There are ways to reduce your tax debt. Whether you work with the IRS directly or use a tax debt settlement professional, it’s important to understand your options. Search online to learn more about tax debt relief and how you can take advantage of it.
The following are your options if you’re trying to get rid of tax debt.
First and foremost, you should consider an IRS payment plan if you’re dealing with tax debt. It’s one of the easiest ways to get relief – and anyone, with any level of tax debt, can qualify for a payment plan.
An IRS payment plan is an agreement between yourself and the IRS. That agreement lays out how much money you owe, how long you’ll repay it for, and what your monthly payments will be. Once you’re on a payment plan and are making regular payments towards your debt, the IRS won’t typically garnish your wages or seize bank accounts or property. However, you will still be charged interest and have to pay penalties for late payments.
You have two types of payment plans to choose from: short-term and long-term. Short-term payment plans spread your tax debt repayment out over 180 days and is suitable for anyone with $10,000 or less in tax debt. Long-term payment plans spread repayment out over 120 days or more, and they’re the best choice for individuals with $50,000 or more in debt.
To get on an IRS payment plan, search online to see if you qualify before applying.
Another option you can take directly with the IRS is to have your debt set to “Currently Not Collectible” status. This is a special notation that allows you to stop making payments on your tax debt until you have the finances to do so.
Currently Not Collectible status can be granted when you can’t afford to pay the taxes you owe or make payments towards that debt. It’s essentially a way to defer your repayment with IRS approval. Once you’re granted Currently Not Collectible status, the IRS won’t garnish your wages, levy your bank accounts, or require you to set up a repayment plan. However, your debt doesn’t disappear – the immediate threat of having that debt collected is what goes away. The balance will continue to collect interest and late penalties, so your debt can grow while you’re in Currently Not Collectible Status.
In order to achieve this status, the IRS will have to determine that you cannot financially afford your tax debt repayment. The IRS will have to see “significant hardship”, or that paying your tax debt would result in an inability to pay for essential living expenses like rent and utilities. You’ll have to meet certain IRS requirements, but you can search online to see what you need to qualify for this status.
Lastly, you can try to settle your debt – and get rid of it without paying off the full amount – by submitting something called an “Offer in Compromise” to the IRS.
An Offer in Compromise is essentially a debt settlement agreement. You’re able to agree on a settlement with the IRS, paying less than the total amount you owe and eliminating some of your tax liability.
Typically, the IRS will approve Offer in Compromise agreements when you offer them an amount that they would be able to collect over a “reasonable period of time” – which means you won’t be able to get an agreement that completely erases your tax debt. However, it can significantly lower the amount you owe and help you get rid of your debt faster.
In order to qualify for an Offer in Compromise, you’ll need to apply and make sure you’re eligible. The IRS considers your facts and unique circumstances, including your income, expenses, and assets. Search online to find out if you qualify for the Offer in Compromise process before you begin applying.
If you’re struggling to repay your tax debt, you have options. However, you might not know about all of the options available to you. That’s why it’s a good idea to consult a tax debt settlement service before taking any action.
A tax debt settlement service can help you navigate the process of settling or reducing your debt. They can introduce you to different repayment options and help you assess all of the paths available to you. They may also be able to help you find tax debt solutions that you never considered. Search online to find tax debt settlement professionals and services in your local area. It could make a world of difference for your finances.
Source: Keep Asking