How Do I Get Rid of Tax Debt?
Making an IRS payment plan, applying for an offer in compromise, requesting for a delay in collection, and working with an IRS tax attorney are key options for resolving tax debt. Taking these steps can help a taxpayer minimize the impact of delinquent taxes on his or her life, credit, and financial standing.
Steps for Removing IRS Tax Debt
Making an IRS Payment Plan
The IRS offers taxpayers more time to pay the tax debt in the form of a payment plan. Through a payment plan, a taxpayer can pay the outstanding tax bill, including accrued interests and penalties, in installments over a specified period. The taxpayer can either get a short-term or a long-term installment plan, depending on the amount owed.
To qualify for a short-term payment plan, the taxpayer must owe at least $100,000 in total tax, interest, and fees. The taxpayer must owe $50,000 in cumulative tax, interest, and fees to qualify for a long-term payment plan.
Applying for an Offer in Compromise
A delinquent taxpayer may get tax relief through an “offer in compromise.” This arrangement enables the taxpayer to pay fewer delinquent taxes than he or she owes the agency. Applying for an offer in compromise may be the best option for taxpayers who can’t settle their delinquent taxes or if doing so results in financial challenges.
The IRS is more likely to approve a payment plan than an offer in compromise. The agency approves less than half the requests.
Requesting for a Delay in Collection
A taxpayer can request the IRS to set his or her account to “Currently Not Collectible” status if he or she can’t meet the tax payment obligations and living expenses. The taxpayer must apply for this delay in collection. The IRS may ask the taxpayer to fill out a Collection Information Statement to show that he or she is indeed in a tough financial situation. The taxpayer must provide information about monthly earnings and daily living expenditures on that form.
Working with an IRS Tax Attorney
An IRS tax attorney can provide meaningful assistance to a taxpayer in distress and looking for tax debt help. The attorney can help the taxpayer determine the amount of back taxes he or she owes to the IRS and make a realistic payment plan. The attorney can also walk the distressed taxpayer through the process of requesting an offer in compromise or delay in collection.