No one likes owing money, and we all have different ways of dealing with it (or avoiding dealing with it). While certain debts can be ignored (whether or not they should be), tax debts cannot. The Internal Revenue Service has a number of serious enforcement options, which means that your best bet is usually to work with the IRS to settle your tax issue.
That being said, if you owe taxes and are unable to pay in full, there are sometimes options available. In today’s post, we’ll discuss three of these options.
Among the more straightforward options is an installment agreement. If the IRS agrees to this payment plan, you essentially make monthly payments until the debt is paid off. Ideally, this would not take more than three years.
The upside to an installment agreement is that if you remain current on payments, the IRS will not pursue collection activities such as wage garnishment or liens. The downside to this option is that you will likely accrue interest on the remaining balance.
Another option that may be available to you is called an “offer in compromise.” If the IRS accepts an offer in compromise, you would essentially be able to settle your tax debt obligations for less than the full amount you owe. You should know, however, that the IRS is generally against offers in compromise and accepts less than one-third of the offers it receives each year.
Finally, if you are unable to pay your taxes due to a financial situation that may resolve itself in the future, the IRS may grant you a hardship suspension. This is basically an agreement to leave you alone for a while. However, you will continue to accrue interest that is compounded daily. Moreover, the IRS will regularly review your account to determine if you have become able to pay.
These options may be available to you if you are unable to pay your tax debt in full. When dealing with the IRS in any capacity, however, it is important to have a knowledgeable legal advocate on your side. Before meeting with the IRS, please contact an experienced tax law attorney.