8 Tips to Deal with IRS Collections

When you are having trouble affording your tax payments as a result of hardship or an audit, it can feel overwhelming. When the IRS sends you to collections as a result of continued non-payment, however, it can turn into a more difficult situation.

With the IRS, the best thing to do, of course, is to make your payments in full on time. When this is impossible, though, there are certain steps you can take prior to the collections process in order to avoid proceedings.

  • 1. Make an Offer in Compromise - An offer in compromise allows you to settle your debt with the IRS for less than you owe. You will need to fill out a form 656, provide information on your net assets and show records of your cash flow being less than the total amount of debt owed. When approved for an offer in compromise, you’ll need to be prepared to pay for the settled amount in full at the time of the agreement.
  • 2. Communicate and Pay as Much as You Can - Keeping an open line of communication with the IRS is one of the best things you can do when you can’t pay. Make payments for as much as you can when you file your return, and then continue to pay as much and as often as you can while keeping up communications with the IRS.
  • 3. Request a Payment Plan - Paying what you owe can be an amicable solution between you and the IRS. They will determine how much you’ll need to pay each month in order to settle your amount within a predetermined timeline. It’s important that you always make your payments on time once a plan has been reached, otherwise you can default on your payment plan.
  • 4. Take Out a Loan - Depending on how much you owe and how much interest you’ll end up paying, taking a loan to pay the IRS may be an option for you. Be sure to compare interest rates and fees between payment plans with the IRS and repaying on a private loan, however. It may make more sense to set up an installment plan with the IRS instead.
  • If none of these options are possible, however, and the IRS has begun collections proceedings, try these tips to deal with IRS collections:

  • 5. Apply for Taxpayer Assistance Order - A Taxpayer Assistance Order (TAO) can be applied for if you are able to show that the collection presents a significant hardship on you and your family financially. While this will not release you from your tax liability, it can at least stop the collections process and acquisition of levied property.
  • 6. Check Your Statute of Limitations - Your taxes actually have a statute of limitations - 10 years from the date that your original tax assessment was made. When your taxes owed have exceeded this time period, and you’re facing collections, you can request that your taxes be dismissed due to the time that has passed.
  • 7. Seek a New Audit - If you are facing collection proceedings due to an audit, and you never received notice of an audit, you can request a new one be conducted.
  • 8. Ask for “Innocent Spouse” Relief - When as the spouse, if you aren’t aware of the item or cause that caused the tax liability (even if you filed joint taxes) you can request to be granted “innocent spouse” relief and be released of liability.

Whichever route you take, it’s imperative that you take action as quickly as possible. When you don’t address IRS taxes owed or collections, you can face severe consequences such as federal tax liens and levies on your property.

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