Reduce IRS Debt - What Are Your Options?
You owe back taxes. That's rough, but it isn't the end of the world. You have lots of options to reduce IRS debt, especially if this is the first time you're in debt to taxman. There are ways to significantly reduce the debt, it can be broken down into monthly payments, or the debt can be garnished from future tax refunds. The last method has the least effect on your daily life and finances, but it's difficult to get.
Hiring a tax attorney is a great way to relief some of the pressure and stress that you are feeling right now. Sure, they cost money, but the can be your face and voice to the IRS with will take a huge weight off of your shoulders. If you cannot afford an attorney, it would be a great idea to at least seeking consultation from one. They can show you the best route for you to take to reduce IRS debt.
Let's take a look at some ways to reduce IRS debt.
Redo Your Past Taxes
Before jumping in to other methods, it's a good idea to look at your past taxes to reduce IRS debt. If you can find errors, or if there are other deductions that you may have missed you can amend your past returns to reflect this. Be honest with this though, or you will end up in more trouble than you currently are in.
Analyze all of your past with incredible scrutiny to see if there are other deductions that you can add. You may still end up owing money, but if you can decrease IRS debt from the start it will be much easier to make it through this. Download form 1040X and a new form 1040 from the IRS to amend past returns.
Offer In Compromise
This seems to be the route that everyone wants to take to reduce IRS debt, but no one gets. Very few people who apply for OIC actually meet all of the requirements that it requires and get approved. In order to qualify for OIC you have to prove that your debt is more than the IRS's reasonable collection potential. This can be difficult.
If approved, you will pay a fraction of the money that you owe The Man, agree to file your taxes on time for the next five years, and agree to a few other terms.
If this is the route that you want to take to reduce IRS debt, I recommend paying a visit to a tax attorney or tax pro before to make sure that you aren't wasting your time.
While this doesn't directly reduce IRS debt, it will alleviate the pressure of having to pay a huge sum of money at once. The Installment Agreement allows you to make monthly payments that are debited directly from your checking account. Almost everyone who applies for Installment Agreements qualifies.
Partial Payment Installment Agreements are also available, and are the offspring of Offer In Compromise and the Installment Agreement. You make monthly payments for a set amount of time and the remainder is forgiven. Like OIC, this is pretty hard to qualify for, so ask a tax attorney.
Reduce IRS Debt
As you can see, there are tons of options to get your tax debts taken care of. There is also a program that the IRS leaves you alone for a year, then attempts to collect. If none of these apply to you, bankruptcy is also an option.
Be sure to seek out a tax attorney for, at least, advice. They know way more than you do and can help you prevent costly mistakes.
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