Owing the IRS means more penalties and fines if you do not come up with a payment plan. You may also lose control of your assets if the government seizes them or impose a tax lien. If you have a debt of more than $10k, you may wonder how to repay it without straining your finances.
Read on to discover several options you can explore and their eligibility criteria. We will also cover each tax relief option's terms and suitability for various conditions.
Installment Payment Plan
One way to deal with tax debt is by setting up an installment agreement plan. This way, you can pay a specified amount for a given period and avoid accumulating penalties.
Apply for an installment plan online and pay a setup fee of $31. Alternatively, submit your application physically or by mail for a $107 charge.
Once the IRS receives and reviews your application, you can agree on a reasonable repayment plan. A short-term installment program is suitable if your total debt is less than $100k. On the other hand, a long-term agreement is ideal for debt that is not more than $50k.
The eligibility criteria for installment payment plans will depend on specific programs. Still, you must meet some basic requirements such as:
- You filed all past returns
- You cannot pay the total amount once
- You do not have a current bankruptcy filing
Applying for an installment agreement plan will allow you to stop IRS debt collection measures. Further, you can qualify for other forms of credit like mortgages.
An Offer in Compromise (OIC)
If you cannot pay your entire tax liability due to severe financial problems, you may qualify for an offer in compromise. This program allows you to settle the debt for an amount lower than the actual value.
Submit an OIC application if you filed all past returns and submitted the estimated payments. You can also request consideration if you have a valid extension for the current financial year returns.
When the IRS receives your OIC application, they will review it and evaluate various factors. Such include your ability to pay and asset equity. They will also verify your income and revise your expenditure for a given period.
Before the IRS approves an offer in compromise, you will submit an initial payment in a lump sum. This is often 20% of the total amount you owe. If the IRS accepts your offer, they will send a confirmation letter. The document will include guidelines on clearing the balance in five or four installments.
Filing a Currently not Collectible Status
If you cannot cover living expenses and pay a tax debt, you may file a currently not collectible status. This program allows taxpayers to stop the IRS from using debt collection measures. Such may include wage garnishment, seizing assets, or freezing accounts.
When applying for this tax debt relief program, the IRS will require information about your expenditure and income. They will also need you to fill out a Collection Information Statement.
Filing a currently not collectible status is only suitable if you are in a severe financial crisis. This is because the program only delays the IRS from collecting what you owe. Still, the penalties and fines will accumulate until you can pay fully or apply for a different debt relief plan.
How to Identify the Most Suitable Tax Resolution Option
Identifying the best tax resolution plan can be tricky due to several options. Consulting an expert will help you evaluate your choices and eligibility for each program. Further, it ensures you organize your documents and file past returns before applying.
Get Tax Resolution Services in Texas
Seeking professional tax resolution services will help you determine how to deal with debt. Moreover, it protects your finances and allows you to avoid significant penalties.
At FinishLine Tax Solutions, we help Texas taxpayers that owe the IRS set up payment plans. Our professionals will ensure you pick a relief program suitable for the debt amount and your financial situation. Call us now if you owe the IRS $10k or more.