One of the things that you should never miss paying off is your taxes. Tax debt is of quite a serious nature as this is the money that you owe to the government. If not paid, the government can even garnish your bank accounts. Thus, it is better to keep a watch on the money that you are required to pay to the Internal Revenue System or the IRS. However, if you face problems with your tax debts, you can consolidate debt and include your tax debts into it or else you can also negotiate with the IRS and talk to them about your financial problems.
Ways to pay off tax debt
There are mainly two ways in which you can pay off your tax debt and these are the settlement agreement and the installment agreement. The different installment agreements through which you can pay off your debts are:
1. Partial payment installment agreement – Partial payment installment agreement is considered best tax debt solutions if your finances do not even allow you to make even minimum payments through either guaranteed or streamlined agreements. In installment agreement, you will get the option to make monthly payments as per your affordability. Other than this, the IRS will also be re-evaluating terms of the agreement every 2 years in order to check whether or not your affordability has increased.
2. Guaranteed installment agreement – Guaranteed installment agreement is suitable for you only if the amount you owe to the IRS is less than $10,000. In addition, you are also required to fulfill some eligibility criteria. You will be required to agree that you will file and pay the taxes within time for the forthcoming tax years. The IRS however won’t be approving the installment agreement if you had made payments through another installment agreement in past 5 years.
3. Streamlined installment agreement – In case of streamlined installment agreement, you will not be required to fill out a Form, 433-F which the Internal Revenue System requires so that they can analyze your financial condition and if you are in real financial crisis. If you want to avail of the streamlined installment agreement in order to pay off your IRS tax debt, the amount that you owe should be more than $25,000 and in addition to that you will also have to agree that you are going to pay off the due amount within 60 months.
The options that you have in case you opt for settlement agreement is the penalty reprieve offer, the compromise offer or else you can also seek professional help in order to settle your tax debts. Other than this, you can also opt for IRS tax bankruptcy option only if your situation is such that you will be required to file bankruptcy.
Every taxpayer has several options for resolving his federal tax debts. There are many tax professionals who are willing to help individuals to evaluate their options for dealing with tax debts. They will prepare financial statement for their clients based on their financial situation to determine which tax settlement strategies are most applicable for them.
Below are the five strategies to settle your tax debts.
1. Installment agreement – This is a monthly payment plan for paying off your Internal Revenue Service. With this IRS tax debt settlement strategy, either you or your tax professional can set up an instalment agreement by filling out some paper works, over the phone or by using online payment agreement.
2. Not currently collectible – It means that the taxpayer has no ability to pay his tax debts. After the Internal Revenue Service received the evidence that you have no ability to pay, it will declare that you are “currently not collectible”. After declaration, the IRS shall stop all collection activities including levies and garnishment.
3. Partial payment installment agreement – This is an IRS tax debt settlement strategy that contains a fairly new debt management program. Through this, you will have a long term payment plan to pay off the Internal Revenue Service at a reduced dollar amount.
4. Filing a bankruptcy – As a tax payer, you can be eligible for discharge under Chapter 7 (which provides full discharge of your allowable debts and which is most likely applicable when you have no real state or when you have modest income) or under Chapter 13 (where you will be provided with a payment plan to repay some of your debts, with the remainder of debts discharged) of the Bankruptcy Code. However, not all tax debts are capable of being discharged in bankruptcy.
5. Filing an offer-in-compromise – It is one of the best ways to settle your tax debts for even less than the amount you owe. There are 3 options for this IRS tax debt settlement strategy: lump sum payment, monthly payment for over 24months or less, or monthly payments over the remaining statute of limitations. If you choose the lump sum payment plan, you must submit at least 20% down payment or must start making monthly payments if you choose any of the two monthly payment options.
There are several tax settlement strategies you can choose from. However, there are certain requirements for each option that you have to comply first before you become eligible.
Life can be a lot easier if you do not have to worry of everything such as settling tax debt. Tax debt has been the problem of many people since they have received some notice form the IRS. Whatever the reasons in not settling the tax debt, the fact still remains that this is a debt that needs to be paid. In order to settle IRS tax debt, you have to do some necessary actions in order for your salary paycheck and house to be auctioned. This can be possible if they see that are not willing or you are showing negligence. Therefore, you got do something in order for the IRS to see that you are willing to do your part.
If you have received letters from the IRS, it is necessary that you call them and not vice versa. Do not wait for the moment where the IRS agents will call you. This only means that you are not showing interest in settling your tax debt. You can negotiate with them to know the terms and conditions which you think you can be able to meet. Do not sign any legal documents if you are not sure that you can be able to meet them. If you think that the agreement is in your favor, then you can sign it but be sure to follow religiously what is agreed upon. Because if not, the penalties and interest will increase tremendously. For people who have lost their job or have physical disabilities, the penalties and interest are removed. This case does not apply to everybody.
It is highly recommended that you have to educate yourself with the laws and regulations governing tax debt. If you have zero knowledge then you can search online and be familiar with the terms and conditions as well as the favors which you can avail of. Another thing that you can do in order to gain more information is to visit the local attorney in your place. Lawyers are the perfect source of information so you can visit one of them to know learn the laws and regulations of IRS regarding tax debt.