4 Ways to Cut Tax Debt

It means the beginning of a new year Tax time Right around the corner. As many Americans get their receipts and forms in order, some still have tax debts lingering from years past. By the end of 2021, more than 10 million delinquent accounts had more than $133 million in assessed taxes, penalties and interest, The IRS.

If you owe Tax debt And not sure what to do about it, don’t despair. There are several possible ways to settle this.

You can get rid of tax debt now by answering a few short questions.

4 Ways to Cut Tax Debt

Here are four ways you can potentially reduce your tax debt.

Use a tax debt relief service

You can settle tax debt yourself, you can hire a professional to do it for you. Many independent companies offer tax debt relief services. They will assess your situation, develop a plan, and communicate with the IRS on your behalf.

“You likely don’t know, or fully understand, what’s possible without professional help and the full array of your options,” explains Tatiana Soir, CPA, MBA. “There are experts available for such work and their entire job is to ensure that tax debt issues are remedied as quickly and painlessly as possible,” he added.

If you’re going to hire help, though, Tsoir warns, “It’s important to beware of scammers. Check a potential company’s reviews and credentials, and at least do a Google search on them.”

Explore your tax debt relief options with Anthem here now or use the table below to compare some of the best services.

Negotiate directly with the IRS

Your first instinct may be to call the IRS and ask them how to resolve your debt. If you’re going to go this route, however, it’s important to do your homework to protect your interest.

“There are many options from appeals to installment agreements and compromises, tax court petitions and even offers to file for bankruptcy,” Tsoir explains. “Many of these have caveats though, so you have to be careful when choosing which path to follow.”

Apply for tax debt forgiveness

Another option is the Offer in Compromise (OIC) tax relief program that allows some taxpayers to settle tax debts for less than they owe.

“This program allows you to pay off your tax debt in a single lump sum or through a short-term payment plan, thereby reducing your overall tax debt,” says Ahad Ali, CPA at Ahad & Co. “This strategy is fantastic for taxpayers who have obligations that exceed what they are able to pay,” he adds.

caught? Not everyone will qualify. According to the IRS, offers are generally accepted only if they represent the most that the agency can expect to collect within a reasonable time. Only 30% of offers were accepted in the 2021 tax year.

To qualify, you must:

• Stay current on all your estimated payments
• Do not have an open bankruptcy precedent
• there is one valid extension For the current year
• Any tax deposited for the current and last two quarters (if you are an employer)

You can file an OIC yourself or have a tax relief professional file it for you.

Apply for a hardship exemption

Finally, the IRS offers a Not Currently Collectable (CNC) status for those who cannot pay their tax debt at all. “If the IRS gives you CNC status, all tax and wage garnishment will stop immediately. However, interest will continue to accrue, and late fees will be assessed on your account,” Levon L. Galstian, CPA at Oak View Law explains the group

Galstyan added, “To apply for CNC, you’ll need to file your tax return just like you would for any other settlement option… When reviewing your case, the agency may ask for proof of your income, employment, debts and monthly payments. . expenses.” You can also get CNC status with the help of a tax relief professional.

While one or more of these tax relief options may work well for you, this is not an exhaustive list. To learn all the ins and outs, you’ll need to do additional research or consult a tax professional.

Worried about tax debt?

If you are worried can’t give Your tax debt, this should not prevent you from filing accurate returns on time.

“The most important thing is to always file a truthful tax return. If you can’t pay what you owe, there are alternatives. However, if the return wasn’t filed in the first place and the government creates an SFR (substitute return), your statute of limitations expires. doesn’t often start moving,” says Sawyer.

He adds, “Even if you are eligible for tax debt repayments, if you never file or if you file a fraudulent return, you can’t benefit from it. This is where people often get into trouble.”