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Last Updated on March 9, 2021 by Editor Futurescope
If you fall behind on your tax obligations to the IRS, you will have to pay interest on the amount you owe and also penalties for late payment. However, if you can demonstrate that you aren’t in the financial position to pay the owed taxes in full, the IRS may be willing to consider various payment options. Here are some things you can do to pay off your troublesome tax debts:
Negotiate a One-Time Payment For a Portion of the Owed Amount
You can fill Form 656 to apply for an offer in compromise. The IRS will review your application and consider your ability to pay based on your income, asset equity, and living expenses. If they conclude that you are eligible for the offer in compromise option, you may be able to settle your tax debt by paying only part of the amount you owe. You may be able to do this with a one-time payment or pay in installments.
Find an Installment Plan That Fits Within Your Monthly Budget
If you qualify for an installment plan, you will be able to make monthly tax debt payments to the IRS. To be eligible for it, however, your debt must be $50,000 or less, and you must have filed tax returns for the past five years. Additionally, you must have paid your state taxes and late fees, and you must be able to meet the minimum monthly payments.
Put Your Account on Hold Due to Financial Hardship
If you have insufficient or no income and no assets, you must furnish proof of this to the IRS. You must be able to convince them paying your taxes would make it difficult for you to pay for your living expenses. After reviewing your case, they may agree to put your account on hold with a Currently Not Collectible status. It will be a temporary hold, during which the IRS will not garnish your wages or seize your property. That will give you time to get your finances in order, and the IRS will expect you to pay your tax debt after a specified period.
How Outside Assistance Can be Helpful When Assessing Your Options
If your tax situation is complicated or your tax debt is $25,000 or more, you should consider getting outside assistance from an experienced tax accountant. They will review your tax situation and advise you on the tax relief options that are available to you. Additionally, they may be able to negotiate with the IRS and come up with an acceptable solution for debt repayment.
By taking immediate and concrete steps to resolve your troublesome tax debts, you can avoid locking horns with the IRS over debt payment. You can make payments on time, clear the entire amount you owe, and get a fresh start. There will be no question then of the IRS seizing your current and future federal income tax refunds to pay off the tax debt. You will also face no issues in obtaining bank loans once you are debt-free.
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