If You Lose Your Job or Your Income Drops?
Losing your job or experiencing a major drop in income can make IRS tax debt even harder to manage.
Your debt does not disappear, but a change in income may affect the resolution options available. If you can no longer afford your IRS payment, you may be able to adjust your arrangement or temporarily delay certain collection actions.
If after reading this blog you need further help resolving your tax debt contact Action Tax Relief at 937268-2737 or visit www.ActionTaxRelief.com.
What If You Already Have an IRS Payment Plan?
If you are currently making payments through an IRS installment agreement and suddenly lose your job or experience a significant reduction in income, do not simply stop making payments without addressing the situation.
The IRS states that taxpayers whose ability to pay has changed may be able to have their monthly payment reduced to reflect their current financial condition. The IRS may ask for documentation showing the change in your finances.
Depending on your circumstances, you may need to provide information about your income, monthly expenses, assets, and other financial obligations.
The key is to address the problem before your existing agreement goes into default.
Could Your IRS Account Be Placed in Currently Not Collectible Status?
If your income has dropped so significantly that paying the IRS would prevent you from covering necessary living expenses, you may qualify for Currently Not Collectible, or CNC, status.
When the IRS determines that you cannot afford to make payments because of financial hardship, it can temporarily delay collection of the tax debt.
This does not eliminate what you owe. Penalties and interest may continue to accrue, and the IRS may periodically review your financial situation to determine whether your ability to pay has improved.
The IRS may also still file a Notice of Federal Tax Lien while an account is in Currently Not Collectible status. However, certain collection actions, such as levies, may be temporarily suspended while you remain unable to pay.
Could You Qualify for a Lower Monthly Payment?
Even if you can afford to pay something, the payment you were previously making may no longer be realistic.
In some situations, taxpayers may qualify for a revised installment agreement or another payment arrangement based on their current financial condition.
For certain agreements, the IRS may require a financial statement and supporting documentation. Your income, expenses, assets, and ability to pay can all be considered when determining an appropriate payment amount.
A major change in income can therefore make it worth reviewing your existing arrangement rather than continuing to struggle with a payment you can no longer afford.
Could an Offer in Compromise Be an Option?
A significant and lasting change in your finances may also affect whether you qualify for an Offer in Compromise.
An Offer in Compromise allows some qualifying taxpayers to settle their IRS tax debt for less than the full amount owed. The IRS considers factors including income, expenses, asset equity, and overall ability to pay when reviewing an offer.
Simply losing your job does not automatically mean the IRS will accept an Offer in Compromise. Your complete financial situation matters.
However, if your income has substantially declined and your ability to repay the tax debt has changed, it may be worth determining whether an offer or another resolution strategy is available.
Don’t Ignore IRS Notices Because You Cannot Pay
One of the biggest mistakes taxpayers make after losing income is avoiding IRS notices because they know they cannot afford to pay.
Ignoring the IRS does not make the debt disappear.
If the tax debt remains unresolved, penalties and interest can continue to increase, and collection actions may eventually include a federal tax lien or levy. The IRS offers payment plans and other collection alternatives, but taxpayers generally need to take action to request them.
Even if you cannot pay anything right now, there may still be steps you can take to address the account.
Your Tax Resolution Strategy May Need to Change
If your income has dropped, the IRS resolution that worked before may no longer fit your financial situation.
If you can no longer afford your IRS payments, call Action Tax Relief at 937-268-2737 visit www.ActionTaxRelief.com to schedule a free consultation today.
Don’t wait for the IRS problem to grow, take the first step toward resolving it today.