Receiving a debt letter from the IRS can come with a lot of questions and stress. Often, taxpayers are left with many questions and end up seeking outside sources for information. However, this can put sensitive information in jeopardy and leave people susceptible to scams. Usually, your best option is to work directly with the Internal Revenue Service to resolve the debt in a manner that best fits your budget and is within your means. Below are some of the most popular options to help you take control of your IRS debt.
Pay the Debt Over Time
The IRS offers a debt repayment plan for those who apply and are eligible. This includes the option to make installment payments, and dependent on the size of your debt, you may qualify for a short-term or long-term plan. Plans start at 120 days to longer-term ones. To apply online via the IRS website, you will need the ability to verify your identity through your bank account, the mobile number registered in your name, or an activation number sent to you via post. This final option takes about 5-10 business days to complete. Additionally, you will need the following information on hand:
- Legal name as listed on your tax documents.
- A valid email address.
- Date of birth.
- Filing status.
- The address of your last tax return.
- Your social security number or individual tax ID number.
- The amount of debt you owe.
Although there is really no true way to have full tax forgiveness, the closest form is an offer in compromise. An offer in compromise is an agreement between a taxpayer and the IRS to settle a debt for less than the original amount owed. For those who benefit from this resolution, their debt is often repaid at pennies on the dollar. The IRS considers certain factors such as an individual’s ability to repay as well as their expenses, income, and any asset equity. Also, the IRS offers an Offer in Compromise Pre-Qualifier to help taxpayers check eligibility.
Temporarily Delay Collections
Another form of IRS tax resolution is to delay collections from people under sudden financial distress. Certain criteria such as being unemployed suddenly or underemployed will help you meet the qualifications. Additionally, forms verifying your status need to be filed with the IRS in a timely manner. Make sure to meet any deadlines detailed within the directions. You will be asked to fill out a collection information statement and provide proof of your financial status as per the IRS. If deemed currently non-collectible, or CNC, you will still be responsible for any interest or penalties accumulated on your balance.
The IRS will revisit your account at a later date to verify your eligibility to begin payment.
Methods for Managing Finances
To help you manage your finances, consider saving into a 401(k) or other retirement plans, which will help to alleviate your current tax obligations. Also, try keeping some funds in a long-term savings account so as to be prepared for any unexpected expenses and maximize your passive income.
Working with the IRS and agreeing to their resolution plans can help you control and resolve your IRS debt in less time than you anticipate.