Tips for Handling Tax Debts

Every year, many Americans find themselves in a position in which they have tax debts that they are unable to pay in full. If this happens to you, don’t panic. The key is, first of all, to not avoid the problem. And, secondly, you must work with the IRS and, preferably, a professional tax adviser to find the best solution to help you settle the debt.   

Installment Agreements

One very common way to handle a tax debt that you cannot pay all at once is to set up an installment agreement or even a partial payment installment agreement. Via these arrangements, you will make small, manageable payments to the IRS until your debt is satisfied.

As long as you have some degree of disposable income and can reach a reasonable agreement with the IRS about how much you’ll pay and when, this option should provide an easy way to pay off your debt in a reasonable amount of time.

Work with your tax adviser or with the IRS directly to ensure you are eligible for this option and to set it up in a way that is mutually beneficial to both you and the IRS.

Offers in Compromise

Another option you might have if you are unable to pay your debt and can document your inability to pay it in full is an offer in compromise. Via this method, you and the IRS will settle on a reasonable payment amount that is actually less than what you owe to satisfy the debt.

Negotiating an offer in compromise can be tricky, so if you plan to go this route, it is highly advisable to have professional assistance. Otherwise, you just waste a lot of time and end up wracking up interest in the process…and that’s if your offer ever gets accepted in the first place.

As you can see, you do have options- these are actually just a few of many possible solutions- for paying too-high tax debts. For best results, work closely with a tax professional to avoid getting into this situation in the first place, or, if it’s too late for that, to get out of it in a way that won’t have a severe negative impact on your finances.