There’s a misconception that the IRS will go after the shirt on your back if you owe taxes. People imagine the IRS as some boogeyman. They panic at the thought of the IRS taking their home or having to do time behind bars.
Here’s the reality: the IRS is more than willing to work with you.
There is tax relief help offered by the IRS. There are also many things you can do on your own if you owe taxes. Plus, you won’t have trouble finding third-party services to get the tax help you need.
What are these actions, programs, and opportunities? Keep reading.
1. Get Real About Finances
You need to come to terms with the fact that you owe money.
You also need to commit to paying what’s owed so you’re no longer sinking. This goes the same if you’re in a relationship as you need to work as a team to budget and make repayments a possibility.
Look at why you are unsound with finances:
- Do you live outside your means?
- Do you suffer from cost sunk fallacy?
- Do you let others take advantage?
You could be the type that’s bad with their money. You could have experienced tough situations. Either way, it’s important to know the “why” so you can develop a plan behind the “how“.
- Know that you have financial rights with the IRS
- Detail and make a list of EVERYTHING coming in and going out
- Understand that your lifestyle (probably) isn’t sustainable as it is
It could mean you need to take on a second job. Or, it’s cutting out a lot of creature comforts. Either way, the first and biggest tip is to commit.
2. File Your Tax Returns
The IRS knows your income so there’s no point in running from them.
You need to file your taxes each year by the April deadline. Otherwise, you could see yourself hit with a penalty. These penalties could exacerbate the situation.
You can find yourself in two scenarios:
- Failure-to-file: about 5% of the unpaid taxes each month which can go up to 25% of what’s owed
- Failure-to-pay: 0.5-1% penalty of the unpaid taxes, month-after-month until paid
You could also file an extension, giving you some time to pay. You will find this option with filing services or by submitting Form 4868. The point is to report your income so you have the opportunity to work with the IRS.
3. Consider an Offer in Compromise
The IRS knows there’s no good if paying them throws you into deeper financial hardships. That’s why they may let you submit an Offer in Compromise.
There are a few ways this becomes a possibility:
- You can’t pay the balance in full
- You can pay but it would financially ruin you
- You doubt you’re liable and the law sides with you
If possible, you can make an offer to the IRS. The offer usually means either a percentage of the amount owed or a longer repayment period. The IRS will determine which they’ll accept and that which they’ve agreed to.
Here is a very simple overview of the experience
- Check out the Form 656 Booklet
- Submit the paperwork
- Hope they accept your offer
- Start the repayment
There is another option worth exploring if you’re considering an OIC which we will look at next.
4. Try for a “Currently Not Collectible”
Whether you think it’s pity or a blessing, the IRS may deem you Currently Not Collectible. This means they understand your financial hardship. The IRS is willing to put off your tax debt until you’re in better financial shape.
Basically: the IRS stops going after you.
Your balance will continue accumulating interest but you won’t get threatening letters. Nor will you have those situations like the IRS levying your bank account or putting liens on your stuff.
The likelihood of you getting the CNC is slim. You’ll want to understand the Currently Not Collectible factors before trying to qualify.
5. Start an IRS Installment Plan
The tax debt relief you’re looking for is found in IRS form 9465.
An installment plan is available if you owe less than $10,000. You are also committing to paying off the debt in 3 years’ time.
The process is fairly straightforward:
- Figure out how much you owe
- Apply online, by phone, or mailing in the 9465 form
- Qualify for an installment plan
- Select your payment amount and the due date
- Wait to hear back from the IRS
- Pay the fee to begin or reinstate the plan
Hopefully, this will lead to your IRS getting conquered. If you can’t make this a reality then working with professionals can prove fruitful, too.
6. Explore Alternative Tax Relief Help
Taxes are a tricky topic in their own right. The subject becomes a different beast when you get behind on them. That’s where experts save the day.
You can explore a few options with the aid of financial services like:
- Bankruptcy
- Debt management
- Debt consolidation and/or settlement
An exciting opportunity within these options is the IRS fresh start program. This gives people owning the IRS greater flexibility with their repayments. It kind of combines the best of installment plans, OIC’s, and settlements.
A nuclear option may be bankruptcy. It’s best you work with a financial expert, like a tax attorney, through the process as it is quite a challenge.
7. Earn More Money
Earning more money is a sort of “duh” suggestion but it’s valid!
Cutting costs and budgeting can only get you so far. Making major lifestyle changes could have you throwing in the towel. We don’t want that.
Keep exploring frugal strategies but start making more money, too:
- Know your worth and ask for a raise
- Do something that brings in a side income
A few extra bucks each week can add hundreds toward debt relief each year. It doesn’t hurt to ask or try with either option, too, so give them a shot!
Financial Freedom is a Possibility
Imagine what’s possible when IRS debt is no longer a burden.
It’s a tough commitment and a lot to process but financial freedom is worth it. Tax relief help, whether on your own or through others, can make it a reality.
Use the tips outlined in this article to make IRS a not-so-scary thing. Then, check out some of the other tax guides. Good luck out there!
The Fortunate Investor
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