Tips for Dealing with Tax Debt

Tax debt problems may seem insurmountable at the time, but you can overcome your tax burdens with the right strategies. Read on for helpful tips on how to deal with the IRS and pay your tax obligations off as soon as possible.

Handling Tax Debt You Cannot Pay

You might be wondering: "How can I reduce my tax debt if I simply cannot afford to pay?" Few taxpayers realize that the IRS has a number of tax debt forgiveness programs that you can take advantage of if you truly do not have the means to repay your obligations. Consult with your accountant, tax adviser, or IRS agent about the forgiveness programs for which you may qualify. In some cases, the IRS will delay the collection of the tax debt in order to give you time to get back on your feet. In other cases, you will still have to make payments, but the original amount of the tax debt will be substantially reduced. You will have the most success with the IRS if you volunteer to make a lump-sum payment as quickly as possible. Usually, the lump-sum forgiveness method requires an immediate down payment of at least 20%.

Stopping a Wage Levy

One way to reduce my tax debt is to get the IRS to stop your bank or wage levy. A wage or bank levy takes money from your paycheck or bank account in order to reduce tax debt. This can lead to serious economic hardship for taxpayers who need every penny of their paychecks to make ends meet. To stop a wage levy, you will need to contact the taxpayer advocate (TA) at your local IRS office. You can either file IRS Form 911 or send a letter to your IRS office in order to get the TA involved. You must then prove that the levy is causing financial hardship, and the TA has the power to lift the wage levy and assign someone to your case. The agent assigned to your case will discuss alternative tax debt repayment options with you.

Tax Relief for Spouses

If you are the spouse of someone who owes tax debts to the IRS, you might not have to develop your own reduce my tax debt plan if you had nothing to do with filing the returns in your household. If your spouse mishandled the returns while you were married and you had no knowledge of his/her actions, you can invoke the innocent spouse defense. Otherwise, the IRS will attempt to collect the tax debts from you as well as your spouse. The innocent spouse defense can keep you from being held responsible for the penalties, interest, and tax debt that your spouse incurred without your knowledge.