I owe IRS debt confused about options.?
Hi, I was self employed from 97-2004 and ended up owing about $40K including penalties. I was married at time and now divorced and former spouse is still included in debt. We are both salaried workers and IRS has retained last two years of returns but no garnishment.
Other than our respective salaries the divorce wiped us out, no homes, assets, i cant even open an account because of the tax lien. I want to resolve this but confused. These are my options:
1- File chapter 7 - discharge taxes since they are more than two years ago. However, this then leaves my ex-and our children with the debt? Would not want that to happen.
2- I have passed on the idea of offer in compromise, too much upfront money with 20% deposit and uncertainty of resolving.
3- Contact the irs directly and establish a minimal payment amount (100 per month?). Where does this leave my ex and i in terms of future tax returns or is that then calculated in the repayment plan?
Please help,
Ready to move on with life and thanks for advice!
Answers & Comments
Verified answer
I am far from a tax guru, and I am not sure if I can answer all of your questions, but in regards to Tax Installment payments here is some information regarding this:
Tax installment payments
The IRS will help to set up an installment agreement when the situation warrants. Installment payments allow taxpayers to pay the tax debt over time. The IRS will consider whether an offer in compromise is an appropriate solution.
How to set up an installment agreement
Taxpayers wishing to pay off a tax debt through an installment agreement, and owe $25,000 or less in combined tax, penalties, and interest can use the Online Payment Agreement (OPA).
Three installment payment options:
Pay in Full: You may agree to pay in full. With this option you will save penalties and interest.
Short Term Extension: If you cannot pay in full at this time, you may be eligible for a short term extension of time to pay (up to 120 days). There is no fee for an extension to pay. If the IRS grants you an online approval of your request for a short term extension, you will receive written confirmation within 10 days.
Monthly Payment Plan: If you cannot pay in full within 120 days, you may be eligible to make monthly installment payments. You must have filed all of your tax returns that are due.
A user fee will be added to the amount you owe and a fee for plans where the payments are deducted directly from your bank account. Or for eligible individuals with income at or below certain levels who apply and qualify, the reduced user fee will generally be added to the amount you owe including agreements where payments are deducted directly from your bank account.
If the IRS grants online approval of your request for monthly installments, you will receive written confirmation within 10 days.
If you owe more than $25,000 in combined tax, penalties, and interest you may still qualify for an installment agreement, but you may need to complete a Collection Information Statement, Form 433F.
Learn more about the Online Payment Agreement (OPA)
I got this information form the link below.
Your debt level requires full financial disclosure to the IRS by both of you. The IRS will then determine the amount that you will pay under a payment plan and how long the plan will run for.
If they have not reverted to wage levies by now there's at least a fair chance that you are already in "considered uncollectible" status.
Beyond that, you both need to seek legal counsel particularly with regards to filing bankruptcy. It may be an option for both of you.
If you failed to list a creditor you keep the debt. In this case however, it appears that there were taxes due on the property, taxes don't get discharged by bankruptcy, and the company that foreclosed is not responsible for the taxable consequences of the previous owner.