Tax debt is a common problem people struggle with, and it creates a stressful situation, as the IRS is relentless about going after you if you owe money on taxes. If you're ever stuck with tax debt, you need to carefully review your situation and call on the assistance of experts, including legal professionals experienced in matters of debt.
Consider some of the following issues:
Accuracy of tax returns
Ideally, you'll have kept copies of your tax returns at least from the past four or five years. You should review your returns to see if perhaps the IRS has made a mistake, and to check if you've overlooked some possible deductions that you could have made for yourself.
You may currently be filing for bankruptcy, or considering it as a step to manage your debts more generally. In some cases income tax debts are dischargeable in bankruptcy. In order to be dischargeable, the tax has to be past due for at least three years. Other matters such as when the return was actually filed, the accuracy of the filed return and late assessments will affect the dischargeable of tax debt.
Furthermore, bankruptcy can help only in regards to income taxes, but not other kinds of taxes.
In Chapter 13 bankruptcy, if you are not able to discharge your tax debt, you will be able to repay the tax owed over five years interest free and discharge any accrued penalties
Various tax debt relief strategies
There are different payment plan options you can set up with the IRS to pay off your tax debt. In some situations, you may qualify for an Offer in Compromise, in which the IRS agrees not to collect the full debt that you owe. Usually the IRS doesn't rush to accept such a tax-reduction compromise. You would really need to show that you're lacking in sufficient funds and assets; then you'd have to uphold your end of the bargain and comply with all requirements, including filing your taxes on time, lest the IRS revoke the compromise. Finally, if you can't pay back anything at all and are in truly desperate financial straits, you might be eligible for Currently Not Collectible status.
Addressing tax debt is complicated and emotionally exhausting. On your side, you need an attorney who can advise you on the best way to manage your debt and advocate for you as you deal with the IRS and any other creditors. Contact us to discuss your situation and work towards the best possible solution for tackling your tax debt.