I would like to pay my IRS tax bill, but I also owe state and local taxes, and need to make payments on my credit cards and student loans. What can I do?

You've just hit the nub of why so many people fall behind in their federal taxes: given the current state of the economy, and the huge debt load carried by the average citizen, it can be virtually impossible to pay all your bills in a timely manner. A few years ago, the average IRS revenue officer wouldn't have given this much thought; his priority would have been to collect whatever tax debt you owed to the IRS, without any consideration for how the rest of your finances would be affected.

Recently, though, the IRS has instituted its “Fresh Start” program, which is basically an admission that, as the nation's economic woes persist, more and more taxpayers are unable to pay their tax debt in-full within a reasonable time. Among other provisions, the Fresh Start program takes into account a taxpayer's need to repay his student loans, as well as any state or local tax bills (you'll still have to pay these obligations, of course, but the terms of your OIC hopefully will mean there's some money left over to take care of them). The IRS also will factor in your monthly credit card payments and any fees or charges imposed by your bank.

The important thing to remember about an Offer in Compromise—even if it's negotiated under the “Fresh Start” provisions—is that it doesn't excuse you from paying your bills (mortgage, credit card, student loans, etc.) The IRS will, however, adjust your payment schedule to account for the reality of these other obligations. Questions? Call the Oklahoma tax experts at Travis W. Watkins, PC (800-721-7054) for a free consultation today!