The IRS has many programs in place to assist taxpayers with back tax problems. The options largely consist of an Installment Agreement, Offer in Compromise (“OIC”), and Currently Not Collectible status.
Bankruptcy can be an option. But you must analyze the age and the type of the back income taxes. For the most part, recent federal income tax assessments cannot be discharged. This is also true for unpaid payroll taxes.
An OIC is another choice for you to consider. You will be required to disclose sensitive financial information. Rejection rates for OICs are high, but your chances for success will increase if you work with a tax professional. Should your OIC be rejected, there is an appeals process.
In the OIC, the taxpayer must prove that he or she will not be able to repay the back taxes over a four to five year period even if there is a sale of all assets that are owned by the taxpayer. Like many other options, an OIC will be accepted only if the taxpayer has filed all back income tax returns.
A Currently Not Collectible option will still require full disclosure of the taxpayer’s financial situation. Again, Currently Not Collectible status will require the taxpayer to be current on all tax filings.
Taxpayers should realize that if they have tax problems there are many options afforded to them by the IRS. Procedures have been placed in service by the IRS to address most tax problems. Just make sure that you are working with a tax professional and understand the options available to you.
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This article is for informational purposes only and is not meant to be tax or legal advice. Each situation is different and you must discuss your cancellation of debt issue with a qualified tax or legal professional. This article is not written to be used for the purpose of avoiding penalties under the Internal Revenue Code.
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