By this time, most of us have either already filed our federal income taxes or at least filed for an extension of time to file the return. So, having rounded the 2009 tax year corner, we can slow down and take a moment to catch our breath. Or can we? There are many who have previous tax years that haunt them. There are some who are resolved to be better prepared for April 15, 2011.


For those people who are struggling through past tax year liability, know that there is hope. There are several methods to petition for relief. One effective method is an Offer in Compromise. For those who qualify the Offer in Compromise will result in a reduction of the tax debt. Generally, one qualifies for this relief if there is a justifiable doubt that the tax debt is even correct. It is advisable here to verify that the IRS has properly calculated the tax liability. It can be tedious and frustrating to obtain the necessary document through the IRS, but it is important to determine if any mistakes were made in the calculation of the debt. Many times the IRS simply has incorrect information. Believe me, the IRS is not going to contact you to verify. It is going to assess the liability and send you a bill. It is up to the taxpayer to contest any inaccuracies. Another way to qualify for an Offer in Compromise is for the taxpayer to show that the entire amount of the debt could not ever be paid back. Naturally, there is a great deal of detail that goes into making this particular claim. The third way to qualify is to show that an economic hardship exists. On average, it can take up to five months to prepare the proper forms and supporting documentation, over one year for the IRS to process the Offer in Compromise, and up to three months to finalize the offer and set up payments.

Another form of relief is to enter into an Installment Agreement with the IRS. This is fairly self-explanatory. After negotiating the best terms available one signs a contract with the IRS to repay the debt under a payment plan. This may be effective is stopping IRS collection efforts such as levy, garnishment, and/or liens. Interestingly, there is also a Partial Payment Installment Agreement that allows the taxpayer to make a regular payment to the IRS, but after a certain point the IRS agrees to forgive the remaining balance.

Finally, the IRS may agree that the taxpayer has no ability to pay the tax debt. If the IRS determines that the taxpayer is Currently Not Collectible then the IRS must cease its collection activities. After ten years, the statute of limitations will expire, meaning that the IRS has ten years to collect the tax.

Arguably, there are few things scarier than having the IRS breathing down your neck. Indeed, it was the IRS who finally nabbed Al Capone. However, there are ways for the proactive taxpayer to jump in and resolve the issues and I would advise that the process start sooner than later. The IRS never sleeps.