For obvious reasons, being unemployed or underemployed is definitely not fun.
However, depending upon your overall financial situation, it could be a once in a lifetime opportunity to rid yourself of back taxes owed to the IRS once and for all, or simply put your back tax situation on hold for the time being, while the IRS’s 10 year collection window closes. After 10 years from the date the return is filed, the liability expires worthless; we’ll come back to this shortly.
The New Economy
Due to a changing economy, and advancements in technology, some industries have seemingly been permanently affected, and will never operate the same again.
As companies become more efficient with how they do things, less manpower is needed to perform the same tasks, leading to employee layoffs. In addition, companies may eliminate office locations deemed unnecessary due to the increases in work efficiencies from technological advances. Or, companies may eliminate office locations simply because the product or service is no longer in strong demand by the market.
Whatever the reason the company has for cutting overhead, the result is the displacement of an expendable employee in a shrinking workforce. The individual must either compete for the fewer available jobs out there, relocate to other areas that have available jobs, take jobs that pay less than their level of experience is worth, or make a career change.
Why ‘Now’ Is The Time
Being unemployed, and in a lot of cases “underemployed”, is enough to qualify the individual for “Non Collectible Status” with the IRS. This is determined by the individuals’ household income and allowable expense calculations. If this status can be obtained, the IRS’s 10 year clock to collect ticks away while in this status.
A tax lien will also be filed against the taxpayer, but at the end of the 10 year period, the tax lien is removed along with the liability, interest and penalties. So if the individual’s financial situation never improves over that 10 year period from the current state, paying the back taxes owed will become one less thing to be concerned about.
In the case of being underemployed or making a career change, therein lies the opportunity to take advantage of the reduced income and submit an Offer In Compromise (OIC), and potentially wipe out the back taxes owed almost overnight if accepted.
Typically, a career change can take a few years for the individual to both learn and become proficient in the new craft, and hopefully earn the level of income they once did. However, the IRS only considers what “was” and what “is” as far as income goes in deciding whether to accept or reject an offer.
The illustration below is an example of possible tax debt relief options (not exclusive to the related scenarios) for both the unemployed & underemployed:
Hiring A Professional
What you don’t know about the OIC process could be the difference between your Offer being accepted or rejected. An experienced Certified Tax Resolution Specialist (CTRS) will know how to take advantage of every opportunity allowable under the law in order to ensure the best chance possible for Offer acceptance. Let’s face it, if you haven’t spent years negotiating with the IRS and learning their process inside and out, naturally you will not be as well equipped as a professional would be in going up against the most powerful collection agency in America.
The benefits of hiring a CTRS
- They typically have resolved a multitude of tax resolution cases; especially ones similar to yours
- They know your rights, and options that will work with your financial situation
- They become your IRS advocate, and deal with the IRS directly on your behalf
So, despite the obvious downside to unemployment and underemployment, all may not be lost. If you find yourself in this situation, and want to take advantage of the opportunity before you, contact me, Craig Thomas, CPA & Certified Tax Resolution Specialist, at Streamline Tax Resolution to discuss the possibilities. (888) 545-5789 x201 or firstname.lastname@example.org.
In any event, I sincerely wish you all the very best of luck in finding employment and/or gainful employment.