Robert J. Fedor, Esq., L.L.C.

What happens if I can't repay my tax debt?

Individuals who fail to file or pay their taxes may do so for a number of reasons. For many, fear is a motivating factor. An individual may know that he or she simply isn't able to pay their tax debt. Afraid of the potential consequences that may result from filing one's taxes and not being able to pay the IRS tax bill, some individuals may cling to the hope that the IRS will somehow forget both they, and their tax debt, exists.

The IRS, however, has numerous sophisticated technologies and investigative means at its disposal to identify and target individuals who fail to fail or pay income taxes. It's often best, therefore, that individuals who lack the financial means to pay their taxes explore other options.

While not known to be the most understanding or charitable of governmental agencies, the IRS does offer economically disadvantaged individuals some alternative means of repaying tax debt. One of the most popular options is to present an offer in compromise.

In simple terms, an offer in compromise helps individuals settle tax debt through the repayment of a reduced payment. An individual must pre-qualify before his or her offer in compromise is considered by the IRS. Qualifying individuals are typically unable to pay the full tax debt amount based upon their income, debts or other financial hardships.

As is common with the IRS, there are no guarantees that an individual's offer in compromise will be accepted. However, many are as the IRS often views reasonable offers as its best chance of recovering tax debt. Individuals who are awaiting a decision about their offer in compromise would be wise to take steps to ensure they are in compliance with the program's requirements and fully understand their repayment obligations.

Source: IRS.gov, "Offer in Compromise," 2014

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