How to pay your tax debt
Most taxpayers receive a refund. But some have a balance owed to the IRS or another taxing authority, and the amount can range from a manageable amount to something a little scary. That raises the question, “What can I do about my tax debt?”
The IRS and other tax authorities are often very aggressive collectors and often have legal powers that are not available to your other creditors. When an individual or business owes a tax debt, the government wants payment. Even if there is no money or less than the desired amount available, they will try to get payment from you. Yet despite being massive and seemingly all-powerful institutions, these organizations often have to try to work with people.
Different forms of payment
Get the facts and research your options. Let’s say you want to pay all your taxes, but paying the full amount in one payment is impossible or would make things very difficult for you. There are ways to pay. It will cost you, as there are almost always penalties for late payments, but the costs can usually be managed.
Here are some options for paying or dealing with your tax debt:
– An offer in compromise
– Installation agreements
– Postponements due to difficulties
– Bankruptcy Discharges
– Legal limitations
An offer in compromise is when you tell the IRS that you cannot pay the bill in full, but you can pay X dollars. They will investigate and can negotiate. If you can agree, you will pay the new liability.
You could pay off your debt in installments just like you make payments on any other type of contract. There will be a fee for this option, but you can pay off your debt and not all in one payment.
If you’ve hit the rocks financially, you can bring up the subject of hardship. Creditors know they can’t get blood from a stone and detailed documentation of your circumstances is required, but this is an option.
Bankruptcy is not a good option for some taxpayers, but in some circumstances, it is the best or only way out. If you file bankruptcy and discharge it, there are several disadvantages, but your debt to the IRS will not be one of them.
In general, once a tax assessment is done, the IRS has a statutory limitation of 10 years to collect your money. Sometimes cases get lost or forgotten. If time has passed and your tax debt is not paid, under most conditions, after 10 years, so is your obligation to pay.
In some cases, the statute may differ, depending on the method of handling the debt you are evaluating.
This article seeks to give you a general idea of what is involved in a tax debt with the IRS or other tax authorities. For more detailed expert advice, a visit to a tax attorney is strongly recommended.
*This article does not constitute legal advice and does not establish an attorney-client relationship.
