Federal tax debts can be a major source of stress for most Americans, and there are all manner of Internal Revenue Service (IRS) levies, penalties, late payments and other fees that you may have to deal with. Perhaps the IRS has threatened to garnish your wages or is already doing so, or maybe they have seized assets or placed a lien on your property? In such circumstances, it’s understandable that many people like you will be desperately seeking some form of tax debt relief. The great news is that it’s possible to get out of your apparent financial black hole when you follow the below advice.
What tax problems are you struggling with?
Various common issues can confront Americans in their dealings with the IRS, with each of them typically requiring their own unique strategy if they are to be resolved.
You may be fretting about unpaid back taxes, unaffordable IRS Payment Plans or Full Payment Amounts, incomplete or late tax returns, owed payroll taxes (‘941’ taxes), IRS audits, offshore bank accounts… and, of course, some of the issues we’ve already cited above.
The list goes on, and you’ll have to carefully research and weigh up the best routes for dealing with these problems. But there’s another factor that will affect what approaches you can take to achieving tax debt relief – the amount of money you actually owe to the IRS.
Size does matter when it comes to tax debt
The general rule of thumb here is that the lower your back tax debts are, the easier it will be to get the IRS to compromise and forgive the outstanding debt.
After all, with so many cases of major tax fraud, corporate tax-dodging and significant underpayments, if you hardly owe anything in comparison, the IRS is hardly likely to spend significant resources trying to get you to pay back every cent.
If you owe less than $10,000, you’re in a pretty good position, particularly if your record is a ‘clean’ one, with no previous tax penalties or fines. It might be best in this situation to simply request the IRS’s standard three-year payment plan that divides your debt into 36 small, manageable monthly instalments.
The situation’s a bit different when you’re between $10,000 and $20,000 in debt. There are still some good options for dealing with your debt, but you may have to seek the assistance of an attorney, tax resolution specialist or tax debt relief company. Unfortunately, if you have debt at this level, the IRS is much less likely to give you a quick path to resolving it.
More advanced debts of over $20,000, meanwhile, put you among the ‘big fish’ of IRS targets, so you don’t have a brilliant hand for negotiating the debt down – or at least, not unless you have tax specialists, attorneys or debt resolution firms to assist you. But even in this situation, it’s important to remember that hope is not lost. An effective tax settlement should still be possible, but you’ll need to spend a good amount of time and effort researching and evaluating your options.
What are the tax debt relief options available from the IRS?
There are various routes that the IRS offers to those with back tax debts, and it’s important to consider all of them before taking any action carefully. Negotiations with the IRS can sometimes be a ‘one-shot’ thing, with tens of thousands of dollars of savings potentially lost if you make the wrong choice. So, take the time to read through the below options:
Instalment payment plans are very popular among those seeking IRS tax debt relief, for obvious reasons: they enable payments to be spread over an extended period of time to lessen the burden on the debtor. Thankfully, the IRS is quite flexible when agreeing on such plans, and even those who only owe a few hundred or thousand dollars can take advantage of them.
What is known as an Offer in Compromise (OIC) can be an invaluable option for those who owe a greater amount in back taxes, penalties, fines or other fees that they may be reasonably able to repay. OIC enables you to make the IRS an offer to settle your debt for less than you actually owe. However, you’ll have to get the IRS to accept your offer, as if you offer too small an amount, they will simply reject your suggestion and continue insisting that you repay the total sum owed.
So, what route should you take?
The above are not the only options that may be open to you, with others including filing for bankruptcy or by being declared not currently collectable by the IRS. Nonetheless, an instalment plan or OIC may be the routes that you are best advised to consider at first.
As for which tax debt relief strategy is the right one for you, well, it all depends on your unique financial situation. You will need to consider your ability to pay, in the context of your monthly disposable income. If, for instance, you have a decent amount of money coming in, an instalment agreement or partial-pay instalment agreement may be the best path. But if you are only just making enough money to cover your expenses and are more or less breaking even, an OIC or even bankruptcy may be better.
Consider the merits of a tax debt relief professional
As a general rule, you should seek the advice of a tax professional when you have IRS tax debts to resolve. If you owe less than $10,000, you can probably handle the problem on your own by getting in touch directly with the IRS and requesting a payment plan. For those that owe more than $25,000, though, there’s no ambiguity about it – they really should be working with an experienced tax professional.
Any such professional that you choose should possess the in-depth expertise and a strong background in IRS collection matters, encompassing everything from dealing with revenue officers to the Automated Collection Systems division and Appeals. With the right person by your side, the prospect of tackling and resolving those burdensome tax debts will be so much less overwhelming and intimidating.