Dealing with your Internal Revenue Service (IRS) debt can be complicated and financially burdensome. You owe more than you can repay to the government, which can make things even more challenging. It’s important to remember that the IRS has the power to take control of your assets, which may be seized and used to repay your debt fully. Therefore, it’s crucial to pay attention to these amounts. However, there’s no need to panic, as there are several simple ways to resolve your IRS tax debt without suffering negative financial consequences.
Numerous resources from the Internal Revenue Service are at your disposal that can simplify the process of settling any accumulated tax debt. However, if you prefer an alternative approach, there are several simple ways to ensure you meet your tax obligation to the government on time.
Special program
If you meet the requirements for a special relief program, the IRS may allow you to defer your tax debt for a year or two. The program takes your current financial situation into account before determining your eligibility, and it may grant you an exemption from repaying any tax debt in the current fiscal year.
Offer in compromise
If the revenue services cannot recover the IRS tax debt through traditional means of forced collection, an offer in compromise may be allowed to settle the debt. However, strict qualification requirements must be met to be eligible for a significant reduction in the amount owed.
Installment agreement
If you can’t pay the full amount of tax due for the current year, an installment agreement is a straightforward way to settle IRS tax debt. The revenue service may allow you to make smaller and more manageable payments in installments to fulfill your tax obligation.
Innocent spouse relief
As an alternative to preferred repayment modes, a joint income account with your spouse can help you settle IRS tax debt. However, you must meet several qualification criteria to secure innocent spouse relief. Once the application is processed, the IRS will not impose tax implications on your spouse or ex-spouse.
Statute of limitations
The statute of limitations provides another way to avoid paying taxes in the current year. Keep in mind that the Internal Revenue Service has a 10-year window to collect the total amount of taxes owed by you in whatever way they see fit. However, this can be a complicated situation, and only a skilled tax attorney or financial expert can potentially help you convince the IRS to wait for a more favorable financial year to collect the remaining debt.
Penalty abatement
The type of debt determines the method of recovery and payment for taxes, and it also affects the amount of penalty imposed for delayed settlement. However, penalty abatement is possible only if you meet the required criteria. To determine the best way to apply for a penalty abatement based on your current financial situation, it’s essential to consult with a tax attorney.
Filing for bankruptcy
Filing for bankruptcy is generally considered a last resort, as it can significantly impact your financial situation. Bankruptcy signifies that you can no longer meet your current obligations, including debt requirements. Chapter 7 of the income tax code allows for a full discharge of any legal obligation to settle IRS tax debt, while Chapter 13 permits a payment plan to partially settle the debt. To explore either option, your tax attorney must file a bankruptcy petition, and the Internal Revenue Service will conduct an audit to assess the financial viability of your application.
