Is Tax Debt Collection Forcing You Into Financial Crisis?
Nevadans who owe substantial amounts of tax debt to the IRS may be eligible to have some or all of the debts they owe eliminated if paying them would place the taxpayers in financial crisis. People may have their debts designated as currently uncollectible. They might also make offers in compromise to pay a small percentage of what they owe. People may have some of their tax debts discharged if they successfully complete Chapter 13 bankruptcy repayment plans. Finally, people who are eligible may file for Chapter 7 bankruptcy to have certain types of tax debts discharged entirely so they can have fresh financial starts.
Currently Uncollectible Status
People who are able to show that all of the money they earn is used to pay their living expenses may have their tax debts designated as currently uncollectible. When the IRS does this, it freezes further collection activities for the tax debt until the taxpayers are able to pay. The IRS has established limits on how much money can be designated as living expenses for each category, and the limits depend on the area in which people live.
Offer in Compromise
People can make offers in compromise to settle their debts for less than they owe. When people make these offers, they base them on the amount they can afford to pay. In some cases, people may settle their tax debts for cents on the dollar.
Chapter 13 Bankruptcy
When people file for protection under Chapter 13 of the bankruptcy code, they agree to make payments to repay a portion of their debts over a period of time that lasts for three to five years. Tax debt can be included in the repayment plan, and people might secure plans that allow them to make payments they can afford. If they complete the repayment plans successfully, it is possible that the remaining tax balances will be discharged.
Chapter 7 Bankruptcy
Some types of tax debt may be discharged in Chapter 7 bankruptcy. Not all types of tax debts are dischargeable in Chapter 7, however. People might want to get tax debt help to learn about their options.