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2 Options You Can Use To Handle Back Taxes You Owe

If you owe the government money for back taxes, you will need to find a way to clear up the debt. If you don't, the government can come after you and place liens on your property and garnish your wages. This type of debt will not go away on its own. Luckily, there are options you can use to settle the debt, but you may want to hire a tax attorney to assist you. Here are two of the options your attorney might discuss with you that could help you settle this debt issue.

Use An Offer In Compromise

The IRS may allow be willing to settle your debt for an amount lower than what you owe, but it will require using an offer in compromise (OIC). An OIC is a request you can make to the IRS, and the IRS will review it and decide whether to accept it or decline it. In 2014, the IRS approved 40% of the requests made.

To qualify for this, you must have the ability to repay the amount you are offering, either in the form of a lump sum or payments over a certain amount of time. In addition, you must be able to prove that you cannot repay the full amount owed to the IRS within a reasonable amount of time.

Hiring a tax attorney to help you with this may improve your chances of the IRS accepting your offer. Your attorney will help you fill out Form 656, which is called an Offer to Compromise form, and he or she will help you determine how much money to offer the IRS for the debt you owe. You will have to pay a filing fee for this, but if the IRS accepts your offer, it could help you save thousands of dollars.

File For Chapter 7 Bankruptcy

The other option a tax attorney might suggest is filing for Chapter 7 bankruptcy. While tax debt is often excluded from dischargeable debts, there are times it can be included. If your tax debt qualifies for a discharge through Chapter 7, you might be able to eliminate the entire balance without paying a dime for it. You will incur costs for filing bankruptcy, but these are likely to be a lot less than the amount you owe the government for back taxes.

To qualify for this, you must meet the requirements necessary for filing Chapter 7, and the tax debt must

  • Be at least three years old
  • Be for a tax return that was filed at least two years ago
  • Legitimate and without any type of fraud

When you meet with a tax attorney, he or she will look at these factors and any others that pertain to your situation and the laws relating to this. From this information, you will find out if your tax debt qualifies.

With this method, you can get by without repaying the tax debt owed; however, there are some consequences. The first is that it will harm your credit. When you file for Chapter 7, it will stay on your credit report for 10 years. This will bring your credit score down, but there is nothing you can do to eliminate this from your record.

The other consequence is that you might still have to pay the tax debt in the future. This is only necessary if the IRS had placed a lien on your property. If this is the case, you would have to pay the lien off when you sell your property.

Learning about the options you have can help you make an informed decision about how to handle the tax debt you have. If you would like to learn more, contact a firm like Wiesner & Frackowiak, LC.