4 Ways to Get Tax Debt Relief

If you owe back taxes to the IRS, you may need to hire tax debt advisors to help you. Here are four options you may have in seeking small business tax help.

In 2016, 22% of small business owners didn’t know what their effective tax rate was, according to CNBC Small Business Survey.

We get it — taxes are complicated. But if you’re behind on paying them, they get even more complicated, and quickly.

If you owe back taxes to the IRS, you may need to hire tax debt advisors to help you. To help you understand your options and determine your way forward, the following are four options you may have in seeking small business tax help.

IRS Payment Plans

If you require extra time to pay your tax bill, the IRS will probably accommodate you. Tax debt advisors can help you set up a payment plan with the IRS so you can pay back your debt in regular installments.

There are some things you should know about payment plans. First of all, having a payment plan setup doesn’t make you exempt from having to pay penalties and interest on what you owe. As long as your balance is above zero, those will continue to accrue.

Second, if you owe more than $25,000 you will need to make your payments in the form of automatic withdrawals from your checking account. If you make payments using a debit or credit card, you will have to pay an additional fee. This fee is usually between $2 and $4, or 2% of the payment.

Offers in Compromise

If you absolutely cannot pay your tax debt off without causing serious financial hardship for yourself, you may qualify for an offer in compromise. This option allows you to settle your back taxes for less than you actually owe.

To decide if you qualify for an offer in compromise, the IRS will consider your ability to pay, your expenses and income, and how much you have in the form of assets.

If the IRS accepts your offer, you will have to make an upfront payment that equals 20% of whatever you’re offering to pay. Also, some of your personal information could be made public. Details such as your name, city, state, liability amount, and offer terms could go into the IRS’s public inspection files.

Even though it is a possible option for those with lower income or higher expenses than usual, more than half of all people who request one are turned down. Because of this, you should explore other options before attempting to qualify for an offer in compromise.

“Currently Not Collectible” Status

If you cannot currently pay your taxes and necessary living expenses, you may speak with the IRS about placing your account in “Currently Not Collectible” status. You will need to request this delay in collection and you may be asked to fill out a Collection Information Statement to prove that your finances truly aren’t adequate to pay back your taxes. You will need to provide information about your monthly expenses and income on that form.

It’s important to note that being deemed “Currently Not Collectible” is not permanent. It does not make your tax debt disappear. In fact, the IRS could still file a tax lien against you.

Once a year, the IRS will probably review your income again to see if your financial condition has improved. In the meantime, acquiring “Currently Not Collectible” status can give you the chance to catch up on your finances.

Hiring a Tax Relief Company

It’s not uncommon for tax debt advisors and tax relief companies to help taxpayers in distress. This can be quite helpful, especially if you aren’t sure how to fill out the forms you need. Taxes are complicated and there’s clearly a wide margin for error. Many people get into trouble with the IRS just for accidentally filling out a form wrong. Tax debt advisors can help you avoid this.

Before you work with a tax professional, you should make sure you understand exactly how they can help you and exactly what they will charge to do it. Many taxpayers simply don’t qualify for the relief programs that these companies advertise, so you want to make sure it’s a good fit for you before paying.

Being in trouble with the IRS can feel like a scary experience, but it doesn’t have to be. With the right guidance, good information, and a reasonable amount of care, you can get your taxes and your finances back on track.