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Tax Debt Options

May 3rd

Many people fear the IRS and dealing with unresolved tax debts can complicate matters. Although most assume that the IRS is stubborn and persistent when it comes to tax debt relief, the truth is that there are actually several options available for managing unpaid taxes.

Resolving Debts

It is a common misconception that tax debts are not dischargeable in bankruptcy. There are some tax debts that do qualify for bankruptcy protection and can be managed under a bankruptcy filing. However, to be eligible for bankruptcy protection tax debts must meet certain criteria. First, the debts must be unpaid income taxes. Second, the debts must have a current tax return on file with the IRS and have been assessed at least 240 days prior to filing. Similarly, the debts must be at least three years old. Finally, eligible tax debts must not be accumulated fraudulently or have any attempt to evade payment.

If bankruptcy isn’t an option, the IRS offers two programs for taxpayers to resolve their back taxes. First, is an installment plan, in which the IRS allows for the debts to be repaid in a series of smaller payments. Typically, the debts are repaid over a period of one to two years. To qualify for the installment plan, a taxpayer must owe less than $25,000 and have a current tax return for those debts on file with the IRS. The other plan offered by the IRS is a debt settlement option, known as an Offer In Compromise. In this plan, the IRS agrees to accept less than what is owed on the debt due to the taxpayer’s financial insolvency. Qualifying for this program can be more difficult and requires financial hardship.

 

 
 
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