Tax season is over, which means one of two things. You either received a tax refund check or you owe the IRS. Owing the IRS is more common than you might think, and not being prepared for that additional cost is also becoming more commonplace. The trouble with tax debt is that people are often fearful of the IRS and may not get the help they need when trying to resolve unpaid taxes.
Not only can tax debt cause you to be put on the IRS’ priority list, but you may be charged penalty fees for non-payment. Going too long without payment or contacting the IRS about your debts can also lead to wage garnishment, a legal order than be difficult to get reversed once implemented. However, you don’t have to be fearful of the IRS because there are ways to manage your tax debts.
First, the IRS offers taxpayers an installment plan for debts under $25,000. This plan allows you to repay your debts in a series of affordable payments, over the period of two to three years. Depending on your financial situation and how much you owe, you may be able to get out of debt with little impact on your monthly budget. However, this plan doesn’t arrange itself and you must contact the IRS in order to gain approval for this type of payment plan.
Also, the IRS offers a type of debt settlement plan for those experiencing significant financial hardship. Because tax debts can be difficult to manage, or may not be eligible for, bankruptcy they do allow for a direct settlement option with taxpayers. The Offer In Compromise program can arrange for you to settle your debts for less than you owe. However, this program isn’t available for everyone and can require a lengthy approval process.