For everyone dealing with back taxes from the IRS, there are a couple of options to help you resolve the issue. This article explores several opportunities to settle the tax debt with Uncle Sam. You can select the best approach to fix your back debt based on your specific situation.
Installment Agreement:
With a monthly payment plan, you can focus on paying your debt off. As long as you have a steady income stream, this option can take the burden off your neck.
Besides, if you come across a huge sum of money, a lump sum payment will go a long way to take the debt off your neck.
Consider Offer in Compromise
With this option, you can settle your back taxes for less than you owe. However, Uncle Sam requires you to pay a lump sum for this approach to work. Also, you can use a payment plan for a short period so you can get rid of the tax debt.
If you cannot afford what you owe the IRS, this option is a sweet deal. Whatever you pay as an offer in compromise will be counted as the entire payment for what you owe. If you qualify, you can end up saving thousands in taxes, penalties and interest.
Not Currently Collectible
With this approach, Uncle Sam will leave you alone for at least a year. An account that is currently not collectible means that you do not have the required resources to service your back taxes at the moment.
For Uncle Sam to declare you as Currently Not Collectible, there should be enough evidence proving you cannot afford the tax debt. This program allows you to file an appeal to prevent an IRS levy, tax, or seizure.
Filing for Bankruptcy
When seeking protection for tax debt, bankruptcy might provide you with an opportunity. One of the benefits of filing for bankruptcy is the possibility of discharging the income tax. To consider bankruptcy, ensure you meet the requirements to get the debt discharged.
While Chapter 7 ultimately removes allowed debts, chapter 13 bankruptcy sets up a repayment plan for some debts while some are discharged.
Avoid Wage Garnishments
When you owe federal income taxes, it comes with a couple of consequences, like wage garnishment. This might lead one to financial trouble if the levy is not released. You can, however, bargain with Uncle Sam to modify or remove the garnishment if it is causing you financial hardship.
Keep your Bank Accounts from Levy
Uncle Sam could issue a levy to withdraw funds from your bank account to be used to service your tax debt. The bank will remove any funds to service the tax whenever any account is serviced. They can empty an account and send the funds to the IRS within 21 days.
However, you can work with Uncle Sam to obtain the release of any tax lien placed on your account.
Innocent Spouse Relief
You might be exempted from such tax woes for people with tax issues caused solely by their partner. As long as you prove that you were not involved in whatever your spouse did, Uncle Sam might exempt you from whatever fines/penalties incurred.
Remember, the Statue of Limitation has an Expiry Date.
Back taxes have a statute of limitations. Uncle Sam has ten years from the date scheduled to collect the back taxes with all penalties and interest. When you work with an attorney or tax professional, they can help you set up a viable strategy to take care of your back taxes. Together, you can work to set up a plan to wait out the ten years.
It is helpful as the appeal can halt levies, seizures, taxes, etc. You can explain your situation with the collection, which Uncle Sam can resolve without a levy.
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Pat Raskob