IRS Question Corner … Bad Tax Debt - What Are My Options?
Question: I suppose it doesn’t really matter about the details of how I got into this mess, but I owe the IRS big time. When my company was taking off, I took some bad tax advice, which in turn resulted in a big tax debt. Trouble is, my company is now out of business, and I don’t know where I can get the money to pay off the personal tax debt. Do I have any options?
Answer: Yes, you have options.
The best one is what’s known as the Offer in Compromise. This is a program designed for taxpayers in situations similar to yours. The IRS came up with it after years and years of beating on doors and chasing deadbeat taxpayers. The tax-collecting agency realized a kinder, gentler approach can be more effective.
Here’s how it works: You and a qualified tax professional will approach the IRS regarding your current tax debt. Together, you will make an offer to settle that debt, once and for all, in exchange for the IRS’s agreement to reduce that debt. In fact, Offers in Compromise can result in a debt reduction amounting to pennies on the dollar.
Of course, only certainly taxpayers qualify for this program, and based on the description of your financial predicament, it sounds like you may be one of those who qualify. However, the first thing you should do is consult with a qualified tax professional who will analyze your previous returns and come up with the exact amount you owe the IRS. With those numbers, the two of you will then begin the negotiating process to finalize an Offer in Compromise.
It’s really that easy.
In addition, if you do not qualify for the Offer in Compromise program, other programs are available as well, including the Installment Agreement.
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