Placing the taxes in non-collectible status
This is where you request that the IRS place the account in non-collectible status because you simply cannot afford to pay your taxes and live under the IRS standards (which are pretty frugal). So, if you have no equity in any assets and extremely limited income, you can request and the IRS may grant non-collectible status. This doesn’t discharge your taxes though. So, I some point in time (before the statute of limitations runs), if you begin to earn wages or acquire assets, the IRS may require that you pay. Interest and penalties will continue to run on the taxes. This may give you, at least, a temporary reprieve if you are really down and out. This is a straightforward process, but if you cannot afford an attorney, you may consider contacting the IRS Taxpayer Advocate for help. Many bankruptcy attorneys offer a free consultation. You may want to consider meeting with a bankruptcy attorney for a free consult to discuss options. Lone Star Legal Aid also offers free legal services if you qualify, including bankruptcy.
Wait for the statute of limitations to run
As a general rule, the IRS has ten years from the date the tax was assessed to collect taxes. If the IRS files a lien, the lien automatically expires at the end of the ten year period. Keep in mind, though, that certain action stops the counting of the ten years. Examples of this are 1) pending bankruptcy (adds time period when bankruptcy is pending plus six months); 2) submission of offer in compromise (adds time period offer in compromise is pending plus thirty days); 3) various appeals.
Consider innocent spouse relief
Consider Offer in Compromise
Consider Installment Agreement
These may be good options, depending on your circumstances. If the taxes are owed, still within the statute of limitations, and the taxpayer has the means to repay the taxes, in most cases the taxes will have to be repaid. Sometimes, bankruptcy is an option, but if a tax lien is filed, or the taxes are not dischargeable, the taxes will still have to be repaid after the bankruptcy is complete.
Each person’s situation is different. If you owe taxes, get all your returns filed and consult with an attorney regarding your options. The attorney can analyze your particular situation and suggest options that may help you with your situation.