-Video father of 2 $6000 IRS debt-
Life is definitely not fair. One cold autumn afternoon, a family in Seattle, Washington was in tears as they watched their house burn down. They basically had nothing after their ordeal and thought things couldn’t get any worse. They were wrong. The family’s cost basis documents on stock market trades were among the items destroyed by the fire so all the IRS could see were sales which were classified as profit. Since the family couldn’t prove what the purchase prices of the stocks were, they were forced by law to pay a percentage of the total sales.
This of course was devastating but the family used the crisis to start a cloud storage business which helps homeowners and small businesses safely store their records. I honestly don’t know how profitable their business has become but I admire them trying to make the most of a bad situation. It’s an important testimony that we should take to heart. Disasters do happen which could result in some seriously bad tax ramifications. Perhaps you have been in arrears with tax payments and can really identify with what I’m saying.
Fortunately we live in a society where tax debt can be forgiven if your income level is low enough. It’s unlikely that you will end up owing nothing, but after submitting what is called an Offer in Compromise you may be able to get a substantial reduction. When the IRS looks at your income, expenses, asset equity and your proposed settlement amount they make the final decision based on ability to pay within a reasonable time period. Contrary to the image we have of the IRS, they generally accept an Offer in Compromise if it is reasonable and representative of your fiscal situation.
While your application is being considered, all debt collection calls are suspended which contributes to your peace of mind. Before your application submission there are 2 guidelines that you must follow.
1) You must submit a payment with your offer and a promise of subsequent payments.
2) You must submit a $186 non-refundable application fee which may be waved if your income level is abysmally low.
Keep in mind that during the decision process, a lien may be placed on your house and property. If the offer is rejected you have 30 days to file an appeal. Lastly, if the decision takes more than two years your offer is automatically accepted.
Discharging Tax Debt through bankruptcy is also an option but a last resort. The reason is you must be very knowledgeable about the process in order to avoid any missteps. The three rules below must be met in order for you to role your tax into a bankruptcy. Since this is the comparative of a thumbnail sketch I would advise you to do your research before committing to the process with your bankruptcy lawyer.
1) Your tax debt must be at least 3 years old.
2) You need to have filed a return at least 2 years before the bankruptcy filing.
3) The tax to be discharged must be income tax and not a federal lien on your house. If a lien has been filed then you still must pay the amount of the lien before selling your house.
It must be emphasized that whenever you deal with the IRS, you need to abide by the letter of the law because they are not in the business of compassion. Let’s not forget Joe Louis, a 12 year world champion boxer who woke up one morning to a tax debt of $1,000,000. This was a calculation that the IRS would not budge on despite Joe giving $89,000 to the United States Navy Relief Society. In an effort to pay the money back he spent the rest of his life in disreputable, low paying jobs and failed to enjoy his golden years the way he should have. So BEFORE you go through the process of negotiating your taxes, chisel out a clear plan of attack with your tax adviser. Not doing so may cancel out options should the first leg of your negotiations fail.