Falling behind on taxes and having to deal with the repercussions of tax debt with the IRS can be a stressful problem, affecting every aspect of your life. Fortunately, there are numerous options to eliminate or reduce your tax liability with the IRS. Whether you handle the situation yourself or hire a tax attorney to help you settle it, overwhelming tax debt isn’t an unfixable problem.
How to Handle Overwhelming Tax Debt
While you certainly have the option of handling your tax debt alone, it’s often advised to work with a tax attorney, especially if your tax debt exceeds $10,000. The only professionals qualified to handle tax debt are CPAs, enrolled agents, and tax attorneys. Because of their experience and specialty in the courtroom and dealing with the law, tax attorneys are best equipped to deal with tax debt and the IRS.
Understand that there is no “secret” to getting out of back taxes, but working with a tax attorney to determine a solution that is effective for your particular situation can make a huge difference. The five options for dealing with tax debt include:
An installment agreement. If you can afford to continue paying your taxes and simply need to reorganize your debt and payment plan, this allows you to create a monthly payment plan with the IRS. This is the best option for those who have simply fallen behind or can’t afford to pay as currently expected.
Partial payment installment agreement. This option reduces the dollar amount that you owe to the IRS. However, in exchange for tax debt reduction, you must agree to a long-term repayment plan. Though your tax debt will be reduced, you can still feel the pinch for years to come.
Offer in compromise. By making a lump sum payment upfront or agreement to a short-term payment plan, you can reduce your tax debt. Be sure to consult with your tax attorney on this option.
Not currently collectible. If your financial situation doesn’t give you the resources to pay, the IRS will voluntarily agree to stop collection efforts for a year or until you’re financially stable again.
Bankruptcy. Discuss with your lawyer whether a Chapter 7 or Chapter 13 filing is right for you.