How to Pay Off Debt Fast: Paying Off Tax Debt
The last in our series on how to pay off debt fast, we want to talk about a problem that not many of us have but if you have it you know you can find yourself in a world of trouble as a result. I’m speaking of course about outstanding tax debt.
Having tax debt can be a very stressful and worrisome problem. As a result, most people who have tax debt want to find a way to pay it off as quickly as possible. Some people end up with a large tax debt because of not paying their taxes when they should have, while others may actually even have tax debt that resulted from incorrectly calculated taxes. Whatever the reason, when faced with tax debt, you have to decide whether to try to handle the problem yourself, or get help from a tax professional.
If you feel you may have tax debt that has resulted from incorrectly calculated taxes, working with a tax professional is often the best choice. Ask for references from coworkers or friends to make sure you find the best tax professional possible. Make sure you have all of your original tax returns for the period in question, and organize your paperwork as much as you can. This will help save money, because tax professionals will generally charge you for each hour of their time. If you do as much of the organizational work as possible, you will not be paying for as many hours of their time. You can also find out what parts of the paperwork you can do on your own, to further save money.
If you plan to handle the resolution of tax debt on your own, you will want to make sure to get all your records organized. Once you know exactly what is owed, calling the IRS will allow you to find out what arrangements can be made to allow you to pay your tax debt. One of the easiest methods is setting up an installment agreement with the IRS, allowing you to make monthly payments towards your owed taxes. There are various types of these plans available, so make sure you understand your options completely before making any decisions so that you don’t agree to a plan that you eventually won’t be able to live with.
There are also partial payment installment agreements available through the IRS. If you are considering this method, working with a tax professional with experience in these types of agreements is the best choice. All of your tax returns must be filed, and you must be current on estimated tax payments or income tax withholding before the IRS will approve such a plan. Once all the paperwork has been filed, requesting a partial payment installment agreement, it will have to be approved by the IRS.
If your tax debt is so great that the IRS may doubt it could be collected from you, or if there is question as to whether you are actually liable for the tax debt, you might qualify for an offer in compromise. This means that the IRS might choose to accept less than the full amount of the taxes you owe as payment. There are contractual terms involved with these agreements, and the IRS is not required to approve your offer, but it can be worth a try.
