What is a Federal Income Tax Debt?
A tax debt is when a person owes income tax to the federal government. Every year, people file tax returns to report their income and the federal taxes on that income. Sometimes people get a refund and sometimes people owe a tax debt. The Internal Revenue Service (IRS) is responsible for collecting tax debts. Many people know they have a tax debt at the time they file their tax return. Others only learn about the tax debt later: when they receive an IRS notice or when the IRS seizes a refund, part of their paycheck, or funds in their bank account.
Taxpayer Rights and Options in the Collection Process
Dealing with a tax debt can be confusing and intimidating. However, taxpayers have the right to pay only the correct amount of tax and to a fair and transparent collection process. Finding your options to resolve a tax debt starts with an important question: Is the tax debt correct?
If the debt is incorrect, you have the right to provide proof of the correct tax liability to the IRS. The type of proof and how you can provide it will depends on your particular tax situation.
If the debt is correct, you have options to temporarily stop collection actions, request an affordable payment plan, or request a compromise payment. Here’s more detail about these options:
- Currently Not Collectible status: If paying the tax debt would prevent you from meeting your necessary living expenses, the IRS may pause collection efforts. To request Currently Not Collectible status, you need to fill out an IRS financial disclosure form that explains your income and expenses to the IRS.
- Installment agreements: Taxpayers may set up a monthly payment plan based on their ability to pay. Like requesting Currently Not Collectible Status, you will need to fill out an IRS financial disclosure form that explains your income and expense to the IRS. The amount of your monthly payment will be based on your income and expenses.
- Offer in Compromise: In very special situations taxpayers may settle their debt for less than the amount owed. The IRS generally only agrees to a settlement if they believe it is unlikely that you will be able to pay the full amount of your tax debt before it expires.
Legal Services Can Help
Legal Services of Greater Miami offers a Low-Income Taxpayer Clinic (LITC) to provide free help to low-income taxpayers with problems involving the IRS. Legal Services also educates the public on their tax rights and obligations.
If you have a tax debt or another issue related to federal income taxes, Legal Services can provide free guidance and representation. Other income tax issues include: you never got your refund, you’re being audited, you received a Notice of Deficiency, or you received a tax notice that you don’t understand. You can reach Legal Services at www.legalservicesmiami.org or 305-576-0080.















