Tax debt relief is rare, but is sometimes awarded to individuals who’ve overextended themselves and are unable to pay their taxes by the time they are due.
Unfortunately, getting Uncle Sam to cut you a break is not easy. That’s because all the laws are written to favor the federal government.
Sure, the government provides bankruptcy laws. But going through bankruptcy does NOT discharge your tax obligations!
In other words, the government will forgive your debts to others, but will not forgive the tax debts you owe to them.
If you think this is a hypocritical double-standard, you’d be right. Nevertheless, it’s just the way it is, and we have to play by the rules our legislators make.
Tax Installment Plan
The most common kind of relief the government will offer you is some kind of installment plan. They may allow you to make four or five equal payments over four or five months. Or they may spread out your payments over 60 months.
Every situation is unique. Different terms are offered to different people.
If you have a huge tax obligation, an installment plan will at least break down the payments so they are somewhat more manageable (although certainly no less painful).
Offer in Compromise
Although it is extremely rare, the IRS may offer you what’s called an Offer in Compromise. This is basically the same thing as settling a debt.
If you owed $20,000, the IRS may evaluate your situation and decide you will never be able to repay that tax debt. And so they may allow you to make a single lump sum payment for less than what you owe.
By making this reduced lump sum payment, the IRS then agrees to wipe out the entire tax debt.
In a perfect world, an Offer in Compromise would be more common. But the federal government is quite greedy, so this kind of settlement is very rare.
How to Seek Tax Debt Relief
Anytime you face a tax obligation that you cannot pay, then your best course of action is to contact the IRS and talk to somebody. Do not try to hide from the IRS; be transparent with them.
Many times you will be able to negotiate some kind of installment plan. In fact, there are four different kinds of installment plans depending on how much you owe and your past history of filing your taxes.
You can find out what you qualify for by searching the IRS web site or calling an IRS agent directly.
If you are facing a genuine hardship involving a disabled child or insurmountable medical bills, the IRS may be willing to forgive a portion of your debt through an Offer in Compromise.
But in order to see if you qualify for such an offer, the IRS would need to thoroughly evaluate your financial situation.
Remember: Tax debt relief comes in many forms. Don’t procrastinate and try to hide from the IRS. Call them and work something out. You will feel less stress and you’ll be happier when you resolve your tax debt as quickly as possible.