A tax debt is the last thing that you may want to deal with but there are times when you cannot just avoid it. There could be a legitimate reason why you may have a big tax bill that you are unable to pay. However, you cannot use it as an excuse to avoid clearing the debt that you owe to the IRS. If you fail to pay, the authorities will surely penalize you by seizing your assets and placing a lien on your property to recover the debt.
Still, there are ways to work out a settlement with the authorities and save you from a penalty or criminal proceedings. The IRS will usually cooperate if you have a genuine intention to work things out and take the right approach in this context. Here are some useful tips that can help you resolve the debt issues and settle IRS tax debt properly.
Don’t ignore the problem
First things first, you should take your tax debt seriously because the IRS will not spare you at any cost. Even if you are unable to pay your taxes, you must still file your return on time. If that is not possible, you should file for an extension. Late filing gets you a penalty of 5% of the tax amount owed per month and can reach up to 25% of the balance. This means that your debt will grow rapidly if you fail to file your return or make payments on your obligation. So you must not ignore the problem but rather work on a strategy for resolving it.
Be realistic about the situation
Remember that the IRS forgives tax debts very rarely. However, they may accept an offer in compromise for settling the tax liability for less than what you owe to them. You may also get an option to pay back in installments that are easier on your pocket. But you should be realistic enough and not expect them to forgo the debt altogether. Moreover, you will probably have to prove that you are experiencing true financial hardship and will not be able to pay back your debt unless you have an easier option or settlement from the IRS.
Seek professional help
If you owe a small amount to the IRS, you can handle the settlement on your own. It is easy to do as you can give an online application for an installment payment plan, which the IRS approves in most cases where the liability is less than $10,000. However, you will surely need to hire an IRS attorney for negotiating a significant liability with the IRS. Look for a law firm that delivers results for clients dealing with major debts. They are aware about what really needs to be done for working out a feasible settlement plan with the tax authorities. What’s more, they can save you from critical action such as a tax lien, which can damage your credit.
Get the payback streamlined
The best bet to save you from tax hassles is to just go ahead and clear the debt. If you have a large IRS debt, you should get the payback streamlined by seeking an installment agreement with the IRS. This measure requires you to fill all the past returns and start paying installments as a part of an agreement. However, you will not qualify for such an agreement if filing for personal bankruptcy. Not only are these installments easy to pay but you also have the option of getting the payment period extended in case you are unable to pay according to the original agreement.
Pay attention to the Statute of Limitations
The IRS has a period of ten years from the date of assessment to collect the taxes, interest and penalties from the taxpayers. You need to pay attention to this Statute of Limitations to stay out of trouble with the tax authorities. Again, a tax attorney can help you in resolving the backdate taxes and other IRS issues by strategizing to wait out this expiration date.
Managing the IRS debt can be easier than it sounds provided that you are willing to follow the right path. The best thing is that it can save you from a lot of hassles in the long run because the IRS will get the tax anyway, whether you do it amicably or they have to penalize you for them. Collaborating with an experienced tax attorney to handle the issue and work out a feasible settlement plan with the authorities is the smartest thing to do.