If you are in at your wit’s end over what to do about your IRS tax debt, you should know about the various options you have open to you. The IRS is more than willing to evaluate your debts and discuss with you how to settle it. Click here to read or watch more IRS Help resources.
You may be pleasantly surprised to discover that the IRS will help you provided you are respectful towards them and show that you are serious about taking responsibility to clear your debt. So be sure to exhibit politeness and cooperate with the IRS staff when dealing with them. Being rude will get you nowhere and you will be treated to stern inflexibillity in solving your tax debt, which will do you no good.
The most common way to get out of tax debt is to go under a payment plan. This simply means that the IRS allows you to pay off your debt within the tax year (that means no more than 12 monthly instalments). Only in extreme circumstances will they allow a debt to be split up into more than 12 payments. The reasoning is that they want you to be debt-free in time for next year’s tax bill; otherwise, you will be on payment plans forever. To be allowed a payment plan, all you need to do is suggest it to the IRS and in all likelihood, they will agree to it.
Another option open to you is to apply for an Offer in Compromise. This is a provision whereby the IRS allows you to pay a certain percentage of you tax debt after which the rest is cancelled. Although it is difficult to be granted an Offer in Compromise, it may be still worth making an application for one of the three types of Offers in Compromise available from the IRS.
The first is based on your ability to pay off your total debt by the deadline set by the IRS. The IRS will evaluate your income and assets and if they feel you do not have the capacity to pay off your entire debt, then it will be reduced to an amount you can afford to pay. The second type of Offer in Compromise is where there has been a mistake in the amount of your tax debt. If such a situation is shown to be true, then you will only be liable for the correct amount of your tax debt. The final type of Offer in Compromise is where you agree to pay a lump sum that is close enough to the actual sum that you owe. Usually the percentage acceptable to the IRS is about 80% of your total debt.
An IRS tax debt does not have to cause you undue worries. There are programs in place that can help you get out of your tax debts fairly quickly.