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5 Programs To Help Solve Your Tax Debt

5 Programs To Help Solve Your Tax Debt

There are many solutions or a combination of solutions to your tax debt problem. The key to solving your problem is to learn about the various programs and to use the correct program or combination of programs to help solve your problems

A. Tax Abatement programs

These programs let taxpayers pay a reduced amount in full and final settlement of their tax liability. They work well when there are doubts as to whether or not the taxpayer owes the debt, or if the IRS will be able to collect it. Some of these programs allow for a lump sum payment, while others allow for payment plans.

B. Affordable payment plans

With these programs, taxpayers pay the full amount due, but can make payments over as long as 60 months. The IRS considers the taxpayer’s ability to pay when setting the terms of the payments. If taxpayers have equity in an asset, they can use the net realizable equity to pay down their tax liability. In other cases the IRS will agree to subordinate their lien to help taxpayers sell or refinance their way out of their tax debt.

C. Deferral programs

These programs let taxpayers defer their tax payments. The taxes may be uncollectable, or the taxpayers can get more time to pay their taxes.

D. Penalty Abatement programs

Under these programs, if the taxpayer provides the IRS with good cause, they may reduce or eliminate penalties charged on back taxes.

E. Tax Expiration Programs

If the tax collection statute of limitations has run, or if your business is defunct, you may be able to have the IRS waive income taxes.

These programs may not apply to you, but you, and your tax preparer should do the research to see if they apply in your situation.

Should You Take Money From Your 401(k) to Pay Back Taxes

I would be very reluctant to take money from a 401(k) plan prematurely for any reason. It took years to accumulate that money by having it taken from your check one pay period at a time. You need that money for retirement. Unless you qualify for a specific exception, you will have to pay a 10% early withdrawal penalty. You will also have to claim the withdrawals as income this year and pay income tax on them.Sadly, many people don't realize how the withdrawals will affect their taxes when they take out the money. They withdraw $60,000, spend it, and then realize the following year when they file their taxes that they owe $20,000 or so. How will they pay that?

One great thing about having your money in a retirement account is that it's practically untouchable. When people get too far behind in their taxes, the IRS can empty a regular bank account unannounced. Real estate can have liens attached by creditors. Retirement accounts, on the other hand, are almost impossible for creditors or the IRS to get a hold of.

When you no longer work for an employer, you should move your money out of the company 401(k) plan and into an IRA or other retirement account. Some people end up with multiple retirement plans from all the places they've worked. It's hard to even keep track of them all! An IRA gives you more investing options, and you can contribute to it every year. Contact the new plan’s administrator and ask them how to do a "rollover." Make sure it's a direct rollover to avoid tax complications.

If your tax problems are severe, you should hire a good tax attorney. Yes, tax attorneys are very expensive, but this is a serious problem. Without an expert looking out for your husband's interests, things could get worse. With help, however, you have several options to choose from, including setting up an installment plan, making an Offer in Compromise (OIC), or challenging the amount of taxes owed. Tax problems are enormously stressful. They only get worse when they drag on and on. Take action now to solve these problems.

I've heard too many times about people taking money out of retirement funds, or even "borrowing" it, and then it's gone. The closer you get to retirement age, the harder it is to make up for that loss. Do yourself a favor, and keep your retirement money for retirement!
If you would like to learn more about how to deal with your IRS debt, go to http://www.taxdebtbook.com.