The IRS is the world’s largest and most powerful collection agency (and the staggering fact that Congress has allowed them to start outsourcing debt collection to private third parties doesn’t change this).
Therefore, if you owe the IRS money, there is nowhere to run and no place to hide. It is only a matter of time before matters are brought to a head — either with or without your participation. As such, it’s absolutely in your best interest to make dealing with this your top priority. Procrastinating, or waiting and seeing to ensure that the IRS really, really wants you to pay up are both very bad ideas. In fact, don’t even consider them.
And while you’re at it, please don’t be fooled by Hollywood stereotypes of “bungling IRS agents” who use computers that were state of the art circa 1985. The IRS is high-tech, well resourced, and most importantly: in the absence of your evidence to the contrary, they have the law on their side. This isn’t a department store debt we’re talking about here. This is the U.S. government.
So yes, the situation is serious — and putting things any other way would be dishonest and misleading. However, provided that you start taking action now vs. later, you can regain some clarity and control of this situation and minimize the financial damage. You can also get peace of mind and sleep well at night.
Your specific action plan can only be determined after a detailed analysis of your situation, since there’s no one-size-fits-all strategy. Generally however, here are the four options that may be available to you:
- Stop IRS Collection Efforts Option #1: You can simply pay the IRS what they claim you owe.
- Stop IRS Collection Efforts Option #2: You can petition the IRS to set-up an installment plan, and pay them over time (full amount owing plus interest and any penalties).
- Stop IRS Collection Efforts Option #3: You can petition the IRS to accept your Offer-in-Compromise (OIC), which is when you commit to paying a lump sum that is less than the total amount owing (more on this in a moment).
- Stop IRS Collection Efforts Option #4: You can file for bankruptcy protection — though keep in mind that if your monthly disposal income is above your state’s chapter 7 (“liquidation bankruptcy”) threshold, then you’ll have to file for chapter 13, which means you’ll have to put together a complex, structured repayment plan over the next 3-5 years.
More on the Offer in Compromise
Of all of these options (and frankly the first and/or last items may not be valid options in your situation), you may be most interested in the Offer-in-Compromise. After all, it has a friendly ring to it — and more importantly, as noted above it would allow you to pay less than you owe.
However, the critical thing to keep in mind is that the IRS isn’t, well, stupid. They know that EVERYONE who owes the IRS money would petition for an Offer-in-Compromise if they could. After all, why pay 100% of your tax bill when you can pay 80%?
That’s why the IRS examines each Offer-in-Compromise petition with an excessive amount of scrutiny — and many petitions are rejected, either because they’re incomplete, or because they fail to make the case that the settlement offer should be considered. To make matters worse, although the IRS (mercifully) presses the pause button on accrued interest and penalties while it reviews an Offer-in-Compromise petition, as soon it is rejected the clock starts ticking again — i.e. the costs begin rising.
If the IRS claims that you owe money, then contact the Law Offices of Jeffrey B. Kahn, P.C. today. We have in-depth experience helping clients stop IRS collection efforts — including taking advantage of the Offer-in-Compromise program. We will ensure that you are treated fairly, respectfully and professionally by the IRS at all times, and that you get the best possible outcome based on your specific situations and details.