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.
- Eliminating Debt: Understanding Your Options (debt-consolidation-2u.com)
- How to Effectively Settle Your Tax Debt (2010taxes.org)