For many people, tax season is a dreaded time of year and dealing with the IRS is even more stressful. The good news though, is that if you find yourself owing money to the IRS, you can easily resolve your debt. Read on below and find out what options you have to get out of tax debt today.
First Things First
First of all, if you find yourself in debt with the IRS, you need to double-check your original income tax return. In some cases, you may have simply overlooked some deductions. If this is the case, you can simply amend your return, which will reduce the amount of money you owe.
After you have reviewed your return, you need to decide whether you want to handle the debt on your own or hire the help of a tax professional. Typically, if you owe more than $10,000, you should hire a professional. However, if you choose to handle it on your own, you will need to determine a tax debt plan.
One way to resolve your IRS tax debt is by agreeing to a monthly installment plan. However, before you request an installment plan, be sure that you have filed all of the required tax forms. You should also determine just exactly how much you can afford to pay each month.
There are many ways to request a monthly installment agreement. If you owe less than $50,000, you can apply online, by phone or by mailing Form 9465 (Installment Agreement Request) to the IRS. If you owe more than $50,000, you must mail your request along with Form 433-F (Collection Information Statement).
If, after reviewing your situation, the IRS determines that you cannot pay any of your tax debt at the time being, they may delay any collection efforts until your financial situation improves. However, penalties and interest charges will continue to build up until your debt is resolved.
Offer in Compromise
In some cases, the IRS may grant you with an Offer in Compromise, which allows you to resolve your debt for less than you actually owe. This is a great option for people who foresee long-term financial hardships. To qualify for an Offer in Compromise, you must be current with all payment and filing requirements and cannot be involved in an open bankruptcy proceeding.
You can obtain all of the forms you need to apply for an Offer in Compromise within the Form 656-B booklet. There is a $150 application fee (as of 2013), which is non-refundable, and you will be required to make an initial payment based on the option you choose. However, if you meet the IRS' Low Income Certification guidelines, the application fee and initial payment may be waived.
Other Ways to Resolve IRS Tax Debt
These are the most common and best ways to resolve IRS tax debt. Nevertheless, you do have additional options. Other options you may wish to consider include taking a cash advance on your credit card, taking out a bank loan or utilizing your equity in real estate.
You may also consider borrowing against your 401(k) plan, borrowing against your life insurance policy or filing bankruptcy. Before choosing any of these options though, be sure to weigh the pros and cons of each. Additionally, make sure that the method you choose will suit your unique situation.
Jayson Mullin is a partner at tax resolution company Top Tax Defenders. They specialize in IRS tax issues including unfiled tax returns, audit representation and much more.