It can happen by accident. Perhaps you haven’t withheld enough from your paycheck in the past year or thought you calculated your withholding differently or or made more in your side gig than you realized. Perhaps you had unexpected gains you didn’t think about adding to your tax bill; In any case, you wind up with a whopper of a tax bill.
If your debt has been piling up for a while, it can be overwhelming and extremely stressful. You might feel stuck or frozen, not knowing what you should do or how you are going to get out of your situation. But the worst thing you can do is nothing. The penalties and interest just keep adding up, sinking you further and further into trouble.
The IRS takes their money seriously! They will seek every legal way to collect the money they are owed. They can seize your assets, freeze your bank account, garnish your paycheck, and even restrict your passport. They can file levies and liens on your property. All of these options will be on the table if you don’t take action.
If you owe money to the IRS but can’t pay, there are several options available to you, but you must be caught up in your tax filings and pay the most recent year amount first, in order for them to be available for you.
Here are some of the options the IRS provides to taxpayers who owe money. Whether these are applicable to you depends on your circumstances.
You set up a payment plan or partial payment plan –like a loan – to pay the debt owed to the IRS.
Offer in Compromise
An offer in compromise is a plan presented to the IRS that shows how you will pay your debt. It’s based on your living expenses and what you can afford to pay on a regular basis. Some of your debt may be relieved as part of this plan. The IRS must accept the offer.
If this is your first debt with the IRS, you may be eligible for a First-Time Penalty Abatement, which waives your penalties.
“Currently Not Collectible” Status
This status allows you to defer your debt. The debt does not go away; you still owe the IRS money. But you’ll stop the process of getting your bank accounts levied or other collection efforts if you are granted this status. This often happens when you don’t have enough income to cover your current living expenses. Once your income rises, the IRS will re-evaluate your situation.
Similar to student loans, the IRS debt is in the front of the line when it comes to bankruptcy cases, and the debt may or may not get discharged if you file for bankruptcy. Since this is such a complex area, your best bet is to consult with several professionals – an accountant, a tax resolution professional, and an attorney that is expert at bankruptcy issues.
A tax resolution professional can help:
Get in touch at no obligation to you so we can understand your specific tax situation and provide advice on the options available to you. As always, your tax issue is handled with the utmost confidentiality and privacy.