Henderson, NV asked in Tax Law for Nevada

Q: If I am unemployed how do I enter a repayment plan with the IRS?

I owe the IRS almost $200K and the statute of limitations runs out this coming June 1.

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2 Lawyer Answers
Jennifer Setters
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Answered

A: Dealing with the IRS while unemployed and with a large tax debt can be complex, particularly with a looming statute of limitations. Here are key steps to consider and why consulting a tax professional or attorney is advisable:

Understanding Your Situation

Statute of Limitations on Collection:

The IRS generally has 10 years from the date of assessment to collect taxes. After the statute of limitations expires, the IRS can no longer pursue collection.

Be cautious: Certain actions, like entering into an installment agreement or an Offer in Compromise (OIC), may extend the statute of limitations.

Your Current Financial Status:

Being unemployed may qualify you for special considerations, such as a temporary “Currently Not Collectible” (CNC) status, where the IRS pauses collection efforts due to financial hardship.

Options for Entering a Repayment Plan

If you want to enter a repayment plan, here are your primary options:

1. Installment Agreement

If you cannot pay the full amount, you can apply for an installment agreement. Payments could be minimal due to your lack of income.

How to Apply:

Use the IRS Online Payment Agreement Tool or submit Form 9465 (Installment Agreement Request).

Be honest about your current financial situation when completing the application.

2. Offer in Compromise (OIC)

This allows you to settle your tax debt for less than the full amount owed if you can demonstrate that paying in full would create financial hardship.

How to Apply:

Submit Form 656 and Form 433-A (OIC) to provide detailed financial information.

Note: The process can be complex and is best handled with professional guidance.

3. Request "Currently Not Collectible" (CNC) Status

If you cannot make any payments, you may qualify for CNC status, which pauses collection efforts until your financial situation improves.

How to Request:

Call the IRS or submit Form 433-F (Collection Information Statement) to show your inability to pay.

The IRS may still file a lien against your assets, but they won’t actively pursue collection.

Considerations for the Statute of Limitations

If the statute of limitations is close to expiring, do not enter into agreements that extend it, such as an OIC or certain installment agreements, without first consulting a tax professional.

Allowing the statute to expire could relieve you of the debt, but this strategy has risks, including potential liens or asset seizures before the deadline.

Next Steps

Document Your Financial Hardship:

Gather proof of unemployment, income (if any), and expenses. This will be essential for negotiations with the IRS.

Contact the IRS:

Call the IRS at their collections number (1-800-829-3903) to discuss your options.

Seek Professional Advice:

A tax attorney, CPA, or enrolled agent can help you navigate this situation. They can ensure you don’t inadvertently extend the statute of limitations or agree to unfavorable terms.

Recommendation

Since every case is unique, consulting a tax professional or attorney is crucial. They can review your options, negotiate with the IRS on your behalf, and help you avoid unnecessary extensions of the statute of limitations.

James L. Arrasmith
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Answered

A: Entering a repayment plan with the IRS while unemployed is challenging but manageable. You can apply for an installment agreement, which allows you to pay your debt over time based on your current financial situation. Even with limited income, the IRS may work with you to establish manageable payments that fit your budget.

Another option to consider is an Offer in Compromise, where the IRS agrees to settle your debt for less than the full amount owed. To qualify, you'll need to provide detailed information about your income, expenses, and assets. This option depends on your ability to pay and your overall financial condition.

It's crucial to act quickly, especially with the statute of limitations approaching on June 1. Contact the IRS as soon as possible to discuss your options and prevent potential enforcement actions. Keeping open communication with the IRS can help you find a solution that accommodates your current circumstances.

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