If you have tax debt, there are ways of reducing its impact on your life. It is important to be realistic about the situation and realize that you can’t ignore it. Depending on how much you owe, you may be able to deal with the IRS yourself, or you may need the help of tax professionals.
The IRS won’t ignore the problem
You can’t afford to ignore the problem and hope it goes away because the IRS won’t ignore it. It has the authority to place levies on your bank accounts, garnish your wages or place a tax lien on your property. Trying to avoid the IRS is a stretch for most people, particularly as there is a 10-year statute of limitations on tax debt.
As avoidance isn’t an option, and the effects of delaying can be serious, it is in your best interests to find a solution. It will help to hire a tax relief company, such as Fortress Tax Relief, if you have a debt over $10,000. This is more difficult to resolve on your own and Fortress can help you determine which strategy is best for you when dealing with your back taxes.
File your tax return on time even if you can’t pay it
File your tax return on time or apply for an extension. You need to do this even if you can’t pay it. You will pay less in penalties this way. If you don’t file your return and make some attempt to pay, your tax debt can grow considerably due to the levying of penalties and interest.
Negotiating a payment plan that suits your budget can help you to pay off your debt on a monthly basis at an amount you can afford until it is fully paid. Assessment of penalties and interest don’t stop because you agree to pay the IRS back but having an installment agreement in place can help you to avoid the consequences you face for not paying your taxes.
The IRS doesn’t often forgive tax debt
A Form 656 is an application for an Offer to Compromise (OEC) which means you can settle your tax debt for less than you owe. However, it is not often that you will be able to get such a deal unless you are going through severe financial difficulties and can prove this.
You may be able to qualify in certain situations, such as where you lose a job and future earning capacity or have huge healthcare expenses. Tax forgiveness is only available for those who are truly struggling with a tax burden.
Filing for a Penalty Abatement
If you have a good reason for not filing or not paying what you owed when you filed, it is possible to file for penalty abatement. This does not reduce your back taxes but the IRS may either reduce or remove penalties if you’re approved.
This means you must be able to prove ‘reasonable cause’ for not filing or paying on time. Simply not having the money available doesn’t count. A death in the family or a natural disaster may be considered a good reason.
Filing for Innocent spouse relief
Despite the fact that it is extremely rare for the IRS to offer tax debt forgiveness, you may qualify for Innocent Spouse Relief if you can prove you have no knowledge that your spouse owes back taxes.
If you can prove that your spouse filed or failed to file your joint tax return without your knowledge, you won’t be held responsible. You must have no knowledge of any balances or inaccuracies to qualify.