It might surprise you to learn that Americans in 2022 owed over $120 billion to the IRS in the form of penalties, interest, and back taxes. Unfortunately, dealing with IRS debt is something that isn’t uncommon at all. The good news is that there are IRS debt relief solutions available that you can take advantage of.

Let’s explore the key information you need to know so you can make the best decision.

Offer a Compromise

These are available to taxpayers who are unable to pay the money they owe to the IRS. In these cases, doing so would cause significant financial hardship.

To clarify, let’s assume that someone was ordered to make monthly payments of $3,000 to the IRS. If they did so, they wouldn’t be able to afford the car payment, rent, etc.

The IRS will take a look at your expenses, income, and assets before determining if you qualify. It’s worth noting that many people who receive an offer in compromise aren’t able to do so on the first try. They often have to appeal the IRS’s initial decision to sway the outcome in their favor.

Claiming Hardship

It’s possible to claim hardship as a reason for being unable to pay your IRS debt. This isn’t quite the same as an offer in compromise, though.

An offer in compromise involves someone claiming that making payments will put them in financial hardship. This process establishes that an individual is already dealing with financial hardship.

For instance, if someone is unemployed, they simply won’t have the money to make the required payments. It’s worth reaching out to the IRS to see if your situation applies.

It could save you thousands of dollars in the future.

Filing for Bankruptcy

There’s a possibility that declaring bankruptcy will eliminate your tax obligations.

As long as you have reported income tax in the years leading up to your bankruptcy filing, you may find that your owed income tax is erased. However, this isn’t a decision that you should make lightly.

Filing for bankruptcy is essentially a financial reset button. There are many different types of bankruptcy, but the two most common are Chapter 7 and Chapter 13.

The primary difference between these is whether or not you keep your property as part of the bankruptcy agreement. You will also have this incident listed on your credit report for multiple years, which is something that could affect you negatively in the future.

For instance, you may find it difficult or even impossible to secure financing for a car or home.

Tax Return Amendment

Interestingly, many people don’t take full advantage of the tax deductions put in place by the IRS. This creates a situation where people pay much more money in taxes than they need to.

Amending your tax return can lower your taxable income and reduce the amount of money you owe. Working with a tax professional is the best way to get started if you feel this is a relevant option.

However, it’s essential that you remain fully transparent when amending the return. You will only make your situation worse if you go back and try to claim deductions that you don’t qualify for. Keep this in mind when moving forward.

Penalty Abatement

The IRS occasionally imposes hefty rates on the money you owe them. In some cases, having a high amount of interest on an IRS tax bill could make it virtually impossible to pay off.

There are situations where you can reduce or even eliminate these penalties. For instance, an IRS error could result in them charging you far more money than they should. Experiencing a grievous bodily injury that puts you out of work could also cause them to forgive your penalties.

The primary issue here is that the IRS gets to determine if your situation calls for debt forgiveness. They investigate each case individually, and they may not agree with your claim to waive your penalties. Still, it can’t hurt to try if you find yourself having difficulty making the proposed payments.

Working With an Attorney

Hiring a tax attorney will be your best bet when it comes to getting the results you need. They have all of the tools and resources to help you navigate the situation. When searching for an attorney to work with, consider their past reputation and how experienced they are in the industry.

You should also prioritize lawyers who have worked with many people like you in the past. The better they understand your situation, the better results they will provide.

Consequences of Owing IRS Debt

In addition to high-interest rates and financial penalties, the IRS may garnish your wages in order to recoup the money you owe them. This is a process where they take money out of your paycheck before it ever reaches your bank account. This can apply to hourly wages, salary, bonuses, and even commissions.

If you find yourself in this situation, it’s essential to get out of it as soon as possible. Check out this resource to read about wage garnishment release.

Prioritize IRS Debt Relief

Owing money to the IRS can be financially crippling and damaging to your mental health. Taking advantage of the above IRS debt relief options will help get you back on track and take steps toward improving your financial health.

Our website has plenty of other useful articles on finance that can help you avoid situations like these in the future. Be sure to check them out!