they leave you alone. Some of my clients use this solution to “run out the clock” on the time to collect the tax.
Installment Agreement. An installment agreement will both prevent and stop collection. The IRS cannot levy or seize property while the request for an installment is pending, or for 30 days after denial or termination of an installment agreement, or during the time the appeal of a denied or terminated installment agreement is pending.
Streamline Installment Agreement. If you owe $50,000 or less, an installment agreement is easy, and it’s called a streamlined agreement. If you owe over $50,000, it requires negotiation and submitting Form 433-A to the IRS. Keep in mind that because interest continues to pile up while you’re in the agreement, you may pay for years and not reduce much of the balance owed.
TIP Many of my clients who owe more than $50,000 still qualify for the streamline agreement. The thing to do is obtain your master tax transcript and deduct the penalties and interest in calculating eligibility.
TIP If you can’t pay your tax liability through an installment agreement in less than five years, consider other options, such as bankruptcy or an offer to settle or partial pay or hardship. An installment agreement is often a short-term solution, and you must be current on your tax filings to qualify.
Offer in Compromise (OIC), also Known as Tax Settlement. This is explained in detail in my free book as well as articles on this site. The OIC has the dual benefit of putting IRS collection hold and resolving the tax debt. An offer is submitted to the IRS to settle the tax for less than the full balance. The IRS cannot file a levy or seize property while the offer is pending.
Currently Not Collectible (CNC). This is discussed in detail in another library article and my free book. Currently Not Collectible or “hardship” may be the most overlooked tax solution because it at once stops collection and solves a long-term problem. For those who qualify, CNC may be used as an alternative to bankruptcy, offers in compromise, and installment agreements.
Bankruptcy. This topic is explained in much greater detail in another library article under "bankruptcy." Look, bankruptcy is not for everyone, yet when it is the right solution, even the bleakest tax problem can be utterly transformed into a positive gain for the citizen. Filing bankruptcy not only shuts down IRS collection, it may also eliminate all or much of the tax liability.
Innocent Spouse Defense. Filing an innocent spouse claim prohibits the IRS from collecting until it’s decided whether the innocent spouse is responsible for the other spouse’s tax debt. The innocent spouse claim is a fairness defense. The idea is to show the IRS that one spouse was incurring tax liability or engaging in conduct of which the innocent spouse had no knowledge.
If you're inerested in learning more about how to defend against the IRS, let's talk. We use these strategies just about every day. We have a complete command of the little details that can make or break a successful IRS defense.
I'm here to help you turn the tables on the IRS. Please call for free 24 hours a day at 1 800 659 0525 or 414 771 9200.