Resolve Tax Debt Without Filing Bankruptcy
- May 14, 2019
- Posted by: asal
- Category: Tax Resolution
Every taxpayer who is facing the issue of the tax debt would get advice or suggestion from his/her well-wishers to use bankruptcy as a weapon to deal with it. However, this is not a viable option to get rid of tax debt. If the IRS comes to know that you are trying to play games with them, you will discover the worst time of your life. You would be paying the money you owe to the IRS in addition to a late fee, interest, and other charges. In some cases, they can put you behind the bars as well.
Three Ways to Deal with your IRS Tax Debt:
- File bankruptcy (not recommended in most cases)
- Contact the IRS to set up a payment plant, to resolve your tax debt issue
- File a proposal under the Bankruptcy and Insolvency Act
- Hire a reputable tax attorney
Filing bankruptcy to resolve IRS tax debt issues:
If you get success in proving bankruptcy, it will remain on your records for seven to ten years. In this time span, it will become very hard for you to find out a lender from whom you can get money or buy a home or car. Even if the lender agrees to finance a loan, he will charge the high-interest rate. Taxpayers who know the cons of filing bankruptcy always lookout for ways that can help them in eradicating tax debt without filing bankruptcy. If you are one of them, you should hire a tax debt relief attorney who knows ins and outs of the work ethics of the IRS and aware of the tax code in accordance with the recent changes.
Setup a payment plan with the IRS directly:
To solve your tax issue, try to arrange the payment directly. You should contact IRS immediately if you have an outstanding balance on your tax account. IRS would send you a letter or notice stating how much you owe and in how many days you need to pay. If you have a genuine reason for delinquency or your tax attorney can negotiate with the IRS, the tax authority is more likely to accept the payment plan. Payment plan entices a large number of taxpayers however, it doesn’t mean that you would be paying only the outstanding balance. IRS keeps on charging interest and penalties until you clear the outstanding balance. Therefore, always opt for a payment plan that allows you to clear off the due at a faster rate.
File a proposal under the Bankruptcy and Insolvency Act
Another way to deal with the tax debt issue without filing bankruptcy is to file a proposal under the Bankruptcy and Insolvency Act. The proposal allows you to stay away from the creditors and the IRS would accept a lesser amount than that of the original amount. With this legislation, you can make an offer to all of the unsecured creditors in order to change your payment schedule and amount of monthly installment. The best part of filing a proposal is that you can make a new start without going bankrupt.
Hire a skilled tax attorney to deal with tax relief
A licensed tax attorney is a person who would help you in achieving tax debt relief. You need to give him/her the detailed information about your assets, income, and debt. He/she will then create a proposal to represent your case in front of the IRS. There are some requirements that you need to fulfill before filing the proposal. All of your tax returns must be filed and up to date. During the proposal, you cannot compromise with the due date and the outstanding balance.