How To Settle IRS Debt
Owing money to The Man is extremely stressful. Learning how to settle IRS debt is the first step to relieving that stress. It may or may not be your fault, but you're still stuck with the debt. If you are like most people, you've dodged it and hoped that it would just go away. Unfortunately, the IRS is very persistent and won't let you forget about your debts. I applaud you for getting this far and doing some research on how to settle IRS debt and now it's time to take action!
A word on tax attorneys and tax pros: If you can afford to use the counsel of a tax professional, do it. They will help you navigate the IRS bureaucracy and make sure that you don't make any dumb mistakes along the way. If you can't afford for their full services, many attorneys can offer advice at a discounted price. If you can't find one that does, scour each one of their websites, they provide a ton of info on how they go about resolving tax cases and settle IRS debt.
Here are a few ways to settle IRS debt.
Review Your Past Taxes
Take a look at the returns that you filed the years that you owe money for. Go over them with a fine toothed comb to look for any mistakes you may have made that could reduce the amount before you settle IRS debt. Also look at your finances for those years to see if there are any deductions that you missed.
Before approaching The Man to settle IRS debt, see if you can reduce the amount that you currently owe. In order to amend a past tax return, you will need to fill out form 1040x along with a new 1040 for that year. Be cautious and honest though, if you amend a tax return then file for a debt settlement option your returns will be under review by The Man.
Offer In Compromise
Offer In Compromise is a popular way to significantly reduce amount you owe to settle IRS debt. The basic premise of OIC is that you are legitimately unable to repay the amount of your debt within a reasonable amount of time. The debt will be reduced to an amount that you can pay much easier in one lump sum, or a short series of payments.
In order to apply for OIC you must submit a 20% payment of your debt plus a $150 application fee. Even if you don't qualify for OIC, they still keep your 20% payment to pay toward your debt. Be very sure that this is the route that you want to take before applying to settle IRS debt.
Most people that apply for OIC do not get approved. A tax pro can be a lifesaver when this is the route that you want to take (or they can tell you it isn't the best route to take). They have experience with OIC and know what works, and what doesn't.
Installment agreements are the most common method to settle IRS debt. It functions as a monthly payment to pay down your debt. Almost anyone with less than $25,000 in debt to The Man will be approved. There are a few catches though (go figure, right?), if approved you agree to their payment terms and all tax refunds that you would normally receive during your payment period are withheld and used to pay down your balance.
Sometimes having to agree to their terms is the best way to get this all taken care of. If it were on your terms they would just waive all your debt, right? So get out there and settle IRS debt as soon as possible! Another option when you own a home and need to cover large amounts of debt is the debt remortgage. It's an option that's worth checking out.
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