FOUR GOOD WAYS TO REDUCE YOUR IRS TAX DEBT
If you have an IRS tax lien, or if you have a tax debt and no lien has yet been filed against you, the best thing to do is attack the problem quickly. There is a simple rule in dealing with the
IRS – the longer you put off the problem the bigger and nastier it gets. For one thing, the actual debt grows significantly because of IRS penalties. Unfortunately, by doing nothing the bill simply grows on its own. The other problem is that the older the debt becomes the more aggressive the IRS gets. So here are four really good ways to help you attack that debt:
1. Submit an Offer in Compromise.
Submitting an Offer in Compromise to the IRS is essentially proposing a settlement agreement to them. When you owe an amount you cannot pay, you are proposing to them something that you can afford. The IRS enters into settlements with taxpayers literally every day. Obviously, there are a lot of rules to follow in order to successfully settle with the IRS. For many people, this is absolutely the best solution because they literally do not have to pay back everything they owe. Whether the IRS will settle with you and for how much is dependent upon your “ability to pay.”
2. Penalty Abatement.
The IRS sometimes waives penalties assessed against taxpayers. In other words, they simply eliminate them. If you are interested in pursuing this, you must request penalty abatement from the IRS. As usual, there are stipulations and rules you must follow but if your penalties are significant, the potential savings could be dramatic.
3. Partial Pay Installment Agreement.
This is a solution for taxpayers who owe the IRS money that most people are not aware of and fewer understand. Conceptually, it is similar to a standard IRS installment agreement. However, you are generally paying a smaller amount because in the end you are not paying off the entire balance.
4. Currently Not Collectible or Hardship Status.
If the IRS reviews your financial situation and determines that you do not have the ability to pay them, you can be placed into what is known as Currently Not Collectible status. This does not make the debt disappear or go away. In fact, on the contrary, the debt will continue to grow while you are in Currently Not Collectible status. However, you are “temporarily” avoiding any payment to the IRS, and for some people that temporary status can extend for quite a while. Ultimately, when combined with other strategies it can eliminate IRS debt.