My Zeo

  • Home
  • About
  • Blog
  • Lifestyle
  • Health
  • House
  • Pets
  • Fitness
  • Money
  • Contact

Tax Debt Problems: Everything You Need to Know About Resolving Tax Debts

February 4, 2019

The IRS collects about $50 billion in delinquent tax payments each year. Are you one of many Americans facing tax debt problems?

It can be scary and stressful facing a large tax debt. Don’t fear though, there are plenty of tools out there to help you resolve your tax debt. 

The sooner you get started, the faster you can pay your debt off. You can prevent the IRS from taking more drastic measures by being proactive about the problem. 

Not sure how to get started? Follow our guide and learn how to get out of tax debt today. 

Don’t Ignore the Problem 

The worst thing you can do when dealing with tax debt problems is to ignore them and the IRS. The debt will continue to build penalties and interest, making your total debt much larger than it needs to be. 

If you don’t file at all or try to lie on your taxes those penalties will turn into criminal charges. 

There are also time limits on certain forms of relief. For example, we will talk about innocent spouse relief later, but the time limit for filing is 2 years. 

Prevent New Problems 

The worst thing you can do while dealing with your tax problems is to add to them by incurring more tax debt. So start by filing as CNC status. 

Currently Not Collectable Status

This tells the IRS that your financial situation is so dire that you can only afford to pay for basic living expenses. You’ll need to show proof of your financial situation. 

Once the IRS approves your status the IRS will cease trying to collect from you. Just know that this doesn’t mean you don’t owe the debt. You will still incur interest and penalties while the payment is deferred. 

Pay Your Taxes 

Consult with a tax accountant to confirm that you are making the proper payments. Often the reason that people get into trouble is that their financial situation changes and they don’t know their new tax liabilities. 

This could be because they won some money. Or it could be that they decided to start working for themselves. Being self-employed comes with a whole host of new tax liabilities. 

Address Your Current Problems 

Once the IRS tells you the total amount you owe, it is time to start working towards a solution. Take an assessment of your current financial situation and total income. 

Settlement 

If your financial situation is so dire that paying your IRS debt would be a financial hardship, you can request an “offer in compromise” from the IRS. This solution lets you settle your debt for much less than you owe. 

Payment Plans 

Do you owe less than $50,000? If so then you could be eligible for a payment plan. You will need to show the IRS that you can’t pay your debt within the 120-day deadline. 

If you owe less than $10,000 you can file for a payment plan on your own online. Just know that whatever plan you choose, interest and penalties will get added to the total. 

Delayed Payments 

Sometimes you can’t pay right now, but you will be able to in the future. If this is the case you can request to delay payment. 

You need to show that your current financial situation is so dire that you can only pay living expenses. The IRS will eventually come knocking for their money. 

The amount you owe will continue to accrue penalties and interest. This means you may put yourself in deeper debt by delaying. So consider your situation carefully before agreeing to a delayed payment plan. 

Bankruptcy 

You may be able to file for Chapter 7 or Chapter 12 bankruptcy. Sometimes income tax debt gets discharged during bankruptcy. 

Confirm that your tax debt will get discharged before you decide on this solution. Filing for bankruptcy will stay on your credit report for up to 10 years. 

Compare this to a recent change that had all three credit bureaus removing tax liens from credit reports. Previously, if you didn’t pay your tax debt, the IRS would issue a tax lien and then report it to the credit bureaus. 

This lien would then get reported to the credit reporting agencies. This tax lien would drag credit scores down 30 points for 10 years. 

Since these liens are no longer included on credit reports, it is in your best interest to not file for bankruptcy if you want to keep your good credit score. 

Get Assistance 

Sometimes the best thing you can do is get from a third party. They will have the experience and knowledge for dealing with the IRS. 

Just be sure to do your research before you choose a service. You can read online reviews like these community tax reviews to help you determine which one is a good fit for you. 

Innocent Spouse Status

On a rare occasion, one spouse doesn’t know what the other one is doing when it comes to filing their taxes. When this happens you can request innocent spouse relief. 

It is a tough burden of proof that you face to prove to the IRS that you had no knowledge of your spouse’s actions. But if you are successful all debt will be forgiven. 

You can also file for relief if you and your spouse are legally separated. You will then only be responsible for the amount of tax allocated to you. 

Resolve Your Tax Debt Problems

The most important thing about addressing your tax debt problems is to face them head-on. Sure it’s stressful and no one wants to, but that is the best way to get your debt resolved. 

If you can arrange a payment plan this is the fastest way to take care of the debt. Keep in mind that getting outside assistance can help you negotiate with the IRS.  

Avoid incurring further tax problems by hiring the right tax accountant. 

Leave a Comment · Blog

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

About Me

Hello all!!!! I'm Darcy and I recently started writing on My Zeo about health and fitness (and part of that important health equation is sleep!). As we are all super busy with life, I try to integrate how to stay fit, relax and be healthy and happy through everyday life.

Facebook

My Zeo

NEWSLETTER

TeraHemp

Dissecting the Cost of Gastric Sleeve Surgery in the UK

The cost of a gastric sleeve in the UK usually oscillates between £8,000 to £15,000. This wide range . . .

Read the Post

Best Wines for Thanksgiving Dinner

As we welcome the brisk autumn breeze heralding the Thanksgiving season, our hearts are filled with . . .

Read the Post

Why should we focus on playing Rummy online?

Whenever people shift the focus to the best options of gaming like Rummy online, then definitely . . .

Read the Post

Important advantages of rummy app that you must know

A Rummy app is a mobile application specifically created for playing the popular card game Rummy on . . .

Read the Post

What are the top reasons for playing the Rummy game?

Everybody is very much interested in getting involved in games and sports in life, and further . . .

Read the Post

Follow Us Online

  • Facebook
  • Instagram
  • LinkedIn

Copyright © 2018 myzeo.com

Copyright © 2023 · Simply Pro by Bloom Blog Shop.