How to Get Out of Tax Debt
There’s no feeling worse than being in tax debt, but you’re not the only one.
Over 11 million Americans owe a total of $114 billion in back taxes. It’s a huge problem in our country and one that isn’t so easily solved by tax cuts and reprieves. There’s a lot you’re going to have to do to crawl out of the hole, but that’s why we’re here today.
In this post, we’re going to give you a quick guide to help you resolve your tax debts. It’s not going to be quick or easy, but with a plan in place, you can look forward to a brighter financial future.
Make Sure You’re Doing Taxes
Even if you’ve got a balance owing when you do your taxes, it’s still crucial to file them. Putting taxes on the back burner or ignoring them altogether is going to create much worse problems than the back taxes that already exist.
You don’t want criminal charges levied against you because you neglected your taxes. If you can’t complete them by the deadline, simply apply for an extension to give yourself time.
Using a Payment Plan
There are both short-term and long-term payment plans that the IRS has in place to deal with significant back taxes. Whichever one you qualify for gives you the ability to pay your taxes back over time in set installments.
Short-term payment plans will be paid back within 120 days, and you can owe a maximum of $100,000 to qualify. Long-term payment plans are paid back in 120 days or more, and you can owe a maximum of $50,000 to qualify. The best way to pay each is through automatic withdrawals from your checking account.
Offer in Compromise
An IRS offer in compromise allows you to settle your payments for less than what you owe. This is the best option if you can prove that you’re going through financial hardships that make it essentially impossible to pay your back taxes.
For most people, it’s extremely difficult to qualify for an offer in compromise over one of the payment plans.
Apply for “Currently Not Collectible”
The other thing you can apply for is “currently not collectible” status. This states that you can’t afford to pay your taxes, as well as your normal living expenses. It’s basically a deferral of your tax payments until a date at which you’re more financially capable, making it a temporary fix.
To qualify, you’ll have to prove to the IRS how dire your financial situation is by giving them income and expense information.
Get a Tax Accountant to Help With Tax Debt
These are a few of the ways you can tackle your tax debt, but most people that owe back taxes feel in over their heads. For that reason, it’s always advisable to hire a tax accountant to help you understand what your options are, as well as the consequences involved with failing to pay your taxes.
Having a tax debt is always uncomfortable, but it’s important to know that with hard work and dedication, you can get out and build a better future.
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