How to Successfully Get Out of Tax Debt in 1 Year!
If you realize that you owe a significant amount of money to the Internal Revenue Service (IRS) this year, your attention may quickly turn to how into getting out of debt as quickly as possible. Thinking ahead and developing a specific plan about how you will settle your debt to the IRS is an important first step. Owing money to the IRS can be stressful as the IRS has the power to garnish wages and/or seize property in order to make sure that the debt is paid.
As long as you have a legitimate tax return and have no intent to commit fraud, then you have a chance to reduce the amount that you owe. The IRS wants to get paid, and they would rather you do it as soon as possible and with legitimacy. Here are some tips for successfully getting out of your tax debt quickly in as little as one year:
Request An Installment Agreement:
An installment agreement can allow you to pay your tax debt to the IRS in monthly installments over a period of time. This gives taxpayers more time to pay, rather than requiring a lump sum payment. You can set up a designated amount within your means.
Apply For An Offer In Compromise:
In some cases, a taxpayer may be able to settle their tax debt for less than the full amount they owe. This is ideal for those whose tax debt exceeds what they can actually afford to pay. If you qualify, you will be able to make a lump-sum payment or a short-term payment plan.
Consider An Alternate Payment Method:
If you owe a large sum of money to the IRS, you don’t have to rely on your bank account. It may be wise to think of other sources of payment such as forms of credit. A personal loan from a bank, opening a credit card at a low-interest rate, or even asking for a loan from a family member can be a way to pay the debt to the IRS. Such a choice eliminates the risk of wage garnishment and/or seizure of property.
Declare Yourself Currently Not Collectible:
There are instances in which you may be unable to pay your debt for a period of time. This can stop the IRS from pursuing things like a wage garnishment or seizing property. You also are not required to set up an installment agreement at this time. Instead, the IRS will take any pending refunds and direct them towards your outstanding debt.
Making yourself “not collectible” means that you get a deferment on what you owe. The IRS will hold off on seizing your assets. They may put a Notice of Federal Tax Lien to notify you that you still owe a debt to them, which will show up on your credit report. When you are applying for a home loan or such, banks and creditors will know.
Generally, income and the statute of limitations will play into whether or not you qualify for this status. If you are retired, living on welfare, earning less than $84,000 a year, and reaching the 10-year statute, then the IRS will consider you “not collectible.”
Filing bankruptcy is something to consider in some rare cases. When your tax debt is eligible for discharge, them aim for bankruptcy either via Chapter 7 or Chapter 13. You will have to forfeit your assets to the court in both instances. Do not file for bankruptcy lightly, unless you are prepared to start over with your finances from scratch.
Unpaid taxes are called “priority debts” and they must meet certain criteria to allow for discharges. For one, the taxpayer must not have committed evasions or filed a fraudulent return. If you have already proven you’re untrustworthy in the eyes of the law, then the IRS will not allow for a second chance. You also cannot use bankruptcy to hide any intentional deceptions.
The timing of when you filed your taxes also matters. Taxes must have been due for three years or more. Factor in extensions which will add to the time that you must wait. Your tax return must have been filed at least two years ago, and with the assessment being a minimum of 240 days old. If you don’t meet these criteria, then you can’t consider the taxes owed as dischargeable.
Both options have benefits and tradeoffs. Filing for Chapter 7 bankruptcy ensures that you will clear your debts, even in a case of the unpaid balance. In contrast, Chapter 13 bankruptcy requires a more complex plan to pay off your debts with the surrendered assets.
Watch The Expiration Date For The Statute Of Limitations:
The IRS has a maximum of 10 years from the date of assessment to collect all taxes, penalties, and interest from you. So, if this period of time passes, you are not required to pay back your debt. Generally, the IRS does not “forget” about an outstanding tax debt, but it can happen. We recommend only considering this as a last resort.
Do you anticipate that you will owe the IRS a chunk of money this year, or already owe from a previous tax return? You may benefit from working with a tax firm to strategize the best way to handle your debt. Experts can identify what solution may work best for you, depending on your amount of credit and situation. Disposable income, which includes the money left over from student loans and credit card debt, is one such factor. If you are able to pay a portion of your debt, a firm will also use that in their strategy for you.
Let Success Tax Relief Deal With The IRS For You
Success Tax Relief is a full-service tax firm that can help you with routine tax prep and audit support. We also help clients apply for installment agreements, an offer in compromise or declaring yourself not collectible. Our team can communicate directly with the IRS on your behalf, to take away much of the stress and worry.
Contact us to get started. We’ll help you set up monthly payments and reduce your tax liabilities. Success Tax Relief wants to implement sensible debt management so that you can optimize your finances.