If you owe back taxes to the IRS, ignoring them isn’t the solution. Whether you have the funds to pay your back taxes or not, you’ll need to take action to avoid further penalties.
The IRS offers a few programs to help taxpayers pay back tax debt or eliminate it entirely. Understanding these programs can help you determine the proper steps to settle back taxes.
Read on to learn more about IRS debt resolution programs, then contact our tax advisors at Levy & Associates for assistance.
Solution 1: Payment Plans
If you can’t pay your tax debt in a lump sum, you can consider a payment plan instead. The IRS offers installment plans that enable you to pay tax debt in monthly payments.
Not everyone can qualify for an installment plan. You’ll need to meet a few IRS requirements to qualify for this relief program:
- Be up to date on filing your tax returns
- Pay most state income taxes and late fees
- Be able to make minimum monthly payments as required by the IRS
- Have less than $50,000 in tax debt for a long-term plan or $100,000 for a short-term plan
If you qualify for an installment plan, the IRS will review your tax debt and determine a minimum monthly payment.
While a payment plan can give you more time to pay back your tax debt, it won’t relieve any of your debt. You’ll also still need to make interest payments and cover any penalties you’ve already received. These programs also have a few setup fees ranging from $50 to $250. (If you are a low-income taxpayer, you may face lower fees).
Solution 2: Offers in Compromise
If your tax debt feels too overwhelming to pay in full, you can consider applying for an offer in compromise. This IRS program could allow you to settle back taxes for a lesser amount. However, you’ll need to convince the IRS that you cannot pay your original tax debt or even provide monthly payments.
If you’re interested in this tax resolution program, you’ll need to fill out an application through the IRS website. You can confirm your eligibility in advance through the Offer in Compromise Pre-Qualifier Tool.
As part of your application, you’ll need to provide an “offer” to settle your tax debt. Then, you must submit your first payment of this offer along with your application.
If the IRS denies your application, it will apply your payment to your tax debt.
Solution 3: Modify Wage Garnishments
If you fail to pay back taxes or qualify for a debt resolution program, the IRS may garnish your wages. This means that the IRS could contact your employer and request a percentage of your paycheck be given to the IRS to pay down your debt. If you’re unemployed, the IRS could garnish federal payments, such as a future tax refund or Social Security payment, instead.
Depending on your financial situation, wage garnishments could significantly impact your ability to make ends meet. If the IRS has already begun garnishing your wages, and you can’t afford to live on the leftover wages, you can ask it to lower the amount it garnishes.
Contact the IRS at the number on your correspondence to discuss your garnishment.
Contact Levy & Associates for Assistance
Navigating tax debt can be overwhelming and stressful, and the IRS doesn’t always make it easy to meet its demands. If you need help to settle back taxes or work through any other IRS problems, our tax consultants at Levy & Associates can help. Contact us at 800-TAX-LEVY for assistance.