May 22, 2024

One Can Happen

The Healthy Lovers

Dealing With Your Tax Debts

Owing the IRS money is not a position anyone wants to be in. The IRS isn’t like most creditors you owe money to; they are protected by the government and have far more avenues of collection. Not only do you have to worry about collection letter, you may also face legal action, wage garnishment or have a lien put on your house. Although dealing with the IRS can be intimidating, the worst thing you can do about your tax debts is nothing.

Get Talking

If you owe the IRS money you need to contact them right away. Regardless of whether your tax debts are from the most recent tax season or many years old, it is important you get in contact as soon as possible. Don’t make the mistake of thinking that just because they haven’t contacted you about your tax debts, they won’t. You can bet your file is on someone’s desk at the IRS and when they do contact you, you may be facing additional charges such as late fees and penalties.

Negotiate A Deal

What many people don’t know about unpaid taxes is that they are very difficult to have settled through traditional avenues such as debt settlement companies or a bankruptcy. However, the IRS does offer taxpayers an opportunity to directly negotiate their tax debt payments. The IRS offers two programs to help you repay your tax debts in a way that you can afford.

If you (1) owe less than $25,000 and (b) do have some income that could be used to pay your tax debts, you may qualify for an IRS installment plan. The installment plan can arrange for you to pay a portion of your tax debts in small payments over a several year period. The IRS will determine your eligibility for the installment plan and how much your payments will be based on your income level. Therefore, it is extremely important that you have organized financial records at hand to demonstrate your income.

The second program offered by the IRS is an Offer In Compromise program, in which the IRS agrees to settle for less than is owed on the debt. To qualify for an OIC, you must be able to demonstrate extreme financial hardship. You must present an offer to the IRS for an amount that you feel you can realistically pay towards your tax debts. If the IRS agrees that your offer is equal to or greater than the amount they could reasonably collect from you, they may accept your offer.

Pay Your Debts

Once you obtain a payment arrangement with the IRS it is extremely important that you make your payments on time. In fact, many people have found a higher success rate when negotiating with the IRS if they offer to use an automatic debit system for their payments. This ensures the IRS gets their payment on time and gives the homeowner peace of mind that their payment has been made.