Getting out of debt can be a challenge if you owe the IRS a lot of money. Here are some tips to help you get out of debt:
Make a partial payment
Using a partial payment agreement is a great way to avoid a tax lien or garnishment. It will also allow you to take care of your tax owed. You can choose to pay it off in a lump sum or spread it over time. You can even pay it off using a credit card or check.
The IRS has a lot of information about making payments. They can also help you find the best loan or credit card rate for your particular situation. A partial payment arrangement can be the smartest decision you make. In most cases, it will be a better option for you. However, if you’re in a crunch you may want to consider other options before you go bankrupt. You should also consider the tax implications of your decision. If you can’t afford to pay the IRS off in one shot, consider borrowing money from friends or family, or take out a home equity loan. You may be able to avoid foreclosure on your home by negotiating a payment plan.
Apply for an Offer in Compromise
Whether you owe the IRS a lot of money, or you are looking for ways to settle your tax bill, applying for an Offer in Compromise can help you eliminate tens of thousands of dollars in tax debt. If you are unsure if you qualify, you should check with a tax professional to get more information.
To apply for an Offer in Compromise, you must fill out an application. You will also need to provide detailed financial information. The IRS will use the information to determine how much it thinks you can pay.
You will also have to pay a nonrefundable application fee of $205. If you qualify, you may get a waiver of this fee. However, you still must include 20% of the offer amount with your application.
Once you have submitted your offer, you must wait for an answer. It can take up to two years for the IRS to accept your offer. While you wait, you can make payments.
Avoid home equity loans for unsecured debts like tax debt
Taking out a home equity loan to pay off an unsecured debt is the wrong move for many reasons. First, the interest rate on a home equity loan may be less than what you’re paying on a credit card. Second, you won’t be able to deduct the interest on your loan. Finally, your lender might decide to foreclose on your home. Not only is this bad news, but it could damage your credit score for years to come.
If you’re still on the fence about taking out a home equity loan, here are some things you should keep in mind before you make your final decision. First, don’t forget to read all the fine print. You want to avoid a lender who changes their terms without explanation. The other thing you’ll want to keep in mind is a home equity loan’s closing costs. This can offset any savings you’ve achieved from your loan.
Finally, keep in mind that you should not take out a home equity loan if you don’t plan on staying in your home long enough to pay off your debt. If you do, you’ll want to make sure you have a plan B in place before the loan makes it onto your credit report.
Negotiate with the IRS
Whether you have a large tax bill, or you owe money to the state or the IRS, you can get help negotiating a payment plan. There are a variety of IRS settlements you can request, including an offer in compromise (OIC), partial payment installment agreement (PPIA), and a repayment plan. Getting help negotiating a payment plan can be the key to reducing your debt.
To qualify for an offer in compromise, you must demonstrate that you have a genuine financial hardship. You must provide the IRS with a detailed explanation of your financial situation, including your current income and expenses. In addition, you must provide proof of your inability to pay. You may be able to receive an offer in compromise if you are experiencing a sudden and unexpected loss of income. You may also be able to receive an offer in compromise after a significant medical event.
A tax attorney or CPA can help you negotiate a payment plan with the IRS. They can help you determine your current financial status and offer a plan that meets IRS criteria. They can also reduce penalties or interest.