Tax season is often a time of financial stress, especially when the bill arrives and it’s higher than anticipated. However, you don’t have to panic if you can’t afford your tax bills right now. Many are not aware of the multiple provisions and strategies available to them in such situations.

In this blog post, we will delve into the top five options available for those who find themselves unable to foot their tax bills. These suggestions can provide some much-needed relief and help you navigate your financial obligations more efficiently.

Installment Agreement

One of the most straightforward solutions for taxpayers unable to pay their bills in full is to set up an installment agreement with the Internal Revenue Service (IRS). As Tax Law Advocates suggests, the IRS offers different types of installment agreements based on your specific circumstances, allowing you to pay your debt over time in manageable monthly installments.

While interest and penalties continue to accrue on the unpaid portion, this approach can significantly ease your immediate financial stress. It’s important to remember, however, to keep up with your monthly payments to avoid defaulting on the agreement.

Offer In Compromise

An Offer in Compromise (OIC) is another option that the IRS provides to taxpayers who are in financial distress. This program allows you to settle your tax debt for less than the amount you owe, but it requires careful consideration and typically involves a detailed examination of your financial situation.

This process is quite involved, and acceptance isn’t guaranteed, but it could potentially save you a significant amount of money. If you decide to pursue an OIC, it may be beneficial to engage a tax professional to assist you in preparing your offer.

Temporary Delay

If you’re facing financial hardship, such as unemployment or a medical emergency, the IRS may grant a temporary delay of the collection process. During this delay, also known as ‘Currently Not Collectible’ status, the IRS generally halts collection activities.

However, the tax debt isn’t erased; interest and penalties continue to accrue. To qualify for this relief, you must provide substantial proof of your financial status to the IRS.

Penalty Abatement

One considerable element contributing to the inflation of your tax bill could be penalties. Penalties can rapidly accumulate due to a variety of reasons such as late filing or late payment of your tax dues. The IRS imposes these fines as a deterrent to keep taxpayers compliant with deadlines and payment obligations.

However, life can throw unexpected curveballs that can impede your ability to meet these deadlines. In some specific situations, the IRS might show leniency by agreeing to waive these penalties. This process is known as penalty abatement.

Penalty abatement works on the principle of “reasonable cause.” A reasonable cause can encompass various situations that were beyond your control and directly resulted in your inability to comply with tax obligations. For instance, these could include a serious illness that required extensive medical attention, or an unexpected natural disaster such as a flood or hurricane that significantly disrupted your life.

Innocent Spouse Relief

If your tax debt is from a joint return, and it’s due to erroneous items from your spouse (or former spouse), you might qualify for Innocent Spouse Relief. This provision is intended to provide relief to individuals who were unaware of a spouse’s erroneous claim. Note that this relief isn’t easy to get; you must meet specific conditions outlined by the IRS. Seeking professional help for such cases is highly recommended.

In Conclusion

Facing an unmanageable tax bill can be daunting, but it’s crucial to remember that you’re not alone, and there are options available to help you navigate through this challenge. Whether it’s setting up an installment agreement, applying for an Offer in Compromise, or seeking penalty abatement, these alternatives can provide much-needed financial relief.

However, navigating these options can be complex, and each carries its own set of qualifications. Therefore, it’s advisable to reach out to a tax professional or a company like Tax Law Advocates, who can guide you based on your unique circumstances and needs.

Jane