How to Get Out of Tax Debt
How to Get Out of Tax Debt.
Owing money to the IRS is an extremely stressful situation for anyone, especially if you don’t have the money to pay. However, the IRS is more forgiving than the collection calls and sternly worded letters make them seem. Even though you may not want to respond to IRS’s demands for payment, the worst thing you can do is ignore them. Here are five strategies for how to get out of tax debt.
The first and most used option for paying back tax debt is an installment agreement. An installment agreement is basically a monthly payment plan to repay tax debt to the IRS. In order to set up a payment plan, you’ll need to complete and send Form 9465 to the IRS. When setting up a payment plan you’ll need to decide how much you can pay each month and what date you want your payment due date. As long as you can repay your tax debt in three years or less, and you owe less than $10,000 (including interest and fees) the IRS required by law to accept your installment agreement. Unfortunately, an installment agreement is only an option if you owe less than $10,000 in tax debt.
Partial Payment Installment Agreement
A second choice for repaying tax debt is a partial payment agreement. With this option, you’ll set up a repayment plan similar to an installment agreement, however, the payments will not pay off the entire tax debt. Following the established repayment period, the IRS forgives the rest if your tax debt. Because this option allows you to settle your tax debt for less than you owe, applying for this type of agreement is much more difficult. Therefore it’s best to consult a tax professional to find out if a partial payment installment agreement will work for you.
Offer In Compromise
An offer in compromise is another way to satisfy your tax debt without paying the entire amount owed. With an offer in compromise, you agree to pay a lump sum or short-term payment plan to pay some of the tax debt in exchange for IRS forgiveness of the rest. If you think you are eligible for an offer in compromise contact a tax professional to find out more about negotiating with the IRS.
Tax Debt Discharge
The IRS has a ten-year statute of limitations on collecting back tax debt. Therefore, if you can somehow wait it out, it is possible for some to discharge some or all of their tax debt. Again, if you think you qualify for an offer in compromise, it’s best to consult a tax professional for guidance.
Tax Debt Discharge Through Bankruptcy
Filing got bankruptcy is a last resort for resolving your tax debts. That’s because there are many requirements for determining which tax debts can be discharged through bankruptcy. Unfortunately, many types of taxes don’t qualify. For example, the IRS checks the filing status and age of tax debt before determining their eligibility for discharge.
If you still have questions about how to get out of tax debt, contact the pros at USA Tax Prep today!