Tax debt can be a burden for many individuals and businesses. It can cause stress and anxiety, and can even lead to legal consequences if left unresolved. However, there are options for tax debt relief that can help alleviate the burden and get your finances back on track.
Negotiating with the IRS
One option for tax debt relief is to negotiate with the Internal Revenue Service (IRS). The IRS offers various payment plans and settlements to help individuals and businesses pay off their tax debt. These include:
- Installment agreements: This payment plan allows you to pay off your tax debt in monthly installments over a period of time. The amount you pay each month will depend on the total amount of your debt and your current financial situation.
- Offer in compromise: This settlement option allows you to settle your tax debt for less than the full amount you owe. However, it is important to note that not everyone is eligible for this option and the IRS will carefully review your financial situation before approving an offer in compromise.
- Currently not collectible status: If you are unable to make payments due to financial hardship, the IRS may temporarily suspend collection actions until your financial situation improves.
It is important to work with a tax professional or attorney when negotiating with the IRS to ensure that you are getting the best possible outcome for your situation.
In some cases, filing for bankruptcy may be an option for tax debt relief. Chapter 7 bankruptcy can eliminate certain types of tax debt, while Chapter 13 bankruptcy can allow for a payment plan to be set up to pay off the debt over a period of time. However, it is important to note that not all tax debts are eligible for discharge in bankruptcy and there are other consequences to consider before filing for bankruptcy.
Offer in Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS will generally accept an OIC when it is unlikely that the tax liability can be collected in full and the amount offered represents the most that can be collected within a reasonable period of time.
If you are considering an OIC, it is important to know that not everyone is eligible for this option. The IRS will carefully review your financial situation and ability to pay before approving an OIC. It is also important to work with a tax professional or attorney when submitting an OIC, as the process can be complex and there are many factors to consider.
Innocent Spouse Relief
If you filed a joint tax return with your spouse and your spouse did not report all of their income or claimed incorrect deductions, you may be eligible for innocent spouse relief. This option allows you to be relieved of responsibility for any tax, interest, or penalties that resulted from your spouse’s actions.
To qualify for innocent spouse relief, you must meet certain criteria, such as not knowing about the incorrect items on the tax return and not benefiting from them. It is important to work with a tax professional or attorney when pursuing innocent spouse relief, as the application process can be complex.
Tax debt can be a stressful and overwhelming situation, but there are options for relief. Whether you choose to negotiate with the IRS, file for bankruptcy, or pursue other options, it is important to work with a tax professional or attorney to ensure that you are getting the best possible outcome for your situation. By taking action and seeking relief, you can alleviate the burden of tax debt and get your finances back on track.