Guest article written by Jason Holmes
If you have accumulated tax debt and therefore spending sleepless nights then it’s high time that you consider the options of getting out of tax debt. There are mainly five options through which you can get out of debt. You need to choose the method that suits your current financial situation.
The five methods that can help you to get out of tax debt
Installment Agreement
The Internal Revenue Service of US (IRS) is aware of the fact that it is not possible for all individuals to pay the entire tax amount altogether. So, IRS has constructed some payment plans with the help of which IRS will be able to collect the unpaid tax in installments. The Installment Agreements provided by IRS give you the opportunity to pay the taxes in small affordable amounts over a certain period of time.
In order to enter such Installment Agreement, you need to fill up a form namely Form 9465. This form can be downloaded from the IRS website or you can contact the number mentioned on your tax bill in order to receive the instructions. If you go for Installment Agreement then it is better to pay off the entire tax amount through installments. It can be mentioned here, that Installment Agreement carries some associated fees.
Partial Payment Installment Agreement
This method of getting out of tax debt is quite similar with the first method. The main difference is that, in case of Partial Payment Installment Agreement, you do not require to pay the entire tax amount. You as a taxpayer will be subjected to a financial review every two years and accordingly the tax payment amount will be decided. After the review the tax payment amount may increase or your Partial Payment Installment Agreement may be terminated if your financial condition improves.
Offer in Compromise
This method gives the opportunity to settle the tax debt for an amount which is less than what the taxpayer actually owes. You can get the benefit of this option if doubt exists regarding the accuracy of levied tax and collectability of tax and if it is found that tax collection will lead the taxpayer to an acute financial hardship.
Currently not Collectible
Under this method, IRS voluntarily decides not to collect tax for a year or so. But, once this option is given, all the subsequent tax refunds are withheld and tax collectability is determined at later dates.
Bankruptcy
If a taxpayer files for Bankruptcy, then the tax that he owes can be discharged under Chapter 7 or Chapter 13. But, it is better to avoid this option as Bankruptcy can ruin a person’s credit history.
Jason Holmes a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of debt. Some of his works include e-books like Credit Score The Quintessential Therapy for a Happy Pocket, Take Creditors and Collection Agencies to Small Claims Court and My Story- From Depression To a Smile.