Are you buried under tax debt? Do you owe back taxes? Back taxes are known as taxes that you’re required to pay after the year they were due. If you let another year go by without paying the IRS, that’s when it’s referred to as back taxes.
Those back taxes are also subjected to interest and penalties. This debt can result in collector harassment. Here are five ways to manage your tax debt so you’re no longer stressed out.
Installment Agreement
Your first decision is to make an installment agreement. This consists of a monthly payment plan for paying off your debts. If you’re the victim of an investment scheme such as a Ponzi scheme, where you lost some or all of your investments, then you may qualify for the United States Tax Code to recover 30% to 40% of your losses. This complicated and lengthy process allows you to reduce your tax debt paid off in previous years by receiving a refund with interest.
Partial Installment Agreement
Your next option is a partial installment agreement in which you choose a long-term payment plan to pay off your IRS tax debts at a lower dollar amount. Similar to credit card payments, a partial installment agreement allows you to pay your back taxes in installments instead of one lump sum. A Certified Tax Resolution Specialist or tax debt attorney can help you negotiate the lowest monthly rate that fits your budget.
Make an Offer in Compromise
An Offer in Compromise is a name for the tax debt settlement plan. With this type of plan, you pay a portion in exchange for the remaining balance. During this process, the IRS will review all of your finances. They’ll use your finances to determine if you can pay the full amount. If it’s determined that you can’t, then they’ll reach a settlement.
The payments made for the OIC should be made within two years of the established agreement. If you default or miss a payment, then you’ll face additional penalties. The IRS may not allow you to file another OIC.
File for Currently Not Collectible (CNC) Status
If you simply don’t have the means to pay your back taxes, then you may file a Currently Not Collectible (CNC) status with the IRS. Instead of running from them, you can tell them that you’re not in the financial position to pay your back taxes. Like with an OIC, they will review your finances to determine if you can pay your back taxes. You’re required to provide proof that your income can’t cover living expenses.
Once they approve your request, the IRS will stop attempts to collect your tax debt. This prevents levies, liens, and wage garnishments from happening since the IRS realizes that you can’t afford to pay your back taxes. The CNC doesn’t prevent interest and penalty assessments. In addition, it doesn’t make your tax debt disappear. Your debt will continue to increase while you’re on the CNC. But you’re not expected to pay it until your financial situation improves.
Seek Outside Help to Reach a Settlement
If nothing else works out, then you can seek outside help to reach a tax settlement. Not paying your tax debt can lead creditors to use aggressive procedures to collect that debt. They may even win through wage garnishments or other means.
It’s important to be aware of your options so you can make the right decision for your financial situation. Whichever decision you choose, you should resolve it before the problem escalates. If you’re financially delinquent, then you should seek help from a non-profit credit counselor.
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The Law Office of Barbara B. Braziel helps people get out of debt. We offer free consultations to people of Savannah, GA and the surrounding areas, including Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City.
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