8 Ways to Conquer Outstanding Tax Debt

Are you struggling to pay your tax bill? Don’t panic. You have options, even if the situation feels overwhelming right now. Here’s what happens if you can’t pay your tax bill and how you might get tax debt relief.

Do I Need to Pay My Tax Debt?

You should always aim to pay your taxes on time and in full. However, life gets in the way sometimes. The Internal Revenue Service (IRS) understands this. That’s why there are ways to get tax debt help if you genuinely can’t pay.

With that in mind, here are eight steps you might take if you can’t settle your tax debt right now.

1. Have a Plan

First, take a close look at your finances. Consider the following:

• Your ability to pay: Identify how much you can afford to pay. Can you afford some of the bill, or can you not pay anything? Your ability to pay determines what you should do next.
• When you can pay: Maybe you can’t pay right now, but you can pay in a few weeks or months. If that’s the case, you have other options for getting tax debt help.

You should get immediate tax advice if you can’t pay anything right now. Being unable to pay a tax debt is highly stressful. An experienced tax professional will make this whole process less complicated.

2. File Your Taxes Anyway

You must file your taxes even if you can’t pay them. Otherwise, you face a “Failure to Pay” penalty. This penalty is up to 25% of your unpaid taxes!

Failing to file your tax returns only compounds the issue you’re dealing with. You’re adding to your overall tax liability in the long run.

3. Get Expert Help

For many people, unpaid taxes are overwhelming. With so many options, knowing how best to cope with tax debt is hard. So, contact tax professionals to understand your options and decide which strategy is best for you. Professionals will empower you with the skills and knowledge to face your tax debt confidently.

4. Ask for an Offer in Compromise

An “Offer in Compromise” is what it sounds like – a compromise. You and the IRS reach an agreement to confirm that:

• You can’t pay your tax bill;
• Attempting to pay the tax bill will cause financial hardship and
• You need to settle the account for less than you owe.

It may be suitable for you if there’s no reasonable way to cover a tax bill because it’s unaffordable.

You need to complete Form 656 to request an Offer in Compromise. Our team can help you understand if this is the right option, and we’ll show you how to apply.

5. Ask for an Extension

Request an extension if you know you can pay your tax bill but need a little more time. No fees are involved, and the IRS will give you up to 120 days to settle the tax bill. You’ll face late payment penalties if you don’t pay, though. Make sure you can pay in full before requesting an extension.

6. Request a Payment Plan

Do you need more than 120 days to pay in full? Then, a payment plan may be for you.

The IRS will offer a payment plan based on factors such as:

• How much you owe, and
• How much can you afford to pay in installments?

You’ll pay a small amount of interest, and the IRS may void the agreement if you don’t pay. However, payment plans are a helpful way to approach tax debt relief because they make debt manageable.

7. Ask to Delay Payment

You can ask the IRS to delay your tax payment if you demonstrate financial hardship. In this context, financial hardship means you can’t afford basic living expenses if you pay your tax bill.

To request an extension based on hardship, you need to complete Form 1127. You’ll need evidence to prove hardship, or you may not qualify.

8. Get a Loan or Credit Card

You might apply for a loan to cover the debt, depending on your credit. You could also use a credit card.

However, this option could be expensive, depending on the interest rate. For some, a loan or credit card is a simple – and convenient – way to cover a tax bill.

Get Tax Debt Assistance Now

From personal loans to IRS debt relief, you have options for settling your tax bill. But you shouldn’t take any steps without consulting a tax professional first. Your financial well-being is too important to leave anything to chance.

Contact our tax experts today!