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How to Reduce Your IRS Tax Debt
Individuals struggling with finances have to deal with paying their taxes, among the other things they spend on. However, taxpayers simply cannot ignore their taxes as the IRS will always be there to remind them of their debts. If they plan to run away from the IRS, they cannot do that too as the IRS is good at tracking down debtors.
So, what are taxpayers with delinquent taxes to do in these financially hard-up times?
There are several ways to reduce one’s IRS tax debt.
First, employing the help of a CPA or a tax lawyer to help in analyzing the taxpayer’s situation and coming up with the best game plan to reduce the individual’s Internal Revenue Service (IRS) tax debt is a great starting point. These tax professionals can give sound advice on how to reduce your tax debt and they are more equipped with the knowledge on how to deal with the IRS. If a taxpayer indeed has severe back tax debts, then a tax professional can deal with the figures and come up with the best solution to get rid of the tax debt.
Second, still with the help of a tax professional, a harassed taxpayer can resort to an offer-in-compromise. This common solution to IRS tax debt allows the taxpayer to pay the back taxes for less than the actual amount he is expected to pay. However, this way of reducing tax debt is tricky and somewhat arduous as a taxpayer has to convince the IRS that he has no way of paying the tax debt or the tax debt isn’t exactly his, as observed in people who get divorced. However, individuals who do succeed in an offer-in-compromise are usually old, sick, or poor. So, delinquent taxpayers who are young and healthy and still have several long years of productivity surely won’t succeed with an offer in compromise. However, if the IRS does not accept the taxpayer’s offer-in-compromise for the said reasons, then he can look for another way to reduce his tax debt.
Third, an installment agreement is the way to go when the offer-in-compromise fails. This installment agreement involves the delinquent taxpayer (ideally represented by a tax professional) and the IRS. This route involves the taxpayer paying the total tax debt plus interest and penalties in small installments every month. This somehow lightens the tax debt as the taxpayer can pay his back debts through installments which can be made within three years, as opposed to paying the full amount right then and there. Money which would otherwise be spent entirely on paying off back tax debts can be used for other bare necessities.
Fourth, a taxpayer can try to convince the IRS to get rid of the interest and penalties that have accumulated as a result of the tax debt. This is still a way to reduce tax debt though this would require that the taxpayer be in really dire monetary circumstances and really cannot pay back the full amount. An individual who is bankrupt or who has a severe medical condition can take this course and can fall under the “currently not collectible” category. But just like the other ways, it is best to seek the assistance of a tax professional. Taxpayers enjoy the benefits of the taxes they pay. However, when they fail to pay the taxes that are due, then they may suffer consequences. To make sure that taxpayers do not fall into too much trouble with IRS tax debts, they have to manage their resources and make sure that they pay the exact amount when filing of taxes comes around. This ensures that they do not amass a huge amount of IRS tax debts that can lead them to more problems.