Tax Debt Relief

How to Get out of Tax Debt

Hundreds of thousands of Americans have accumulated substantial tax debts and the government has spent the past few years making life very hard for them. In 2015 it announced a law that proposed travel bans for anyone with a tax debt greater than $51,000 and it has been tightening the noose ever since.

Debt is a very serious issue and one that causes a great deal of stress, but when the person you owe money to is the US government, then it becomes an even bigger and more stressful problem. There are ways to escape though, and in this guide we’ll show you some of the ways to get out of tax debt.

Why Tax Debt is Common

Significant amounts of tax debt are not that common, but smaller amounts are. Every year countless Americans discover that they owe money to the government because they didn’t pay enough taxes throughout the year. If they owe more than $1,000 then they are also hit with a fee, and if this isn’t paid off then it just grows from there.

To avoid this happening in the future you need to re-evaluate your situation every time there is a major event or change in your life, whether that be a change in your career, such as a new job, a promotion or a retirement, or a change to your family life, such as a new home or a marriage.

If you already have tax debt, then you need to look into tax relief in order to get rid of it.


Tax Relief

Tax relief refers to a program that helps to reduce tax debt, either by reducing the amount that is owed or by creating a payment plan to clear it. There are a few different ways that you benefit from tax relief, including:

1. Payment Plans

One of the better options, this allows individuals or businesses to initiate a payment plan based around affordable monthly repayments. This is much more preferable to a single lump-sum payment and gives the debtor more control over their debt.

2. Penalty Relief

Penalty relief removes penalty fees under certain circumstances. The fees that can be removed include those charged for failure to make an on-time payment, failure to file on time, and failure to deposit money when required. If the following are true then a relief may be provided:

  • There are no penalties for the previous 3 tax years, or the debtor didn’t have to file a return prior to the one that accrued a penalty.
  • All returns were filed, or a time extension was filed.
  • The debtor has paid all tax due, or has arranged to pay it.

3. Debt Reduction

This option is available to debtors who are undergoing financial hardship and are unable to make a full payment. In such cases the IRS may agree to reduce the debt or even to wipe the debt out entirely. The debtor needs to convince the IRS that they will suffer serious difficulties if they were to pay off the debt in full, at which point allowances may be made.

4. Representation

If the debtor thinks that a mistake was made, or if they are being audited, then they may hire a representative to help them negotiate with the IRS. They must be qualified and licensed unless they are a tax preparer that helped the debtor to file their return in the first place.

What About Debt Settlement?

Debt settlement is one of the best options for escaping debt, and it’s something we recommend for credit card debt and other forms of unsecured debt. It essentially reduces your total debt and allows you to pay it off in one lump-sum. It’s quick, it’s easy, and when you consider how much you can save, it’s also cheap.

Unfortunately, tax debt cannot be cleared by debt settlement programs as the government are not as willing to reduce debts as credit card companies are. However, it can be very helpful if you have other debts in addition to tax debt, allowing you to clear those debts and then use more of your remaining finances to handle tax debt.

Have a Question?

Our team of financial experts are here to help answer any question you have to get you connected to the right program.