What You Should Know About Tax Debt Relief
Sept 13, 2023
Taxes are one of the certainties in life, but that doesn’t make paying them any easier. Maybe you’ve come across tough times or simply forgot to pay them and now you owe the IRS. The government has various measures in place to try and collect the funds from you, from wage garnishment to placing liens on your property or intercepting your tax refunds. On top of that, you could pay more than you owe thanks to interest and fees if you don’t handle it promptly. If Uncle Sam is breathing down your back to pay up, it’s time to consider various tax debt relief programs. Here’s what you need to know and where to get tax debt help.
Getting Professional Help
In exchange for a fee, these companies work with your creditors to reduce the amount you pay or set up payment plans. Some tax relief companies may be better than others, so it’s key to do your own research and vet companies through the Better Business Bureau (BBB) and Trustpilot to ensure they’re legitimate.
Ideally, you want the company to deliver on its mission so you can navigate your debt repayment and move forward. This option may only be available in certain situations. If you go this route, be sure to look at the fees and the timeline so you know everything upfront.
For more support, you can contact a credit counselor for tax debt help. For example, there are nonprofit organizations such as the National Foundation for Credit Counseling that can guide you through and examine your finances.
Additionally, working directly with the IRS can be a smart move as well.
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If you owe the IRS, get tax debt help right away. That can minimize what you pay in interest and fees and can improve your emotional and financial well-being by creating a plan.
Tax Debt Relief Programs from the IRS
Even though the IRS may seem like your nemesis if you owe tax debt, there are actually options the entity offers that can help you come up with a plan.
Easy Tax helps taxpayers day in and day out with their tax debt issues.
Payment Plans
If you have outstanding tax debt, it’s likely you can’t pay all at once. Luckily, the IRS offers payment plans in two varieties.
1. Long-Term Installment Agreements
The installment agreement is a long-term payment plan and there are two options:
- Pay the tax using direct debit. There’s a $31 fee if you apply online. That’s the most affordable option, as that number jumps up to $107 if you apply by mail, phone, or in person. If you’re considered low-income, you may be eligible to get fees waived.
- Make payments from checking or savings, electronically, by phone, check, money order, or debit/credit card. To access these expanded payment options, there’s a $131 fee if you apply online, and $225 if you set up the plan via mail, phone, or in person. Low-income candidates may pay $43, which can get reimbursed.
Long-term payment plans from the IRS allow you to pay within 72 months or 6 years and your total balance must be less than $50,000.
2. Short-Term Payment Plans
If you think you can pay your tax debt within a six-month period, there’s also a short-term payment plan. This one doesn’t have a fee attached to it, regardless of whether you apply online or not, and allows you to pay with an abundance of options. Your total outstanding balance must be less than $100,000 to qualify.
For both short-term and long-term payment plans, you can apply online through the IRS website. Under either option, you’re still responsible for paying any outstanding interest and penalties.
Help With Your Debt
Offer in Compromise
While a short-term or long-term IRS payment plan can help some who owe tax debt, it may not be a viable option for others.
If paying back your taxes would create a financial hardship, there’s another option to consider — an Offer in Compromise. Just be aware that it may be tough to get approved — as of 2022, the acceptance rate for Offer in Compromise was less than 40%, according to data from the 2022 Internal Revenue Service Data Book.
If you qualify for this option, an Offer In Compromise allows you to settle your tax debt for a lower amount than your current balance. As the name suggests, it’s a compromise that can work for both parties.
To be eligible, you must be up-to-date with all of your tax returns and not in the process of filing for bankruptcy. Use the Offer in Compromise Pre-Qualifier Tool to see if this may be an option to consider. The good news is that while your offer is being evaluated, the IRS pauses any collection activity.
There’s a fee of $205 attached to the application, however, this may be waived if you’re considered low-income. Before applying, be aware that the following will be reviewed to see if you meet the eligibility requirements:
- Your income
- Your earnings
- Your asset equity
To get started, fill out Form 656 and associated paperwork. If approved, you can pay with a lump sum or through monthly payments.
The Bottom Line
If you owe the IRS, get tax debt help right away. That can minimize what you pay in interest and fees and can improve your emotional and financial well-being by creating a plan. You can look into the tax debt relief programs listed above or look for vetted and trustworthy support options. Just beware of any companies promising tax debt forgiveness that require upfront fees. Sign up to become a Consumer INsider today!
