Resolving Your Past-Due Tax Debts: Exploring Your Options

5 October 2021
 Categories: , Blog

If you currently owe outstanding federal or state tax debts, it is important to resolve these debts as soon as possible. Not only can these debts impact your credit score, but they can also result in wage garnishment, tax refund offsets, and accrued interest. Thankfully, there are several different options available to help you with tax resolution.

Pay In Full

If you are able to pay your tax debt in full, this is the simplest and fastest way to resolve this debt. If you do not have the cash reserves necessary to pay in full, you may also wish to take advantage of a low or no interest credit card in order to utilize this option. While this approach will not truly eliminate the debt, it will allow you to save money by avoiding the interest charged on outstanding tax debts and also allow you to take advantage of any cash back rewards that your credit card company may offer on your account.

Set Up A Payment Plan

If you are unable to pay your tax debts in one lump sum, you may be eligible for a payment plan. When setting up a payment plan, you will be required to provide the IRS with the proposed terms of this plan. These terms include how much you are able to put down upfront and how much you are able to pay on a monthly basis moving forward. Ensure that you choose wisely when supplying these details since you may not be able to alter them in the future and may be prohibited from setting up a new payment plan if you default on your current plan. You should also be aware that setting up a payment plan will not stop interest from accruing on your tax debt and may not prevent the offset of any tax refunds until your debt has been paid in full. 

Make An Offer

This is perhaps the most undervalued option when it comes to resolving tax debts. This option allows you to make an offer to pay a one-time lump sum to resolve your debt without paying the full original amount of the debt. While you are free to make any offer you wish, keep in mind that the closer your offer is to the amount of the original debt, the more likely it will be to be accepted. Working with a tax professional to determine the terms of your offer and submit this offer to the appropriate tax authority can also help you to successfully take advantage of this tax resolution option.