Do you have an old tax debt lurking in your past? If you’re interested in settling it, consider these tips.
You may be able to settle an old tax debt without paying the entire amount!
Try these techniques:
1. Find out the exact amount. The amount you owe will include fees and interest. The IRS or other taxing authority that the debt is owed to should provide you with documentation that shows the amount of back taxes you owe and the fees or interest.
2. Consider an Offer in Compromise. The Offer in Compromise is also known as an OIC and can help reduce the amount you owe to the IRS.
· An Offer in Compromise can be a complex process, and it’s not a guarantee that the IRS will reduce the debt. However, if you want to settle, then it’s important to try it and see if it works.
· The OIC has specific eligibility rules. Check the IRS website to see if you’re eligible for this process.
· You may want to ask for a hardship exemption because of your personal situation. You also may have to prove that you can’t pay the full amount.
3. Stay aware of the forms and fees. If you decide to do the Offer in Compromise, be aware of the necessary forms and fees. There is a filing fee that has to be paid.
· If you can’t pay the filing fee, you may be able to get a hardship assistance option.
· Multiple forms are required for the Offer in Compromise. In addition, the filing fee can’t be returned or refunded.
· You may have to send the first part of a payment plan with the appropriate forms.
4. Be prepared for record keeping. The IRS can ask for many documents and may need multiple copies.
· If you’re trying to reach a settlement of your old tax debt, documentation is the key.
· Keep copies of all of the required forms and papers you send to the IRS. You may be asked to send paycheck information, past bills, and other papers as well.
5. Consider your medical and financial circumstances. Make the IRS aware of your special medical and financial circumstances. You may be able to negotiate a lower amount to pay.
· Do you suffer from serious physical health or mental health issues? Do you have a low income with a large amount of debt?
· If your personal situation makes it difficult to pay the entire old tax debt, then you may be able to get an exemption to help. You’ll have to prove your circumstances are difficult, so be prepared to send more papers.
6. Try to negotiate more than once. A rejection of your first offer to settle a debt shouldn’t stop you from trying again. You can contact the IRS multiple times to negotiate a debt.
· You’re not limited to trying once and living with the answer. You can fill out different forms to reapply for the Offer in Compromise. You usually have to start the appeal process within 30 days for the OIC.
Old tax debts can haunt you, but you don’t have to let them take over your life. You can settle them and move on to working toward your financial dreams.