Tax Debt Hardships in Washington DC 

Being in debt can be stressful in any situation, but when you have tax debt hanging over your head it is especially worrisome because the IRS can put a levy on your wages or a tax lien on your property.

Many people in DC are not aware that the IRS has tax debt hardship programs available to help those who are unfairly burdened by taxes, interest, and fees owed to the federal government. However, it important to understand the options, qualifications, and consequences of tax debt hardships in Washington DC before deciding how to proceed. To learn more, reach out to an experienced tax resolution lawyer today.

An Offer in Compromise Can Settle a Tax Debt Permanently

The IRS provides a system referred to as “offer in compromise” which allows taxpayers to settle their tax debts without giving up all of their savings or assets. If the offer is acceptable to the government, it will fully satisfy the entire debt, including all interest and penalties.

This option is available for those who are either unable to pay the full amount owed or in cases where requiring full payment would induce financial hardship. A number of requirements must be fulfilled in order for a taxpayer to settle a debt via an offer in compromise:

  • The taxpayer cannot be in open bankruptcy proceedings
  • The taxpayer must have filed all required federal tax returns and made necessary estimated tax payments
  • If self-employed with employees, the taxpayer must have made required payroll tax deposits
  • The amount offered must be reasonable considering the taxpayer’s ability to pay based on income, expenses, and assets

Many factors go into the consideration of a taxpayer’s ability to pay, so it is often helpful to consult with an experienced attorney for help with calculating an offer in compromise that the IRS is likely to accept based on the taxpayer’s circumstances. There is a filing fee and required initial payment, both of which are non-refundable, so it is important for a taxpayer to assess qualifications for the program before making an offer.

The IRS Will Stop Collection Actions for Taxpayers Ruled “Currently Not Collectible”

For those with limited income and assets, it is possible to stop IRS collection actions such as wage levies if it is demonstrated that the taxpayer is unable to pay any part of the tax debt without undue hardship. When a taxpayer provides proof inability to pay a tax debt, that taxpayer’s account can be considered “currently not collectible” and the IRS will delay collection action until the taxpayer’s financial situation gets better.

It is essential to realize that such action only delays collection and does not cancel or decrease the tax debt. In fact, because penalties and interest will continue to accrue during the time period while a taxpayer is deemed currently not collectible, using this form of hardship relief actually increases tax debt.

An IRS Payment Plan Can Spread Out a Tax Debt Burden

Although it is not the solution for every hardship situation, in some cases the best option for handling tax debt is to enter into an agreement with the IRS to pay the amount owed on an installment payment plan. Those who qualify for a short-term payment plan will not incur a user fee. For long term plans, there is a set-up fee that may be waived in certain circumstances and penalties and interest will continue to accrue until the debt is paid off.

Get More Information on Tax Debt Hardship Assistance

It can be difficult to determine which tax debt hardship relief option is the best for your particular situation. An experienced DC lawyer could provide information, assess different options, and help negotiate the best offer in compromise if that is the right solution. Those facing tax debt hardships in Washington DC should consider consulting a tax attorney for an assessment.