Bankruptcy is a scary word. You might not have gone bankrupt, but you’ve probably considered it. There’s something that triggers panic in all of us when we worry about being unable to pay our taxes.
The IRS is not a generally forgiving agency. If you owe significant back taxes, the IRS can take aggressive measures to collect from you. It will put liens on your assets and properties and even garnish wages from your paycheck. A lot of information should be gathered if you tend to get yourself in financial messes. Therefore, I am writing this article so you would know how you can avoid bankruptcy when you can’t pay your taxes.
Stay in constant communication with the IRS.
Always stay in constant communication with the IRS to get into the bottom of your tax situation.
If you get a notice from the IRS, don’t ignore it. Take action immediately as this will be the start to your path towards tax debt relief. Reply to the notice and let them know how much money you can pay towards your tax debt on a monthly basis; if there is any other information they need from you, like documentation of income or assets, provide this as soon as possible.
If they send another letter asking for more information or payment options, later on, respond quickly by filling out an attachment form with all relevant details included (like monthly income) before sending in your response via fax.
Create a payment agreement.
If you can’t afford to settle the full amount of your tax debt, the IRS will let you make monthly payments. Answering these issues will help determine whether this option is best tax debt relief program for you:
- What is my income?
- How much money do I have each month after paying all my bills?
* Do I have any special considerations, such as a disability or a child who needs financial support?
If your answers indicate that a payment plan might be right for you, talk with an experienced tax professional about creating one that works for your financial situation. Your tax expert will explain how to apply for this option and how much it costs. They’ll also assist in determining whether there are other ways to lower your taxes before relying on IRS payment plans (such as reducing deductions or raising income) so that your final bill isn’t too high.
Ask for a discharge of your liability or abatement.
The IRS may be willing to forgive your debt if you have a financial hardship or cannot solve your tax liability because of an unforeseen event. The good news is that this could potentially save you from having to go through bankruptcy.
To apply for a discharge, fill out Form 982 (Application for Abatement) and send it to the IRS along with any supporting documentation regarding your hardship or unforeseen event. If approved by an appeals officer, your case will be sent back down through the system until someone decides what action should be taken. This means until someone decides whether or not they agree that there is enough proof presented here as evidence of what happened during those previous years leading up until now where you’re stuck with your outstanding back taxes and penalties.
Apply for an offer in compromise.
An offer in compromise is another program to settle your tax liability for less than what you owe. It’s not the perfect tax debt relief solution for everyone, but it may be worth considering if you’ve exhausted all other alternatives.
An offer in compromise works like this: If you can’t pay your taxes now and make monthly payments over time, the IRS will consider letting you pay the remainder back at a flat rate or percentage of disposable income over five years or longer. The amount of time depends on factors such as how much money you owe (the more debt, the longer it will take) and whether or not there are justifying circumstances at play that would help your case (such as losing a job due to illness).
The benefits of accepting an offer include avoiding bankruptcy, keeping assets from being seized by creditors, and continuing earning interest on savings accounts without having them garnished by creditors (which means they could lose access entirely). On top of this financial benefit comes peace of mind knowing that taxes are no longer hanging over one’s head—and when those bills finally come due. There will be plenty more breathing room under which they can be paid off slowly over time rather than immediately through immediate payment options like garnishing wages or seizing bank accounts outright!
Use your retirement account to clear off your tax debt.
If you’re self-employed, you can use your retirement account to pay off your tax debt. Self-employed retirement plans are protected from creditors in most cases. If you want to transfer funds from a traditional Individual Retirement Account without penalty, it’s best to consult with a financial advisor and/or speak with an attorney before deciding how to handle this situation.
In general, if you have other assets that can be liquidated (such as stocks), it’s better for you and all concerned parties if those are used instead of withdrawing money from your retirement plan.
Work with a tax professional who has excellent experience settling with the IRS.
When you have a tax debt beyond your ability to pay, working with an experienced tax professional is essential. A professional can help you understand your options and the consequences of each option. A professional can also help you understand the pros and cons of each tax debt relief solution, as well as its long-term effects on your finances and credit score.
As part of working with an experienced tax professional, it is important that they can explain how each option will affect both short-term payments (such as when filing next year’s return) as well as longer-term settlement possibilities, such as paying off the entire balance over time or negotiating a payment plan with the IRS or state department of revenue. You should never agree to anything without understanding all costs associated with it upfront; this includes fees for representation from an attorney or CPA who agrees not only to go after unpaid taxes but also to help clients determine how those debts may be settled, so everyone wins!
If you owe taxes and you’re worried about getting into trouble with the IRS, don’t be.
There are several ways to resolve tax liability. If you can’t pay back the amount owed, it’s best to contact the IRS and begin working on a repayment plan. You can also negotiate a settlement with an IRS representative. There are many more options out there, including bankruptcy and private debt relief companies.
There are many other ways to settle your tax bills as well: creditors will agree to lower interest rates, or they’ll work out payment plans based on income levels; some may even help you secure employment so that you have enough money left over at the end of each month for taxes! You should also consider reducing or avoiding your tax burden by taking advantage of credits and deductions available through various programs such as those offered by state governments or employers who offer their employees discounts on health insurance premiums (or other benefits).
It’s essential to understand your tax obligations to avoid penalties and interest. You’re not alone if you have trouble paying, but the best thing you can do is start planning now and be proactive in resolving your debt.
If all else fails and bankruptcy becomes necessary, contact a qualified attorney who can help guide you through the process of acquiring tax debt relief!