Despite what you hear on TV, there are no magic solutions to resolving your tax liability. There are really only three settlement alternatives. Each has its own rules, which are important to understand in determining your best option.
- Installment Agreement - this is the most common resolution. You propose to pay off the entire tax liability via monthly installment payments. No break or special deal is given. There are three types:
- Guaranteed - for liabilities less than $10,000, a program that requires the IRS to accept your proposal regardless of financial condition.
- Streamlined - for liabilities less than $25,000, a program that allows the IRS to accept your proposal regardless of financial condition.
- Regular - for all other liabilities. Your settlement is considered based on Apparent NAI (using Expense Standards) and the IRS may ask that you liquidate assets. You may be subject to Lien.
- Offer-in-Compromise - you offer to settle a liability in a lump sum or shorter period of time. The IRS evaluates OICs based on what you can pay. Financial information is required and evaluation is a based on Apparent NAI.
- Bankruptcy - taxes may be discharged in Bankruptcy provided some conditions are met
- Chapter 13 is a restructuring of debt.
- Chapter 7 is a liquidation of of debt.
In addition to the primary options there are a few other avenues to seek relief - penalty abatement and innocent spouse. These must be used in conjunction with one of the primary options. This chapter covers each some in detail; at its conclusion, you will be ready to start dealing with the IRS.
