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.