Taxes - IRS

[spearmint]

I am about to file Ch7 but I owe about 20K to the IRS. I was going to set up a payment plan with the IRS but I read in another thread that you don't pay the IRS until the BK is complete but perhaps that's a CH13. I will file a Ch7.

Also, the accountant who was going to work on a payment plan with the IRS will have her bill included in the BK so I am SOL on working out a payment plan with the IRS.

What happens to tax debt while doing a CH7?

[spearmint]

bump

[StartingOver08]

Actually you can work out a payment plan directly with the IRS. You can do it before you file, but once you actually file BK, then that plan is terminated. So if you are planning to file soon, then you may as well wait until you are discharged from your Ch 7.

Is your $20k all recent IRS debt or is some of it more than 3 yrs old? If it is less than 3 yrs, you can just work out the installment agreement with the IRS directly. They are actually pretty good to work with. They will go to a payment plan up to about 5 yrs.

If you have tax debt more than 3 yrs old you can discharge it in your BK. Look up HHM's thread on the exact process/dates for discharging old tax debt.

[spearmint]

It is all older than three years. The trouble is the returns were only filed a year ago.

[mercedesc350]

Have you looked in to the IRS "Offer in Compromise" program for your tax debt. I utilized that program many years ago for about a $16000 tax bill owed. They settled with me for a few years of payments equal to about 25% of the total. That program is essentially what all the "tax help" businesses use, but you can do it your self without having to pay them. May not be something you can use, but thought I'd bring it up.

[spearmint]

I know about an OIC after paying for a few years. I am not sure if it's better (and cheaper) to work with them directly or through an accountant. An accountant knows the laws and may be able to negotiate even lower payments than 25%.

I've been working with an accountant but at $275/hr I can't afford it now.

[mercedesc350]

I know about an OIC after paying for a few years. I am not sure if it's better (and cheaper) to work with them directly or through an accountant. An accountant knows the laws and may be able to negotiate even lower payments than 25%.

I've been working with an accountant but at $275/hr I can't afford it now.

I know from my previous situation that it depends a lot on your situation. I also know that in general using an accountant or one of those "tax relief" services is reported, anyway, to turn out costing more than working out an OIC directly with the IRS. My mother owes the IRS $90k. She went through an accountant to work something out. After a year she'd paid the acct $6000, and the only thing that had happened was that the IRS had suspended collection activity pending the filing of an OIC. My mother called the IRS directly just last month, got the OIC form online, and put together a plan to pay them about 15% over the next 3 years. She waiting to hear back. Frankly, and it's just my opinion, I kinda feel like the IRS is more likely to "be nice" and work something out WITHOUT the "professionals" involved, unless you've actually got a point of law/accounting issue that is in dispute which really needs such expertise.

[spearmint]

Thank you. That's sort of how I feel. An accountant charged me $8,000 (!!!!!!) for preparing about six tax returns for me. Unbelievable! Nothing complicated either - just returns that weren't filed. All the records were there, presented to her very neatly. Now, I need to file a Ch7 and she still has all my backup documentation and some of the returns that need to be filed.