Having tax debt is incredibly stressful— it’s something no one wants to deal with. But if you’re struggling to pay your back taxes, know that there are a number of ways you can settle your tax debt with the IRS. To help you understand your options, in this post we’re taking a closer look at 5 different ways you can settle IRS back taxes.
1. Installment Agreements
An installment agreement is, essentially, a tax debt payment plan. By entering into an installment agreement, you agree to pay your tax debt to the IRS in monthly installments, rather than in a lump sum. Installment agreements can be an excellent option for those who can pay the IRS a smaller monthly amount, but simply can’t pay their full tax debt all at once.
However, not everyone can qualify for an installment agreement. To qualify, you must first owe the IRS less than $50,000. Then, you must also be up to date in filing your tax returns and be able to pay the required monthly amount each month, on time. Additionally, the IRS does not accept all installment agreement applications and can decline in certain cases.
For a more in depth look at installment agreement qualifications and terms, view our Installment Agreement Page.
2. Offer in Compromise
An Offer in Compromise is one of very few options that can allow you to pay the IRS less than you owe in back taxes, should you qualify. To qualify for an Offer in Compromise, you must convince the IRS that you can’t afford to pay your full tax debt in either a lump sum or in installments. To do this, you’ll need to provide the IRS with detailed information about your finances and they must agree that you cannot pay your full tax balance.
While an Offer in Compromise is an excellent option that can allow taxpayers to pay less than they owe in back taxes, it’s a challenging agreement to enter. The IRS will take a detailed look at your finances to determine whether or not you actually qualify for an OIC should you file for one. Because an OIC is challenging to obtain, we generally recommend seeking professional guidance if you think you qualify for an OIC to avoid getting rejected.
To learn more about the qualifications for entering into an OIC agreement, view our Offer in Compromise Page.
3. Innocent Spouse Programs
If you filed a joint tax return with your spouse or former spouse, you can be held legally responsible for any tax debt that results from that return. However, if your spouse misled or deceived you when filing this joint tax return, resulting in unexpected debt, you may qualify for an Innocent Spouse Program.
To qualify for an Innocent Spouse Program, you must be able to prove that your spouse failed to report income, reported income incorrectly, or took deductions or credits that weren’t permitted. Then, you must also be able to prove that they did this without your knowledge.
Innocent Spouse Programs are fairly complicated and, in fact, there’s more than one type. But if you qualify, you could be eligible for equitable relief, separation of liability, or innocent spouse relief.
To learn more about Innocent Spouse Programs, visit our Innocent Spouse Relief Page.
4. Currently Not Collectible
Currently not collectible doesn’t eliminate your tax debt. However, it can put a hold on it, which can be vital for those who are experiencing extreme hardship. If you can provide the IRS with reasons as to why you cannot pay your tax now, you may be granted CNC status. CNC status doesn’t stop interest from accruing on your tax debt. However, it does put a temporary hold on severe IRS actions like tax levies, tax liens, and wage garnishment.
While CNC is a temporary tax debt solution, it can be incredibly valuable if you need more time to figure out your tax issues and do not want the fear of liens, levies, or wage garnishment hanging over your head.
To learn more about qualifying for CNC status, visit our Currently Not Collectable Page.
5. Hire a Tax Professional
If your total tax debt amount is less than $10,000, you may be able to resolve it on your own by contacting the IRS directly. However, if you’re struggling with a high tax burden, it may be wise for you to seek the advice of a tax professional.
A tax professional can examine your financial situation from every angle and determine which tax relief strategy would be right for you. They may help you use one of the tax debt relief strategies listed above or they may be able to help you take advantage of a more obscure option that applies to your unique situation.
If you’re struggling with back taxes and need professional advice, contact Tax Defense Partners today for a free phone consultation. Tax Defense Partners specializes in providing tax debt relief services for individual taxpayers, corporations, associations, and small businesses. No matter your tax issue, our dedicated team of tax professionals is ready to help you achieve the best possible tax relief so that you pay the IRS the lowest amount allowed by law.