Settling your taxes is inevitable if you want a normal day to day life instead of living with a stressful burden. The most important action to take is to file your returns even if you cannot pay. Doing this avoids the failure to file penalty which is quite steep. The second action to take is to pay your current taxes, including estimated taxes if you are self-employed. Despite the boom in the economy in recent years, taxpayers still struggle significantly to settle tax debts. The amount of taxpayers that find themselves in trouble with the IRS grows significantly every year. The IRS’s job is to reduce the tax gap.
Never ignore the IRS
Do not ignore the IRS. Penalties and interest keep growing. The IRS will take certain steps which will make your situation worse. Even with this burden there are quite a few remedies to ensure you settle your tax debt. A few are explained below:
Set up an Installment Plan
An installment plan will help you settle tax debts depending upon the amount of our IRS debt. A settlement plan involves monthly payments which helps you to settle tax debts.
Offer in Compromise
If you qualify for an Offer in Compromise it is a great way to settle your debt for much less than you owe. It is a process but in the last few years the IRS has relaxed some of the rules to qualify. Commercials that state “You can settle for pennies on the dollar” are very misleading. It really depends upon your tax situation and an estimate of your future income.
Apply for Bankruptcy
In the United States Constitution, there is a law that allows you to apply for bankruptcy. It is important to contact a tax specialist before doing so. It is not always the best route for everyone but if everything else fails it can relieve you of certain tax debt. . There are many guidelines to follow to determine which IRS debt, if any, will be relieved with filing bankruptcy. For example, payroll trust fund debt is not excusable with bankruptcy
Not Currently Collectible
If you have a reasonable cause as to why you cannot pay or why you accumulated the debt, there may be grounds to file for non-collectible status. The IRS has ten years after assessment of the tax to collect the debt. Filing for non-collectible status may allow you time to regain your financial position. It is important to plan how you will effectively be in a position to settle tax debts if you find yourself in that situation.
For more information on settling your tax debt contact us or call Tax Resolutions, LLC at (802) 662-4127.