How To Reduce Your Tax Debt

If you owe back taxes to the IRS there are a few things you can do on your own to get relief if the amount you owe is under ten thousand dollars.  If you owe over this amount, you should seriously consider hiring a tax expert to assist you in your dealings with the Internal Revenue Service.

If you are able to negotiate with the IRS yourself, you have a few paths you can choose to resolve this debt.  Make sure before you approach the IRS with any negotiations that you can back up your dispute and are able to make a repayment plan.  If you walk into an IRS office “blind” you will be in a lot of trouble.  Have as much documentation as possible when approaching the agent, and be willing to bend a little.

After you have settled on the actual amount owed with the IRS agent, there are four repayment plans which are acceptable to the IRS for repayment.

The first option is an installment agreement.  This type of agreement can be made with the IRS, but be aware that it carries extra charges.  The IRS will charge you a fee to set up the installment agreement and they will continue to charge you interest and penalties on the remaining balance each month.  It is nearly impossible to get out of debt this way unless you continue to overpay the amount due each month.

The second option is the partial payment installment plan.  You need to pay a considerable amount down on the debt, and then you can make installment payments on the balance.

Your third option is an Offer in Compromise, which is a negotiation that reduces the total amount of what is owed, even after any prior negotiations, for a lump sum payment immediately.

Finally, you have the choice to ask for a deferment which is referred to as not currently collectible, or postponed collections.  This program will give you up to a year to pay the balance in full in one lump sum.  This program is actually not encouraged, but is available to those who ask.

The best way to handle a debt problem with the IRS is to face that problem as soon as you can and with as much information as you can obtain to back your claim.  The IRS has a very steep interest rate and their penalties are huge.  Many times the fees associated with these penalties are higher than the original bill.


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