Tax Debt

Many taxpayers find them themselves in situations in which they have a considerable tax burden and/or tax debt with the IRS, and therefore are in need assistance when trying to clear their tax debt. There are several options available to taxpayers in helping them overcome this obstacle of dealing with the IRS. One question all taxpayers should ask themselves is whether or not they want to take this task on themselves or should they seek the help of a professional.

If a taxpayer decides to go the “Do it Yourself” route in clearing up their tax debt then they should take into consideration the amount of tax debt that they owe. If a taxpayer owes less than $10,000 then they can resolve the tax debt on their own. They should consider hiring a tax professional if their tax debt is between $10,000 and $25,000. They will need to make sure their original tax returns are accurate and that they will be able to afford the payment plan that they set up. If a taxpayer owes in excess of $25,000 then they should most definitely seek the advice of an experienced and well qualified tax professional.

When finding a tax professional a taxpayer has a couple different options to choose from. They can choose between a Certified Public Accountant, Enrolled Agent, or a tax attorney. These are the three professionals who are allowed to practice before the IRS. CPAs and attorneys are limited to practice in the states in which they are licensed, while Enrolled Agents are allowed to practice in any state.

If a taxpayer has already filed their taxes with the IRS then it is the job of the tax professional to review the return to make sure the taxpayer took advantage of all possible tax deductions and credits available to them. If a deduction and/or credit was not used and it would benefit the taxpayer in lowering their tax debt then the taxpayer has the option of filing an amended return with the IRS. Amended returns should be accurate when being completed, along with the supporting documentation to show why it is being filed. If the taxpayer does not have the documentation to support the change then they maybe at risk of an IRS audit.

There are several options that a taxpayer has in paying their tax debt to the IRS. They can go with an Installment agreement, which would be a monthly payment plan to the IRS. They can also go with a Partial payment installment agreement, which would be a long term payment plan at a reduced dollar amount. There is an Offer in Compromise, which is a program where a taxpayer can settle their tax debts for less than what they owe. This requires making a lump sum or short term payment plan at a reduced dollar amount. Not currently collectible is a program where the IRS voluntarily agrees not to collect on the tax debt for approximately a year. Finally, a taxpayer can file bankruptcy, which would discharge their tax debts owed under the rules of Chapter 7 or 13 bankruptcy petition.