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Friday, December 28, 2007

A Look At The IRS Debt

After posting my financial resolutions for 2008 Dedicated made the suggestion


Call the IRS, with your debt papers in hand. Your goal is to get the debt reduced or eliminated. In my experience, I have seen the IRS eliminate, completely, debts with higher income than yours. I do not believe you earn enough - at your debt level to repay this debt.

If you would rather not call. Write a letter to the address on the notice, include a copy of the notice, divulge all your financial information (income and debts) and request that they give you debt forgiveness on this.

The way I see it, you have nothing to lose. And freedom to gain.


Even though I have called them before and set it up where they wouldn't hound me because of my income, I decided I would try to make that call (1-800-829-1040). The IRS is charging me 5%-8% interest on this debt.

When I finally got someone on the phone, the person said the only way to reduce the amount of debt was for me to fill out a form with an offer of how much I can pay. The application (Form 656) would require a mandatory fee of $145 to be included with the application. This would also require providing proof of income, copies of my bills and any other related documents. The IRS office will then make a determination and will notify me in 30-45 days if my offer was accepted.

I am intrigued by the possibility, but where am I going to get the application fee? Also the fee will not be applied to my debt so basically it just be lost?

As I have stated I am in "deferral" and the IRS is not making any hard pressure to collect although all my refunds go directly to them.


  • Credit Card 36%
  • Home Improvement 16%
  • Car Loan 10.45%
  • IRS 5%-8% (at one point it even dropped to 4% before going back up to 5% and then higher)
  • Finger Hut 1%
  • Black Gold Insulation

    Any thoughts?


    • Posted by Kevin Surbaugh at 12/28/2007 12:16:00 PM
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    4 comments:

    1. I can not imagine the IRS forgiving any debt. I would just pay them the $145 towards the debt and start making payments on that somehow.
      With your low income you could probably qualify for finacial aid with a community college and work towards some kind of degree so you can make more money eventually.
      I am impressed with your desire to be debt free. I just did my tax stuff and I made about $14,000 last year plus about $6,000 in child support. I am a single mom with two boys and live in NJ. My rent was $1240 a month for Jan.-Aug. Then I moved into my grandmother's house (she retired) and now only pay $500 a month. This has been a huge blessing. But we live paycheck to paycheck with only about 2 months emergency money in the bank. We have no more debt, but we also never vacation and have a 1992 beat up car with no car payment. Still we are so blessed and all our needs are met. God will bless you for following His ways of wanting to be debt free. I would also encourage you to prayerfully consider giving Him the tithe as I have for over 5 years and He blesses me so! Happy New Year!
      ReplyDelete
    2. There is an author (Daniel J Pilla) who has written books on resolving tax debt. He advertised one of his books about five years ago and I checked it out at the library.

      You are in the Automated Collection System, where your refunds are automatically intercepted and applied to your tax debt.

      I have 20-year-old tax debt and can tell you from experience that after 10 years, taxpayers are dropped out of the ACS, so that if you still have tax debt after 10 years, they no longer grab your refunds. Obviously, the debt and any liens remain, but you're dropped out of their automated collection process and you're pretty much off their radar unless you sell real estate (e.g. your home) in which case the real estate people (brokers, attorneys) will make sure any liens are paid off before the deal closes.

      As your tax debt ages, it falls in collection priority, especially if your income doesn't keep pace and you don't have substantial assets.

      I have found the IRS to be quite reasonable when dealing with individuals; their wrath is reserved for businesses (esp when required employee payroll taxes are not paid) and for individuals engaging in fraud or otherwise trying to mess with them.

      Individuals like you and me with limited resources and without bad intent are small potatoes in their bureaucracy, and they're willing to make deals with us to close out our files and concentrate on larger and malevolent fish.

      Pilla's book suggests that my tax debt is old enough and uncollectible enough that I could probably get it released just by asking (there's a formal process for this).
      ReplyDelete
    3. PAY
      THE
      CREDIT
      CARD
      DEBT
      OFF
      FIRST
      BECAUSE
      IT
      HAS
      THE
      HIGHEST
      INTEREST
      RATE
      or work more days to escape debt, thanking, who is that, Cummata, every single day... for what?
      ReplyDelete
    4. I have never heard of someone paying a fee to process documents at the IRS. Possibly something new.

      I would gather all info, find a local office and make a face to face meeting. I know you can get out of it. They have much bigger fish to fry. Ones who can actually afford it. Your situation is not like others.

      My ex left me with a headache at both the fed and state level. I did not have the income. I was set free. The IRS took a year or so, the state took 5 years. I have saved both letters of freedom - since they notified me.

      I paid no fees. I sent in a asset statement, income statement, and a letter stating my position of low income and multiple mouths to feed and care for.

      I'm very grateful for their release. I know it is possible for anyone with such struggles to be freed. It just takes work, determination and time.
      ReplyDelete

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