Owing back taxes to the IRS can be stressful, but there are ways to eliminate or reduce your debt liability. In today’s blog, the Fort Worth bankruptcy attorney at Huebner Law Firm, PC will help you discover your options for tax debt relief.
Filing for bankruptcy may be a good option if you have other debts in addition to back taxes. Most taxes are nondischargeable, so bankruptcy will not eliminate your IRS tax debt completely. It can, however, make it easier to pay off by discharging your other debts or giving you more time to pay. What type of bankruptcy is best for you—Chapter 7 or Chapter 13—will depend on the scope and type of debt you have.
To learn more about bankruptcy, call (817) 576-1889 or read our blog: How Do Bankruptcies Work?
Dealing with the IRS can be incredibly intimidating. As a result, many individuals are left with the false impression that they must pay all of their back taxes at once. To increase the likelihood that people pay their debts, the IRS allows individuals to set up payment plans. You can apply for a short- or long-term payment plan. If your request is approved, you can pay off back taxes in small increments over time.
Offer in Compromise
Offers in compromise allow you to settle your IRS tax debt for less than the full amount you owe. There are certain eligibility requirements, and the IRS will only accept the offer if they believe it to be reasonable.
Some of the things the IRS will consider if you submit an offer in compromise:
- Your ability to pay
- Your income
- Your expenses
- Your asset equity
This is one of the most appealing options because it lowers your debt liability, but it is only appropriate in certain situations. An attorney can help you decide if you are in the position to make an offer in compromise and help you submit one that is more likely to be accepted by the IRS.
Statute of Limitations
If you have avoided paying your back taxes for 10 years, the IRS no longer has a legal right to claim them. This situation is rare, but if you believe that the statute of limitations has passed, you should speak with an attorney right away.
Innocent Spouse Relief
The IRS offers innocent spouse relief in situations where your spouse—or former spouse—incorrectly reported or omitted items on your tax return.
You qualify for innocent spouse relief if:
- You filed a joint return that has an understatement of tax due to unreported income or incorrect deduction, credit, or basis.
- You were not aware of the understatement when you signed the joint return.
- The IRS believes it would be unfair to hold you responsible for the understatement.
- You and your spouse have not transferred property to each other to defraud the IRS or another third party.
When you owe back taxes, the IRS charges you penalties and interest. Penalty abatements may be available in limited situations, including when the IRS made errors or delays. Errors may be difficult to spot if you are unfamiliar with how the IRS operates. An attorney can help you determine if you qualify.
Currently Not Collectable
If your finances are in bad shape, you can file for a temporary delay on collection. The debt does not go away, but the IRS will assign this status to you if you can prove that you cannot pay any of your tax debt at this time. Usually, you need to show that your current expenses exceed your income.
Discover the Best Option for Your Situation
When it comes to choosing the best tax debt solution, you need to work with an experienced attorney. There are plenty of companies out there who claim they can eliminate tax debt entirely. In reality, they charge a large upfront fee and rarely succeed. As a bankruptcy attorney who has helped over 10,000 families, I can give you an honest assessment of your situation. From there, I can help you pursue the best course of action and find the relief you need.
Call (817) 576-1889 to tell me about your situation during a free consultation.