How do I Settle a Huge IRS Debt?
Owing the Internal Revenue Service (IRS) money is intimidating to most people. The IRS has the power to garnish your wages, seize your assets and place a lien on your property in order to obtain the money that you owe them. However, these actions can be prevented by communicating promptly with the IRS about your situation. The IRS is usually willing to work with taxpayers, and there are several options available so that you may resolve your debt issues.
Other People Are Reading
Instructions
-
Communicate With the IRS
-
1
Create a file folder in which to store all communications to and from the IRS. An IRS representative may ask you for certain pieces of information from the notices during the course of resolving the matter, so it is important to keep track of all information sent and received.
-
2
Contact the IRS about your payment options. Use the phone number listed on your notice to contact them. Pay the debt in full if it is possible to do so. The IRS will accept credit cards, and the interest rate could be lower on your card than the interest and penalties charged by the IRS.
-
-
3
Fill out an Online Payment Agreement request on the IRS website if you cannot pay the debt in full and you owe less than $25,000, You will need to have a Personal Identification Number to use the online form. This is obtained from the IRS. You will be able to get a PIN if you have your IRS notice with a Caller Identification Number (Caller ID). If you do not have a notice, call the IRS to obtain a PIN.
In addition, the IRS may require additional information from you regarding your income and expenses.
-
4
Fill out form 9465, Request for Installment Agreement, to apply for a payment plan if your debt is greater than $25,000. The IRS may require a more in-depth look at your financial situation. In addition, you may be required to fill out form 433F, a Collection Information Statement, which details your income and expenses. The IRS will notify you of acceptance of the plan.
-
5
Opt for an Offer in Compromise if you cannot pay the entire debt and wish to offer a partial amount to satisfy your debt. Request the Offer in Compromise booklet (form 656-B) from the IRS and review it carefully, as there are very specific requirements in completing the offer. Obtain assistance from a tax professional if you do not think you can perform the request yourself.
-
1
Tips & Warnings
The IRS has a Taxpayer Advocate Service that can assist you free of charge with payment arrangements.
Be sure to adjust your federal withholding exemptions on your paycheck so tax obligations are met in the future.
Once you have set up your payment plan, do not default on your agreement. The IRS can return to prior proceedings such as garnishments, liens and levies if you default.
References
Resources
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
