Given that more than 8 million people owe money in back taxes every year, not everyone has the money to shell out for their debts right away.
These debts can add up fast and start to lead to financial problems that follow us for years.
If you’re stuck without help, you can seek tax forgiveness with some of the resources the IRS and other companies offer.
Here are four ways you can get tax forgiveness to keep you from falling under.
1. Temporary Relief With a Not Collectible Status
If you’re in tax debt but sure you can pay it sometime in the future, you don’t have to fight to have your bill fully forgiven. You can negotiate with the IRS to get them off your back for a while.
If you know that you have no ability to pay your tax debt and feel responsible, ask for a “currently not collectible” status.
Under these circumstances, you won’t have trouble from the IRS but you’ll still stay in their good graces. If you’re potentially up for an IRS levy or lien, you could have your income or your property seized without your consent.
While this might seem harsh, it’s written within the letter of the law that they can collect when someone has refused to pay.
If you don’t try to negotiate, you’ll be denied any help that could come from an installment agreement or a negotiation agreement. If you’ve called and worked out one of these already, you could ruin all the work you put into that negotiation by failing to get a “currently not collectible” status.
When you can’t pay, you need to call the IRS as soon as possible because you’ll be faced with all sorts of fines in the meantime.
2. Credit Card Consolidation
If you have other types of debt or have a credit card with a strong line of credit, you can use your cards to help deal with all of your debts. You can negotiate this consolidation all on your own or you can work with a debt consolidation company to get the job done.
If you can avoid a credit card debt settlement company, you should since you can do most of the work on your own.
A debt settlement group will be collecting your payments for months before they make an offer with your lender. It’ll take longer and cost you more to have them do it for you.
Doing it on your own will clue you into how the process works and will form a relationship with your debt holder.
You’ll find they appreciate speaking to you directly about what’s going on with your finances.
You can consolidate credit card debt, tax debt, and any property debts altogether.
Rather than having to pay several separate bills, you could end up paying one fee and pay off everything for less than it would cost you to pay everyone separately.
3. Bankruptcy Is Serious but it Works
If your tax burden is overwhelming, there are options available in calling for bankruptcy.
While income tax debts are usually manageable, given the higher you owe, the more you typically earn, some people still end up underwater on them.
If this happens to you and you don’t see a way out, you can always claim bankruptcy.
Under Chapter 7 and 13 of the Bankruptcy Code, you can get relief from your tax debts. However, this is a major decision that will impact your financial future for years to come.
Chapter 7 means a full discharge of your debts while Chapter 13 allows you to get into a payment plan so choose your relief wisely.
The IRS is one of the most aggressive debt collectors around and they have the full force of the law supporting their collection tactics.
While you might get promises that you can pay off your debt for next to nothing, that’s little more than a pipe dream in most cases.
Talking to the IRS and dealing with them directly is the best bet for anyone in debt.
If you deal with an accountant or a bookkeeper for a small business you won, talk with them before you make a big decision. This is no small decision and could cause you and your family issues for years if you don’t think it through.
4. Married Into the Debt?
If you’re in debt because of a spouse’s IRS problems, you might feel trapped. It could cause problems in your marriage or even lead to divorce when you’re fighting about money and debt.
You may love your spouse to the end of the earth but that doesn’t mean that you need to take on their tax burden.
You can find a way out with the help of innocent spouse relief. The IRS has standards from anyone who wants to get this benefit to match. If your circumstances fit, then you don’t have to deal with their tax issues and can salvage your relationship.
In some cases, you could divorce from someone and still be asked to take on their tax problems. If this is the case, the IRS’s Innocent Spouse Relief program can help.
They won’t subject you to tax debt that clearly had nothing to do with you and your tax burden.
So long as you address the issue as promptly as possible and give them as much information as you can, you can stay away from spousal debt.
Tax Forgiveness Is a Powerful Way Out of Debt
If you’re struggling with tax forgiveness, you need to take action to ensure that you get help paying the debts you have. There’s plenty of help available if you’re ready to take advantage of it.
If you want to avoid having your property seized by the IRS, check out our improper seizures guide for tips.