Even if you’ve never been behind on your taxes, you’ve probably heard the ads for companies who guarantee to get you out from under tax debts. And if you are behind on taxes, you’re probably asking yourself, “are those companies for real?” In this article, we’ll do our best to shed some light on tax relief programs and provide some advice for anyone in search of a solution for unpaid taxes.
What is tax relief?
Tax relief is intended to help individuals who owe a substantial amount to the IRS. In general, tax relief offers a way to break your tax debt into a series of smaller, more manageable payments. It can also involve negotiating a settlement with the IRS—just don’t expect your debt to be forgiven completely!
Tax relief takes a number of different forms. Here are four of the most common to consider:
IRS Repayment Plan
The typical repayment plan cuts your total debt into a series of planned payments, over either a long-term or short-term period. Long-term plans allow for payments to be made over 120 days or more, but you must owe no more than $50,000 in back taxes to qualify. Individuals owing up to $100,000 can qualify for short-term payment plans. But both options can come with additional setup fees, plus penalties and interest.
Offer in Compromise
If you can’t pay your full tax bill, the IRS allows for something called an “offer in compromise” to help avoid financial hardship. They’ll review your income, expenses, and other factors that may affect your ability to pay, and work with you to come up with a viable solution.
If your unpaid taxes have been racking up additional penalty fees, there may be a way for you to avoid paying them. If you meet certain criteria (such as going a number of years without incurring additional penalties) you may find the IRS willing to forgive at least some of what you owe in penalties. You’ll still owe on your unpaid taxes, but the savings can be significant.
Do I Need the Help of a Tax Relief Company?
The short answer is no—you do not need the help of a tax relief company to secure a tax relief plan. However, they can certainly make your life easier… at a cost. Tax relief agencies generally take on the responsibility of negotiating with the IRS on your behalf, however there is no requirement for going this route. You can negotiate directly with the IRS yourself, or you can trust a certified public accountant to carry out the negotiations for you.
What Penalties Come With Unpaid Taxes?
Besides the obvious problem of mounting debts and penalty fees, unpaid taxes can come back to haunt you during loan applications or other financing endeavors. Tax liens used to affect your credit score as well, but they no longer do so. However, the financial burden of a substantial tax lien can very easily cause you to miss other payments which will in turn affect your credit score.
What Tax Relief Options Do I Have?
There’s no hiding from the IRS—eventually they will come to collect. If you owe back taxes, it’s best to resolve the situation as quickly as possible. The first step in your plan should be consulting with a qualified tax professional to come up with a plan. You may find yourself pursuing one of the tax relief solutions listed above, or you may find it easier and more affordable to take out a personal loan to pay off your tax debt. Compare loan rates and terms to what you’d pay in penalties and fees for taking on a tax relief payment plan, and act accordingly.