There are a lot of ways to resolve your IRS tax debt, but only a few of them can actually reduce the amount you owe. Some of these strategies can eliminate a large portion of your tax liability, while other save you a little bit of extra money.
When you’re in debt, every penny counts. Use these tax-reducing strategies to help you pay off your tax debt faster.
Pay What You Can
It may sound counterintuitive, but paying as much as you can today can reduce your total tax debt in the long run. That’s because the IRS charges penalties and interest as long you have an outstanding delinquent balance.
Penalties and interest can add up, particularly if you owe tens of thousands of dollars and will need several years to pay off your full balance. If you’re requesting an IRS installment agreement, you can lower your monthly payment amounts by sending an initial payment.
Penalty abatement is available to many taxpayers, but not everyone knows about this program or how to use it. Both first-time penalty abatement or penalty abatement for reasonable cause can be used to reduce your overall amount owed to the IRS.
You may be able to avoid paying the following penalties by requesting penalty abatement:
- The failure to file penalty
- The failure to pay (late payment) penalty
- The failure to deposit penalty
You can’t avoid paying interest on late payments, but penalty abatement can reduce the amount you owe and make a monthly payment plan more manageable.
Offer in Compromise
If you want to wipe out a large chunk of your tax debt, the Offer in Compromise is your best option. However, your required offer amount will be based on your financial situation. If you have disposable income or assets that you can sell or borrow against, it will likely increase the amount you need to pay to get your offer accepted.
In some cases, your case won’t be a good fit for the Offer in Compromise program. If you are just experiencing a temporary financial setback, other tax resolution options may be more appropriate.
Talk to a tax resolution attorney before you spend a lot of time exploring tax settlement options that may not fit your situation.
Contact The Gartzman Law Firm to speak with an Atlanta tax attorney about your case. Request your consultation by calling (770) 939-7710.