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"Effective Tax Administration"This is a new ground that has not been fully developed. It is supposed to provide relief in special cases to prevent tremendous hardship. To qualify, you must convince the IRS that, even though you can pay all the taxes due, you would suffer real hardship if you were forced to pay them. An example could be where there was sufficient equity in the family home to pay the tax, but the occupant was a single mother. She could not qualify for a loan, and if she sold her house, she couldn't afford adequate housing for the children. How
do I apply? How do I apply?The application process is the same as for "Doubt as to collectibility," with an additional requirement. You must file Form 656-A providing a full explanation of why you should be relieved of some of your tax liability even though you have the ability to pay the taxes owed. Success or failure will depend on the attitude of your local IRS worker and can vary from one part of the country to another. This may be a case where you are best off seeking advice from a tax professional who is familiar with how the IRS works in your area. Can I discharge my taxes in bankruptcy?Maybe. Income taxes can be discharged in a "Chapter 7" bankruptcy if you have met a number of technical requirements. A "Chapter 13 reorganization" might be used to set up a plan to pay your back taxes. Discharging taxes in bankruptcy is quite technical, and should generally not be attempted without seeking professional help. What if I move to a country that has no extradition treaty with the U.S.?This is a drastic step and is not recommended. You give up too much by doing it, and there are usually other ways to deal with your tax debts. If you're thinking of moving out only until the statute of limitations passes, that probably won't work either. In most cases the statute of limitations is suspended while you are out of the reach of the US government. |
