IRS Law Blog

One of the biggest fears in owing the IRS is not knowing what will come next.

You may feel as if you are always looking over your shoulder, wondering if today is the day the IRS will show its teeth – it’s a horrible feeling.

Maybe you have not heard from the IRS, or they have not heard from you.  When the IRS is kept in the dark, they tend to get aggressive.  This aggression rears its head in the form of the IRS levying your wages, income, accounts, and property.

Or maybe your account is active in the IRS collection queue, with the IRS calling you or sending letters threatening to take your property.

Think of the IRS as a little kid who is not getting the attention they want, and acting out to get it.

But it does not have to be like that.

Your worrying and looking over your shoulder can be put to rest if you make an agreement with the IRS for the repayment of your taxes.

And your agreement does not have to pay the IRS back, or even pay the IRS at all.  The IRS just wants to know what you can do so they can close your file, and move their attention elsewhere.

Here are five options to sooth the IRS, protect your property, and put an end to looking over your shoulder:

• Agree to make payments to the IRS, but it in a small amount, only what you can afford.

By law, the IRS cannot force you into an installment agreement that pays them back in full – you can pay less if that’s all you can do.  For example, if you owe the IRS $100,000, our tax laws can require them to accept $100/month if it can be proven that’s all you have.  This is called a partial pay installment agreement, and it will stop the IRS from levying you.

Once the IRS accepts a partial pay installment agreement, they must immediately stop all levy action against you.  However, it is important to remember that the IRS will review a partial pay agreement every two years to see if anything has changed on your end.

• IRS accepts you do not have to make any payments.

The IRS calls this “currently not collectible,” also referred to by the IRS as “CNC.”  To be currently not collectible, the IRS needs to understand that you are unable to make any payments to them, and have no valuable property that could be used to make payment.

If you can prove to the IRS that you cannot pay, they will back off, and stop coming after you. In their computer, they will place a code, known as Code 53, that puts a hold on any action against you, accompanied by the words Currently Not Collectible.  Once the CNC code is input, you and your assets are protected and safe from the IRS.  There can be no IRS levy with CNC status.

• Enter into an installment agreement to pay everything you owe back to the IRS.

This is called a full pay installment agreement, and would not require any further review or contact from the IRS.  In other words, once the IRS has a plan to repay them in full, they close the case file, and should not reopen it.

With a full pay installment agreement, you should no longer have to look back.  Remember, tax laws require the IRS to stop levy action while you are in an installment agreement.  With a full pay installment agreement,  you are done worrying about intimidating IRS collection letters, receiving surprise visits by IRS Revenue Officers, or any future loss of income or property to the IRS.

• The IRS agrees to settle the debt with you for less than what you owe.

This is the frequently advertised IRS offer in compromise program.  Internal Revenue Code section 7122 permits the IRS to settle a tax debt and accept less than what is owed.  Being free from owing the IRS is a sure-fire way to having no IRS worries.

But be careful – getting the IRS to agree to cut what you owe is not as easy as it is may seem.

A successful an offer in compromise is based on convincing the IRS that they will never get paid.  To do that, the IRS looks at what can be paid to them from your assets, and how much they would get from an installment agreement.  If you qualify for a partial pay installment agreement or currently not collectible status, you may be a candidate for an offer in compromise.

• The IRS runs out of time to collect from you.

Yes, it’s true – IRS debts do end.  Internal Revenue Code 6502 gives the IRS 10 years to collect.  In most cases, when your 10 years expires, the IRS is done.  And that means you are done, too – no more IRS attempts to take your property.

Keeping an eye on the clock is a form of IRS forgiveness and is an alternative to an offer in compromise.

Strategies to hold the IRS off now, like currently not collectible or a partial pay installment agreement, permit the clock to continue to run.  You can combine solutions, using a currently not collectible or partial pay installment agreement to keep the clock running until the IRS collection end date passes.

Owing the IRS does not have to feel like a constant burden  You do not have to spend every day worrying if your wages or accounts will be cleaned out. Protecting you from the IRS means understanding the rules and regulations that require them to back off.  Relief from the IRS can be found in our tax laws, which contain options including installment agreements, currently not collectible status, an offer in compromise, and the 10 year period the IRS has to collect.