If you can’t afford to pay your tax bill, you aren’t alone. Before you give up on paying off your tax debt, however, it’s important to know that you might have another option for handling your past-due taxes. Find out what the IRS’s Fresh Start program means for you and whether you qualify for the initiative.
You Can Pay Off Your Tax Debt in Six Years or Less
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When you receive a tax bill for tens of thousands of dollars, it might seem impossible to pay it off before the deadline. After all, depleting your emergency fund or spending savings you don’t have might mean you can’t cover rent or pay other important bills.
Fortunately, the Fresh Start initiative gives you an opportunity to pay off your tax bill over time. If you can pay off your tax bill within six years, you could qualify for a long-term payment plan that requires monthly installments instead of a lump sum.
You Owe Less Than $50,000 in Back Taxes
Before the IRS introduced the Fresh Start program, you could qualify for a long-term payment plan only if you had less than $25,000 in tax debt. Today, however, you’re eligible if you have up to $50,000 in tax debt.
If you owe more than $50,000, don’t worry. You could qualify for a short-term payment plan if you have up to $100,000 in back taxes. With a short-term payment plan, you’ll have 120 days to pay off your debt while avoiding additional IRS collection activities.
You Have the Ability to Pay Part of Your Tax Debt
When you owe tens of thousands of dollars in back taxes, you might never be able to pay off your debt. If you can pay off part of it, however, the IRS might be willing to strike a deal with you.
As part of the Fresh Start program, the IRS allows indebted taxpayers to submit an offer in compromise, which lets you settle your tax debt for less than what you owe. To apply for this initiative, be prepared to submit forms that prove your income, expenses, asset value, and ability to pay. Since offers in compromise can be complicated, consider hiring an experienced tax relief firm to assist you with the application process.
You Signed Up for a Direct Debit Installment Agreement
Finding out that the IRS has filed a tax lien against you is never good news. After all, tax liens attach to all of your assets and can prevent you from getting additional credit.
In the past, it wasn’t always easy to have a tax lien withdrawn. Under the Fresh Start program, however, you could qualify for tax lien withdrawal if you owe less than $25,000 and if you signed up for a direct debit installment agreement to pay the rest of your debt.
Just because you can’t pay your full tax bill today doesn’t mean you have to continue to bear the burden of tax debt. If you qualify, take advantage of the IRS’s Fresh Start initiative to pay off your taxes and get closer to living debt-free.