Freedom From IRS Tax
You’ve heard of credit card debts, mortgage debts, student loan debts and the like. But have you heard of the IRS tax debt before? I certainly had not before a friend related his story to me, which was of course, quite silly of me. After all, whatever amount of money that you need to pay, you can certainly owe as well. The question is, what happens when IRS comes collecting?
This friend of mine, Henry, apparently never paid back the outstanding amount of tax that he owed. He told me that, next to his student loan, car loan, home loan and a few other personal loans, he had always managed to put his IRS tax at the bottom of his list, up to the point that he’d actually forgotten about it. When the IRS came knocking, he was out of solutions, as his meager pay could barely cover the payments for his other loans.
Let’s take a look at some facts about IRS tax. Your tax debt could be due to a balance from your tax return, an audit assessment or a finalized proposed assessment. For all these outstanding debts, the IRS actually has a time frame of 10 years to collect them otherwise that debt can be written off. Obviously it may be unwise to wait 10 years for the debt to disappear, as the IRS would certainly come knocking on your door one way or another. If you are found to intentionally evade the payment, you may be charged with tax evasion too.
There are several ways you can use to eliminate tax debt. The first one is a do-it-yourself method. If the amount owed is small, then you may attempt to resolve the issue on your own. If you are able to pay off the amount at one go, then by all means, do so. If you are able to pay the amount but over a period of time, then it is advisable to get in touch with IRS and negotiate for an installment payment plan. You are most likely required to provide all the necessary financial documentation, so don’t bother lying about it.
On the other hand, if you don’t think you are able to repay the whole amount, get in touch with IRS and negotiate for a compromise. This means negotiating to have your tax debt decreased. After the reduction, you can negotiate further to pay that reduced amount in one lump sum or in installments. In case you are really not able to pay up, you may enquire about the ‘Currently not Collectible’ program, in which the IRS may agree to not collect the debt for a period of time, usually a year or so. However, this is most likely to be considered by the IRS if you cannot qualify under any installment payments or compromise.
The last method is not the most desirable one, and is usually resorted to in a desperate situation – bankruptcy. Under the Chapter 7 or 13 bankruptcy petition, all your debts whether with the IRS or not, would be discharged.
The solutions mentioned above are also known as tax debt relief methods, which are similar to the typical debt relief methods. If your amount owed is large or if you’re not comfortable negotiating with the IRS on your own, then perhaps it is best to hire professional help to do so on your behalf. It is best to enlist the help of licensed IRIS representatives such as tax attorneys, certified public accountants (CPA) or enrolled agents (EA).
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Category: Finances
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