Seeking Tax Debt Relief

While debts owed to the government, such as past-due state and federal taxes, normally cannot be discharged by a debtor in bankruptcy proceedings, there are some alternatives to deal with overwhelming tax debts. The Internal Revenue Service (IRS) provides an offer in compromise (OIC) program that allows qualified debtors to make payments toward a smaller amount than is actually owed in back federal taxes. Many state governments have similar programs that permit a debtor to reduce the amount of outstanding state taxes. By participating in one of these programs, you may be able to eliminate a portion of your outstanding tax debts, and make payments toward these debts over a period of time.

Federal Tax Debts: Offer in Compromise

An OIC is an agreement that a debtor can enter into with the IRS in order to reduce the amount of the tax debt that the debtor owes. However, there are certain requirements that a debtor must meet in order to qualify for an OIC:

• There is doubt as to whether you can ever repay your tax debt;
• There is doubt as to whether the outstanding tax debt is correct; and/or
• An exceptional circumstance exists such that collection of the tax debt would cause an economic hardship or other unfair result.

If your situation meets one of the above grounds, you may qualify for an OIC. You can apply for an OIC by submitting IRS Form 656, Offer in Compromise, along with a $150.00 application fee, and your initial proposed payment. If your proposed OIC is approved, you can pay your tax debt in one of the following ways:

• You can pay a lump sum in cash, to be paid in five or less installments;
• You can pay periodic payments over a period of two years; or

• You can pay periodic payments over the statutory time that still exists for the IRS to collect the tax debt.

State Tax Debt

Whether a state tax debt can be compromised or reduced in any way is completely dependent on state law. Many state laws do provide for programs through their state taxing agencies under which debtors can reduce the amount of outstanding state tax debts, and/ make payments over time. However, some states do not permit state tax debt to be compromised in any way.

Contact an Experienced Attorney for Help

If you owe past-due federal and/or state taxes, you should immediately contact an experienced tax attorney for assistance. Owing back taxes is a problem that will not go away, and you should confront the debts by taking advantage of tax debt relief programs that may be available to you.