Owing the IRS over $100,000 can be a terrifying experience. You might feel as though everything is on your shoulders and be unsure of where to turn. But don’t worry, there are ways to get out of this mess. We’ll look at your options in this post and assist you in choosing the best course of action.
Consequences of Owing the IRS More Than $100,000
First, let’s talk about the potential consequences of not taking action. The Internal Revenue Service (IRS) may take very drastic measures to collect unpaid taxes if you fail to pay them. These can include:
- Penalties and Interest: These start accruing the day your taxes are due and can quickly add up to a significant amount.
- Federal Tax Lien: The IRS can file a lien against your property, which means they have a legal claim to it. This can make it difficult to sell your home or borrow money.
- Wage Garnishment: The IRS can take a portion of your wages to pay off your debt.
- Bank Levy: The IRS can seize the funds in your bank accounts.
- Asset Seizure: The IRS can take possession of your property, including your car, boat, or even your home.
- Loss of Passport: If you owe the IRS more than $55,000, they can revoke your passport.
What to Do If You Owe the IRS More Than $100,000
If you’re facing this kind of debt, it’s important to take action as soon as possible. The longer you wait, the worse the situation will become. Here are some options to consider:
1, Apply for Penalty Abatement:
Since the majority of IRS penalties are calculated based on the amount owed, they may be substantial if your debt exceeds $100,000. Applying for first-time or reasonable cause abatement can significantly reduce your balance.
2. Dispute the Tax Liability:
There are numerous ways to contest a tax liability, such as innocent spouse relief, an offer in compromise if there is uncertainty about liability, and a refund request after paying with protest.
3. Consider a Settlement:
The IRS uses installment agreements for partial payments or offers in compromise to settle tax debt for less than you owe. There is more info on these options below. Approval is based on your ability to pay the taxes owed.
4. Monthly Payment Plan:
If you can afford to pay off your back taxes in monthly installments over the next six years, the IRS will generally let you set up an installment agreement. If you owe $50,000 or less and set up direct debits or a payroll deduction agreement, you can set up a payment plan online. However, if you owe more than $100,000, you can’t apply online.
5. Offer in Compromise:
An offer in compromise is when the IRS lets you pay off your tax bill for less than you owe. To qualify, you must prove one of the following 1) you can only afford to pay part of the balance, 2) you don’t really owe the full balance, or 3) it would be inequitable (unfair) to force you to pay the full balance.
6. Partial Payment Installment Agreement:
With a partial payment installment agreement (PPIA), you make monthly payments until your tax debt expires on the collection statute expiration date. Then, the IRS waives the remaining balance. This can be a great way to get a settlement on your taxes owed, and it’s especially useful for people who cannot qualify for an offer in compromise due to having too much equity in their homes.
7. Currently Not Collectible:
If you cannot afford to pay you can get the IRS to mark your account as currently not collectible. Regardless of how much you owe the IRS, this status stops the agency from pursuing collection actions against you. The IRS may still issue a federal tax lien, but it won’t levy your assets or garnish your wages. However, the agency can review your situation and demand payment if your finances improve.
8. Bankruptcy:
Filing bankruptcy may be able to help you with tax debt, but consult with a bankruptcy attorney to be sure. Usually, you can only discharge taxes in bankruptcy if they are income taxes that were assessed at least three years ago, but this can vary. However, when you file bankruptcy, the courts issue a stay that temporarily stops all creditors (including the IRS) from taking collection actions against you.
Get Help With $100,000 in Back Taxes
When you owe more than $50,000 or $100,000 in taxes, the IRS will become very serious about collecting the outstanding balance. The agency can use all kinds of aggressive strategies to collect back taxes, and if you don’t take action, you may face liens, levies, asset seizures, and other consequences.
If you’re feeling overwhelmed by your tax debt, don’t hesitate to reach out for help. There are many resources available to assist you, including tax attorneys, CPAs, and non-profit organizations. These professionals can help you understand your options and develop a plan to get out of debt.
Remember, you’re not alone in this. Millions of Americans struggle with tax debt every year. With the right help and guidance, you can overcome this challenge and get back on track financially.
Additional Resources
- IRS website: https://www.irs.gov/
- Taxpayer Advocate Service: https://www.taxpayeradvocate.irs.gov/
- National Association of Enrolled Agents: https://www.naea.org/
- American Institute of Certified Public Accountants: https://www.aicpa-cima.com/
Frequently Asked Questions
Q: What happens if I can’t afford to pay my taxes?
A: If you can’t afford to pay your taxes in full, you have several options. You can apply for a payment plan, an offer in compromise, or ask the IRS to mark your account as currently not collectible. You can also consider filing for bankruptcy.
Q: What is an offer in compromise?
A: An offer in compromise is an agreement between you and the IRS that settles your tax debt for less than you owe. To qualify, you must prove that you can’t afford to pay the full balance, you don’t really owe the full balance, or it would be unfair to force you to pay the full balance.
Q: What is a payment plan?
A: A payment plan allows you to pay off your tax debt in monthly installments. You can set up a short-term payment plan of up to 180 days or a long-term installment agreement.
Q: What is currently not collectible?
A: Currently not collectible means that the IRS has determined that you can’t afford to pay your tax debt. The IRS will temporarily stop collection actions against you, but you will still owe the debt.
Q: Can I go to jail for not paying my taxes?
A: In most cases, you won’t go to jail for not paying your taxes. However, if you willfully evade taxes, you could face criminal charges.
Q: What should I do if I receive a notice from the IRS?
A: If you receive a notice from the IRS, it’s important to contact them as soon as possible. Don’t ignore the notice, or the situation could get worse.
Q: Where can I get help with my tax debt?
A: There are many resources available to help you with your tax debt. You can contact a tax attorney, CPA, or non-profit organization. You can also visit the IRS website or the Taxpayer Advocate Service website.
What to Do If You Owe the IRS Over $100,000
There are ways to avoid the aforementioned outcomes if you owe taxes, but only if you act quickly. Once the IRS levies assets or garnish wages, it’s hard to get those actions reversed. Here are the main resolution options if you owe over $100,000.
Assignment to Revenue Officer
When you owe over $100,000, the IRS will usually assign your account to a revenue officer. Most IRS collection processes are automated, and your account can bounce around the automated system for years.
On the other hand, if a revenue officer is assigned to your case, they dedicate their entire attention to obtaining your outstanding tax debt. Upon arriving at work each day, the first task on their list is to collect your tax bill. They could come to your house or place of business, subpoena documents, get search warrants to locate assets, and take possession of your belongings. Note that you can always request a managerial review if you disagree with an IRS employee’s actions.