As the 2011 tax season approaches, many of us are beginning to worry about how much we might owe the IRS. Tax debts are common and many people may not be aware that they will owe taxes at the end of the year. For those experiencing financial hardships, tax debt can result in serious financial strain and even trouble with the IRS.
Handing Unpaid Taxes
In general there are three ways to handle your tax debts. First, you can request an IRS installment plan. This allows you to repay your debts over a period of one to three years, in smaller increments. The IRS offers this plan to anyone who owes less than $25,000 and is current on their taxes. Of course, you must be able to prove that you have the financial ability to maintain your installment payments.
The IRS also offers a type of debt settlement for those who cannot afford to repay their tax debts in full. If you are experiencing severe financial hardships and are unable to repay your full tax debt liability, you can request an Offer In Compromise. In this offer you propose an amount that you can realistically afford to pay the IRS over time. The IRS may agree to this offer if they can determine that your offer meets realistic collection potential, or the amount that your income will allow for repayment.
For those who may be able to afford to repay their tax liabilities, but have had large amounts added into their overall debt in the way of IRS penalties, the IRS offers a Penalty Abatement Program. This program allows you to request to have your tax debt penalty or delinquency fees removed from your overall debt liability. In most cases, you will be required to prove financial hardship in order for the IRS to lower or eliminate penalties and interest.