Many people find themselves feeling overwhelmed or intimidated when dealing with the IRS regarding money owed.
This is because the IRS has the ability to garnish wages, place liens on your finances and seize property that you own; however, all of the aforementioned actions are generally “last resort” options for the IRS.
You’ll find that if you act promptly regarding tax debt, especially with your communication with the IRS, that there are resolutions that work for everyone that can be established before the situation escalates. Below are some tax debt relief options you may want to consider in order to begin eliminating the amount you owe.
Request an Installment Agreement
If you can’t afford to pay all of your taxes on the date due, you should communicate with the IRS promptly. One of the options you’ll have to arrange payment on your taxes owed is an installment agreement. The IRS will expect timely payment and for you to pay off your tax debt in full within a certain amount of time, so be prepared to work your IRS payments into your regular monthly budgets.
Request a Partial Payment Installment Agreement
This agreement is similar to a regular agreement for installments, but it reduces the amount you owe and lowers your required monthly payments. If you feel you cannot afford the monthly payments the IRS has offered, or if the tax amount owed is something you cannot reasonably pay back within the required time frame, you can request a partial payment installment agreement.
Ask to be Listed as “Not Currently Collectible”
If you currently have no ability to pay your tax debt owed due to situations such as a death in the family, job loss, or medical conditions you can ask the IRS to be listed as “not currently collectible”. This means the IRS will not seek to collect your tax debt from you for a year or longer, depending on the situation. This can be helpful to ward off tax liens and collections during the time you cannot make your payments.
Offer in Compromise
If you have some money available you can propose an “offer in compromise” to the IRS. Essentially, this will lower the amount of tax debt you have to an amount both you and the IRS agree on. You will then have to pay everything in one lump sum.
Innocent Spouse Relief
If your spouse has passed away, or your divorce and your being held responsible for their taxes owed you can request release from the taxes. Often, the IRS will not hold you accountable for the taxes your spouse owes/owed if you can prove certain circumstances.
Statute of Limitations
If the taxes you are paying are 10 years or older, they have hit their statute of limitations. If this is the case, speak to the IRS or a tax attorney about getting these taxes eliminated from what you owe due to their age. You shouldn’t continue to pay on the debt that is past the statute and is no longer collectible. Do not just stop paying, however. You should communicate with the IRS first.
Bankruptcy should only be considered if the prior options listed, or other possibilities, have been exhausted or don’t apply. If you file for Chapter 7 bankruptcy you can potentially have all debts discharged if you qualify. Chapter 13 bankruptcy would discharge some debt and then place you on a payment plan for the rest. Be aware that any form of bankruptcy will stay on your credit report for 7-10 years and can heavily influence any other credit options you have or loans you apply for.