Tax Loans - Information

Welcome to the tax loans page. We provide information about tax relief loans, services, and tools for people with back tax problems with the Federal, State, or City government. This page and the resources below help you understand how to pay your past due taxes or get tax relief.

This page tells you about the general tax loan process and what you can expect. Keep reading...

Options for Tax Relief - Back Taxes - Past Due Taxes

There are several options available to people who owe past taxes to the Federal (IRS), State or City government. These include: 1) Offer in Compromise, 2) IRS Installment Agreement, 3) Tax Loan, 4) Currently Not Collectible status, 5) Statute of Limitations, 6) Bankruptcy.

If you owe back taxes, the first thing to do is ensure you file your tax returns for all previous years. This ensures everybody starts on the same page. This is often a lot of work, especially since most people don't keep orderly records going back years and years. If you have enough information to file your past returns, definitely do that, since the IRS is going to require that anyway.

An Offer in Compromise allows you to reduce your tax debt and pay less than the full amount of tax (sometimes called "pennies on the dollar"). In an Offer in Compromise the unpaid tax bill, interest, and penalties are included in the final reduced amount. To apply for an Offer in Compromise (OIC), you need to fill out an IRS Form 656, 433-A (for individuals), bank statements, auto titles, mortgages, etc. that you have claimed deductions for. You also have to pay a $150 non-refundable fee to the IRS.

An IRS Installment Agreement is a monthly payment plan under which you pay your back taxes over time, instead of all at once. Under most circumstances, the repayment period is 1-3 years, and interest of approximately 10% is charged on the amount you owe. If you have received IRS notices in the mail demanding your tax payment, there is usually a check box which says "I can't pay my taxes. I would like to pay them over time." You then send the form back to the IRS with evidence of your income and assets and await the IRS response. Usually the IRS will allow this, but understand that you will be charged interest, so you will end up paying more than you currently owe. (Isn't it funny how the government doesn't pay you interest when they owe you a refund, but you have to pay them interest?)

A Tax Loan is a loan from a third party lender specifically to help you pay off a tax bill. A tax loan can be for current or past taxes. These loans come in various formats, but they are basically either an unsecured or secured personal loan. You will usually be asked to describe what the loan is for, and provide information to the lender indicating that you can repay the loan. You would only use a tax loan if you cannot pay off your tax bill with cash, or the IRS has refused you for a payment plan for some reason. In order to get a tax loan which has a reasonable interest rate, it will normally need to be secured somehow with your home, car, or other assets. If you cannot pay your tax bill immediately, but you do not have any collateral for a tax loan, you are often better off asking the IRS to allow you to pay your bill over time and pay roughly 10% interest, rather than a much higher interest rate associated with an unsecured loan (15-25% like a credit card).

Currently Not Collectible Status is a designation the IRS makes about taxpayers who simply do not have the income or assets to sell to pay off their back taxes. This would be the case where you have a large number of dependents and low income, you are disabled or injured at work and cannot hold a full time job, or some other reason. In order to get this status, you need to show your necessary living expenses (rent, food, etc.) exceed your income. You will also have to file all your income tax returns and provide evidence of your income and expenses. "Currently" not collectible means that the IRS may ask you again in the future to pay those taxes, even if you cannot now. At that point if your financial conditions have improved you may have to pay the IRS back. You might also have to prove again that you cannot pay your taxes for the same reasons as you originally couldn't in order to retain this status.

The Statute of Limitations is a time limit on when the IRS or other government agency can collect past tax bills. After 10 years, the Statute of Limitations normally runs out, and you will no longer have to pay any taxes due from any year prior to that point. However, this usually occurs only when you have not filed your tax returns for a long time, or you have been audited and the IRS is attempting to look back several years into the past to see how much you might owe. Furthermore, IRS or state filings you've made in the last 10 years to get tax relief can constitute an admission of your obligation to pay the taxes, even though they were due from more than 10 years ago. A bankruptcy may also cause this time frame to be extended. You should talk to your accountant or attorney to find out where you stand.

Bankruptcy is the least desireable method to reduce or eliminate your tax bill. If you file for bankruptcy, it is normally driven by something other than your tax obligations -- such as an adjustable rate mortgage increasing past your ability to pay, a divorce, or medical problem. If you have any assets, the government takes precedence in bankruptcy in front of your other creditors. However, the government cannot usually take assets for necessities you need to survive and provide for your family. In that case, bankruptcy normally delays your obligation to pay past due taxes (plus interest) until you come out of bankruptcy protection, rather than eliminate your tax obligation. In this sense bankruptcy can give you tax relief, but it is temporary. Also, bankruptcy may extend the Statute of Limitations on any taxes you owe for prior years. It is very important to get proper representation from a bankruptcy attorney if you have past taxes due and are considering bankruptcy.