Scenarios
You have sufficient income to pay,
and perhaps even assets
The IRS will want to insist that you pay the full amount of tax, penalty, and interest owed. We can set up an Installment Agreement for you. But we also need to consider the following:
- Can your penalties be abated (that is, reduced or removed)?
- How much time is left for the IRS to collect from you? (Statute of Expiration) Does this time frame allow for a Partial Pay Installment Agreement?
- Do you actually owe the full amount that was assessed?
- What can be done to prevent tax due from accumulating in the future?
You have neither sufficient assets
nor income to pay
The IRS will allow you to provide proof of your low income and assets and may decide that collecting the full amount is not worth the effort. Remember, the IRS has the last word in this, and it is important to make a compelling point to them. Here are some options to aim for in this situation:
You have assets,
but insufficient income to pay
You may be able to convince the IRS that you have insufficient income to pay, but you have assets that you own, such as a house or some financial reserves. In that case, the IRS will want you to use your financial reserves or sell your home to pay your IRS debt off. You might qualify for an Offer in compromise – Effective Tax Administration. Such an offer can be based on
- Economic hardship
- Public policy
- Equity