Three options to resolve tax debt

Unpaid taxes can be a serious financial issue. In addition to adding penalties and interest to the amount you owe each month, the IRS may use aggressive methods to secure payment. Paying back taxes often becomes a priority, especially when the IRS decides to garnish wages and take other actions.

Unfortunately, even if you want to pay your taxes, it might not be financially feasible right now. If your income or the value of your available property is low, making a lump sum payment may not be possible. Fortunately, there are a few options to choose from depending on your circumstances.

Option 1: Negotiate a payment plan

The IRS provides the option to negotiate a short-term payment plan or long-term installment agreement. This agreement would allow you to make monthly payments within a specific period to catch up with your debt over time. However, this option is most suitable for taxpayers who expect to be able to afford the minimum monthly payments.

Option 2: Submit an offer in compromise

Contrary to popular belief, the IRS can be reasonable about what a taxpayer is able to afford. Your lawyer can work to negotiate an offer in compromise, which may offer a degree of tax forgiveness. If you are eligible for this option, the IRS will lower your tax debt to an amount that you can afford to pay rather than the full amount you owe currently.

Option 3: File for bankruptcy

If you have a variety of tax and consumer debts that you cannot fulfill, bankruptcy might be the best option. Depending on the facts of your case and the type of bankruptcy you file, you can find a way to either pay tax debts or make them more manageable. Your lawyer can help you understand the possible outcomes of filing for bankruptcy.