How to Settle Your IRS Tax Debt in Maryland: Frequently Asked Questions

If you are having trouble paying off your tax debt to the Internal Revenue Service (IRS), this might be the time to consider other options. The IRS has made it clear that they are willing to work with taxpayers who find themselves struggling with tax debt, even if it is a substantial amount. There are a number of IRS tax settlement options that are available to taxpayers. An experienced Maryland IRS tax lawyer will be able to determine the best course of action for you given your individual situation.

What Does Tax Debt Settlement Mean?

Settling with the IRS is not very different from how most other types of legally owed debts are resolved. It essentially involves negotiating with the IRS the terms and means by which you will repay your tax liabilities. Tax settlements stem from scenarios where the IRS has assessed that you owe them a certain amount in taxes and/or penalties and that sum turns out to be more than what you can pay. The IRS expects taxpayers to pay the tax they owe, each time it is assessed.

However, there are a number of situations where sudden and life-changing or untimely events affect the ability of many hard-working individuals to pay their debts. In our experience, when you get a tax bill and know that you will not be able to pay it off, you should promptly initiate a settlement process with the IRS.

Do You Need Help from a Tax Attorney?

The most challenging part of working out an IRS settlement is that you need to be involved in negotiations with IRS agents who have significant experience with investigations and debt collection. In addition, you may feel some amount of pressure during this as the IRS has all the power including the authority to arrest and incarcerate you if there is a serious issue with your taxes. Since there is the potential for repercussions and the stakes are high, it is in your best interest to retain the services of a knowledgeable Maryland tax lawyer who will work out the details of the settlement with the IRS.

What is the IRS Fresh Start Initiative?

The IRS Fresh Start program is designed to provide relief for those who are looking for a reduction in tax debt. The program forgives some of the debt taxpayers owe or it offers relief by reducing the fines, penalties, and fees that have been added to your debt. In order to become eligible for Fresh Start, taxpayers must prove to the IRS that the amount of money you owe is more than what you can afford to pay. Acceptable evidence includes financial statements, earnings projections and other documents that show you won’t be able to pay the tax debt within a reasonable time. If the information you provide is satisfactory, the IRS might reduce the total amount and offer you a repayment schedule over a period of several years.

What is an Offer in Compromise?

This is a program that allows taxpayers to request that the IRS write off a portion of the tax debt because you can’t afford to pay the entire amount. This is also known as “debt forgiveness” and is the most popular way to reduce tax debt. An Offer in Compromise may work in several ways including reducing the total amount owed, reducing or waiving fees and penalties, reducing the interest rate that accrues on back taxes, and extended the repayment period to give you additional time to come up with the money. In order to be eligible for this plan, you must be unable to pay the tax debt (including fines, fees, and interest). Your current annual income, current expenses, and assets should show that you would be unable to pay the entire debt. The more dire your financial status is, the better your chances of qualifying for an Offer in Compromise.

What is the Partial Payment Installment Agreement plan?

This plan is a way to reduce the impact of owing a significant amount in back taxes. This plan gives you additional time, typically several years, to pay back your tax debt. This is often a much more comfortable way for individuals under financial stress to pay back what they owe to the IRS. Much like the Offer in Compromise plan, you will only be eligible for a Partial Payment Installment plan if you can show that you are unable to pay the money.

Can Bankruptcy Discharge Tax Debt?

It might not be easy to discharge tax debt with a bankruptcy filing. However, it is possible under some circumstances. You may be able to discharge your IRS tax debt through a Chapter 7 bankruptcy. In a Chapter 7, the outstanding debt may be forgiven. In a Chapter 13 bankruptcy, you may get an opportunity to pay it off with an installment agreement over a certain period of time.

What is the Innocent Spouse Relief program?

If your spouse or former spouse racked up IRS debt, penalties and fines, you may qualify for total debt forgiveness. As part of this deal, you may have to assist the IRS in going after your ex. This might mean testifying in depositions, turning over documents or attending a trial. The program operates on the basis that you should not be held responsible for something your spouse or former spouse did.

Can Wage Garnishments Be Removed?

If you owe the IRS back taxes, they may withhold money from your paycheck to make sure they get paid back. This is known as wage garnishment. The money will get taken off of your paycheck even before it gets to you. If you are able to prove that the wage garnishment is significantly affecting your ability to live a normal life and is hurting your ability to afford basic necessities such as food, shelter, clothing utilities, etc., you may be able to get a judge to release the wage garnishment and put the IRS’s actions on hold.

Contacting an Experienced Tax Lawyer

If you or a loved one is facing a mountain of tax debt and don’t know where to turn for help, call the experienced Maryland tax lawyers at Frost & Associates to obtain more information about your settlement and payment options. Ignoring your tax bill is the worst thing you can do. Given the number of options available, you don’t have to ignore your tax debt and make matters worse. Please call us today to schedule a free and comprehensive consultation.