When it comes to settling tax debt owed to the IRS, you have many debt solutions and options. The IRS has made sure that there is a way to settle back taxes for every type of financial situation that a person may have. Your unique financial situation will determine what method of settlement will work best. Below are ways to settle tax debt. The methods below are in order by best method for your financial standing, going from good to bad. By 'good financial standing', I mean you have enough money to pay taxes and still enough money to pay all other bills after the tax bill is paid. 'Bad financial standing' means that you cannot make any payments towards the tax amount owed because it would leave you with less than enough for a minimum standard of living. These tips will help you find your way towards IRS debt relief.
- Pay amount in full. This is the easiest way to set your tax situation straight with the IRS; once you pay, they go away. If you don’t have the means to pay, you can consider refinancing your home, borrowing from friends or family, or selling some of your possessions you don’t need.
- Ask for a payment extension. If you need a little extra time to get the money together to pay in full, you can easily get a 45 day extension by asking for it. 45 days is the longest period of time you can ask for, but you most likely can ask for another 45 days after the previous is up and you have received another notice from the IRS stating more penalties and interest.
- Setup an installment agreement with the IRS. With an installment agreement you will be allowed to pay off your tax debt over time in more manageable monthly payments. In order to apply for one, you will need to either fill out IRS form 9465 or go to the IRS website and fill out the online payment agreement application (OPA).
- Setup a partial payment installment agreement. If you do not meet the requirements to pay the minimum monthly payments with the installment agreement you may qualify for the partial payment plan, which allows for smaller monthly payments. Every two years you may go under review to see if your payments can be increased to the full amount required with the installment agreement.
- Setup an offer in compromise. With an offer in compromise you pretty much make an offer to the IRS to pay an amount less than the original amount owed and call it even. In order for it to be accepted, the IRS needs to be convinced that if they were to take collection actions against you, they would not be able to collect more than what you are offering them.
- Get declared currently uncollectible and let the statute of limitations expire. Once the IRS declares you as uncollectible they will halt collection activities against you and they will review your situation every couple years to see if it has improved enough for you to make payments towards your taxes owed. While being declared currently uncollectible, the statute of limitations is still running and if it hits 10 years from the date of the assessment, you are no longer liable.
Start paying back taxes and getting rid of your IRS debt. It is highly suggested that you talk with a tax professional when you are dealing with a debt amount larger than $25,000, because the IRS is much more hesitant in setting up an agreement with an individual. A tax professional can set you up with the correct settlement method and increase the chances of it getting accepted dramatically.
Back Taxes Help contains detailed information on resolving problems with back taxes. Connect with tax specialists if you need help resolving your tax issues.
More information on settling back taxes with the IRS and state.