Have a Tax Question? Ask a Tax Expert
Hi and welcome to Just Answer!Please be aware that there is ten years statute of limitation starting from the day the IRS assessed additional tax liability. After the statute of limitation is run out - the IRS has no authority to collect the debt.
If you cannot resolve your tax debt immediately, an installment agreement can be a reasonable payment option. For 25,000 or less in combined tax liability - can use the Online Payment Agreement (OPA) - http://www.irs.gov/individuals/article/0,,id=149373,00.html
To request an installment agreement send Form 9465, Installment Agreement Request, with your return. You will be charged a one time user fee of $105.00. For direct debit agreements, the fee will be $52.00. Interest is charged on any tax not paid by its due date, until the account is fully paid.You will be charged a late payment penalty unless you can show reasonable cause for not paying the tax by the due date. The penalty will be charged until it reaches 25% of the original balance due.
Please be aware that having an installment agreement by itself - will not stop accumulating the interest and penalties.
The IRS has a different procedure if you have more than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433F may need to be completed.
Depending on an acceptable reason the IRS might consider to possibly waive the penalties and at least a portion of the problem might be solved. Generally acceptable reasons are a natural disaster, death or illness.
The interest generally may not be waived.
If an installment agreement is not an option, you may be able to take advantage of an offer in compromise (OIC) - http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
. Generally, an OIC should be viewed as a last resort after taxpayers have explored all other available payment options. The IRS resolves less than 1% of all balance due accounts through the OIC program.
An OIC is submitted on Form 656, Offer in Compromise. Form 656 is a complete information package also containing Forms 433-A and 433-B, Collection Information Statements, instructions, and a worksheet.
The IRS tells that we should beware of promoters’ claims that tax debts can be settled through the offer in compromise program for "pennies on the dollar."
However - OIC is relatively complex matter - and most likely you need someone to represent you with the IRS. I suggest contacting a local CPA or Enrolled Agent and he/she will evaluate your situation and estimate a reasonable offer.If all or part of your debt will be forgiven - that amount will be reported to you on the form 1099-C and generally must be included into your taxable income. I assume that the company you are hiring informed you about that. You might be able to exclude that amount from taxable income if you are insolvent - to proof your insolvency - you should file the form 982 with your tax return.Am I paying too much?That depends on services that will be provided and results. If the service include filing OIC and is not based on results - chances are that your OIC will be rejected and the result will be $10,000 out of your pocket. I suspect that any local CPA will prepare OIC for less money. If result will be positive and if you will be able to exclude the forgiven tax debt from your taxable income and will not pay anything to the IRS - the cost seems reasonable.BBB listed that company and does not report many issues - I see two complains most likely because of digressive advertizement.There is no much complains on the web about that company - so it is unlikely a scam. The only question left that the fee is not based on results.