Top Ways to Get Relief from Tax Debt

Last updated on December 19, 2022

Tax debt can be resolved through various methods, including making payments in installments, qualifying for bankruptcy or getting reduction in tax debt. For each taxpayer in tax debt, there is usually one method that will provide the most benefit. The first step, however, is to find out the eligibility requirements of each tax debt resolution plan.

Tax Debt Reduction

Every taxpayer under tax debt wishes to somehow reduce the amount they owe, but taxpayers must meet strict qualifying criteria to be eligible for tax debt reduction. Reduction in tax debt through IRS plans such as Offer in Compromise and Partial Payment Installment Agreement can only be achieved if the taxpayer applicant does not have the financial capability to pay their entire debt. The IRS also reviews the taxpayer’s ability to take credit when considering a taxpayer’s eligibility for a tax debt reduction plan.

The IRS will reduce the tax debt amount if it finds that reduction is the only way to resolve the tax debt case. The amount that remains to be fulfilled after the reduction can either be paid in a single payment or in monthly installments.

Bankruptcy 

In some instances, tax debt can be resolved by filing for bankruptcy under Chapter 7 or Chapter 13. Bankruptcy must only be used for tax debt relief if all the eligibility requirements are met. It must be remembered that not all debts are allowable for discharge under bankruptcy. The following criteria must be met:

• The due date for tax return that led to the tax debt must have been at least three years ago.
• The tax return was filed at least two years ago.
• The tax assessment conducted by the IRS is at least 240 days old.
• The taxpayer is not guilty of tax evasion or tax fraud.

The tax debt is eligible to be forgiven through a bankruptcy filing only if these four conditions are met.

Tax Debt Payments in Installments

Payments to fulfill a tax debt can either be made in a lump sum or in installments. To pay the entire tax debt in installments, taxpayers may use an Installment Agreement. This plan allows taxpayers to make fixed monthly payments. Taxpayers can pay their tax debt comfortably in installments using an Installment Agreement, but until the entire amount is paid, penalties and interest will accumulate on the debt.

For successful tax debt resolution, it is essential for taxpayers to take correct steps towards resolution from the beginning. Choosing the most appropriate tax debt resolution method is an important first step to achieve a favorable and a quick resolution. Using legal help from a tax resolution company can help taxpayers to get their tax case prepared and represented professionally.