Advantages of Early Resolution of Tax Debt

Last updated on March 7, 2023

Many taxpayers end up paying more in tax debt than they originally needed to because they waited to resolve it. As time passes by, the amount of back taxes owed increases because the IRS charges penalties and interest on it until it is paid in full. Even after a taxpayer has qualified for a tax debt payment plan and has begun to make payments toward the tax debt, interest and penalties continue to accrue to the debt amount until the entire debt amount is paid.

Another advantage of resolving a tax debt case early is the avoiding IRS collection actions. If tax debt is not resolved even after the IRS has sent notices regarding its resolution, the IRS may move to place a lien, which involves seizing an asset or a property owned by the taxpayer to secure the payment of the tax debt. If the tax debt case is not resolved, the IRS moves to levy, where they sell the seized property/asset to fulfill the tax debt. Early resolution of tax debt ensures that the case does not become complicated and harder to resolve with time.

It is in the interests of taxpayers to resolve their tax debt at the earliest possible time. If they cannot pay the entire amount of tax debt, they may use the tax reduction payment plan such as Offer in Compromise, or postpone payment of tax debt using Currently Not Collectible.