4 Ways of Settling Your Tax Debts

Ways of Settling Your Tax Debts

Other than doing the moral duty, taxation is not a fun thing to do. First, it is complex, which increases the chances of making errors. Secondly, it is a legal matter, which complicates matters even more. Once you are in arrears with the IRS, things can be ugly if you don’t find a way of settling the debt. 

Thankfully, there are several ways of paying the debt. 

Seek Offer in Compromise

You probably do not accrue the debt intentionally. It probably came from various fines and penalties accrued through late or false tax filings. Whichever way, you need to settle the debt, and you can always look for ways to pay the accounts, such as an offer in compromise. The IRS can settle for an amount that is less than what you owe. In some circumstances, they can write off the debt entirely for deserving cases. You can work with a tax attorney to look for such a compromise position. Often, you will look to reduce the tax burden by showing that a full collection will hurt dependents or even your ability to pay taxes in the future. For example, if the business will face bankruptcy upon paying the entire tax debt, the IRS will move to save jobs by agreeing to a lesser penalty. 

Garnish Wages

If you owe someone, you can use a check-off system to pay the person or institution directly through a deduction. The IRS can also do so in the form of wage garnishment. In this blog titled Why Does The IRS Garnish Wages And How Does It Work? offers more information about wage garnishment specifically the process and the proportion of wages that can be garnished. The IRS can force your employer to deduct the tax debt from your monthly salary. They will structure it like a loan that you pay in equal monthly installments. Your employer will deduct the amount every month until the debt is fully repaid. It certainly helps you get your finances in order without significantly affecting your ability to live a decent life. 

Partial Payment Installments

Spouses and businesses usually do not have a way of paying via a check-off system. The person or business can opt for an installment offer. Such agreements are suitable for all parties because they depend on the situation. If the situation changes and the taxpayer wishes to renegotiate in light of the new situation, the IRS can re-evaluate the position. Businesses can benefit significantly from such deals. Individuals who don’t have a secure salary will also benefit. 

Professional Revaluation

If the tax burden emanates from a claim that the person or business understated his or her taxes, you can opt for an accountant to audit the work. You can dispute the tax debt if you find that the amount requested is not the amount that you should be paying as tax. This approach will only reduce the tax burden, but not vanquish it. 

Paying off your tax burden will ensure that you have peace of mind. Always make payments that will not hurt your well being. Agreeing to an installment approach is the best. You can also make cash offers, which can often lead to reduced tax payments.