Dealing with tax debt can be overwhelming, but the Internal Revenue Service (IRS) offers various programs to help taxpayers get back on track. If you’re struggling to pay your tax bill, understanding your options is the first step towards financial recovery. This guide will walk you through the solutions available, including what was once known as the Internal Revenue Service Fresh Start Program, and how these options can help you resolve your tax obligations.
Can You Pay Your Tax Balance?
The simplest way to resolve your tax debt is to pay it in full as soon as possible. Paying your balance immediately minimizes the accumulation of interest and penalties. The IRS provides a convenient online payment portal where you can make payments directly from your bank account, debit card, or credit card. Paying in full gives you immediate peace of mind and prevents further complications with the IRS.
Options if You Can Pay Part of Your Tax Balance
If you can’t pay your entire tax bill right away, paying a portion is still beneficial. Any amount you pay upfront will reduce the principal balance and subsequently lower the amount subject to interest and penalties. After paying what you can, consider these IRS programs to manage the remaining balance:
Setting Up a Payment Plan (Installment Agreement)
One of the most common solutions for taxpayers who can’t pay their full tax liability is to establish a payment plan, also known as an installment agreement. This allows you to pay off your balance over time in manageable monthly installments. The IRS offers an Online Payment Agreement application for quick and easy setup. Keep in mind that fees and interest will still apply to the outstanding balance until it’s paid in full, but this option provides a structured way to handle your debt.
Exploring the Offer in Compromise (OIC) – Formerly the Fresh Start Program
The Internal Revenue Service Fresh Start Program is a term that many taxpayers are familiar with. While the IRS no longer officially refers to it as the “Fresh Start Program,” the principles of Fresh Start are largely embodied in the Offer in Compromise (OIC) program. An Offer in Compromise allows certain taxpayers to resolve their tax debt for a significantly lower amount than what they originally owe.
Understanding your payment options with the IRS can alleviate tax debt stress.
To be eligible for an Offer in Compromise, your ability to pay, income, expenses, and asset equity are all evaluated. The IRS will consider whether an OIC is warranted based on “doubt as to collectibility,” “doubt as to liability,” or “exceptional circumstances (effective tax administration).” It’s essential to check your eligibility for an Offer in Compromise to see if this option is suitable for your situation. The OIC can be a lifeline for taxpayers facing severe financial hardship and is, in many ways, the modern iteration of what was known as the Fresh Start program in addressing tax debt.
What if You Can’t Pay Anything Right Now?
If you are facing severe financial difficulties and cannot afford to make any tax payments at this time, the IRS may still be able to help.
Requesting a Temporary Delay of Collection
If your financial condition is dire, you can request that the IRS temporarily delay collection activity. This is not a forgiveness program, and interest and penalties will continue to accrue, but it can provide temporary relief if you are unable to pay due to significant financial hardship. You can request a temporary delay of collection by contacting the IRS and explaining your circumstances.
Addressing Discrepancies in Your Tax Bill
If you believe there is an error in your tax bill, it’s important to address it promptly.
Disputing Your Tax Bill
If you disagree with the amount due or the information on your tax bill, contact the IRS immediately. Call the number provided on your notice or visit your local IRS office. Gather all relevant documents, including a copy of the bill, tax returns, cancelled checks, and any other records that support your claim. The IRS will review your case, and if an error is found, they will adjust your account and send a revised bill if necessary.
Seeking Innocent Spouse Relief
In cases where errors on a joint tax return were made by your spouse without your knowledge, you may be eligible for innocent spouse relief. This can protect you from being held responsible for tax, penalties, and interest resulting from your spouse’s errors. Explore tax relief options for spouses if you believe you qualify for this type of relief.
Tax Debt and Bankruptcy
If you are considering or have filed for bankruptcy, notify the IRS immediately. Bankruptcy can temporarily halt collection actions. Contact the IRS at the number on your bill or call 800-973-0424 and be ready to provide details such as the court location, bankruptcy filing date, chapter, and bankruptcy case number.
Consequences of Ignoring Your Tax Debt
Ignoring your tax debt and failing to contact the IRS can lead to serious collection actions. The IRS may take actions such as levying your wages, bank accounts, or seizing your property to satisfy the debt. It is always better to proactively address your tax issues rather than ignoring them.
Planning for Future Tax Obligations
To prevent future tax debt, it’s crucial to plan and pay taxes throughout the year as you earn income. You can adjust your tax withholding from your wages by using the IRS Tax Withholding Estimator or make estimated tax payments if you are self-employed or have income that is not subject to withholding. Understanding estimated taxes is essential for avoiding tax issues in the future.
Getting Help with Your Tax Debt
Navigating tax debt can be complex, and the IRS provides numerous resources to assist taxpayers.
Utilizing Your IRS Online Account
Your IRS online account is a valuable tool. You can use it to set up payment plans, view your balance, access transcripts, and even engage in live chat for assistance.
Scanning the QR Code on IRS Notices
Many IRS notices now include a QR code. Scanning this code with your smartphone will direct you to specific information and resources relevant to your notice and account.
Using the IRS Document Upload Tool
You can securely upload documents to the IRS in response to notices, phone conversations, or in-person requests, streamlining communication and document submission.
Contacting the IRS by Phone
Call the phone number listed on your IRS notice for personalized assistance. Alternatively, you can contact the IRS directly at 833-678-7020. The IRS often offers a call-back option to avoid long wait times on hold.
In-Person Assistance at IRS Taxpayer Assistance Centers
For face-to-face help, visit an IRS Taxpayer Assistance Center. You can also seek guidance from Low Income Taxpayer Clinics (LITCs) if you qualify, which offer assistance to taxpayers with limited income.
Taxpayer Advocate Service (TAS)
The Taxpayer Advocate Service is an independent organization within the IRS that protects taxpayer rights. TAS can help you resolve persistent IRS problems and advocate for changes to prevent future issues.
Authorizing a Third Party
You can authorize a representative, such as a tax professional, to communicate with the IRS on your behalf.
Protecting Yourself from Tax Scams
Be vigilant about potential tax scams. The IRS will never initiate contact via phone calls, text messages, or social media to demand immediate payment. Official IRS communication begins with a letter sent through the mail, outlining appeal and dispute procedures. To verify if you owe money to the IRS, check your tax account information online directly on IRS.gov.
Be aware of tax scams and always verify communication from the IRS.
Be particularly cautious of phone scams where criminals impersonate IRS agents. Scammers can be convincing and aggressive. Remember, legitimate IRS processes are clearly defined and do not involve unsolicited, threatening demands for immediate payment. Also, be wary of companies claiming to be the IRS or promising to settle your debt through a “Fresh Start program”—learn how to settle your debt with the IRS on your own to avoid unnecessary fees and potential scams.
Conclusion
Resolving tax debt is achievable with the resources and programs offered by the IRS. While the specific “Internal Revenue Service Fresh Start Program” as a single entity has evolved, the underlying principles of providing relief and pathways to resolution are still very much in place through options like Offers in Compromise, payment plans, and other assistance programs. By understanding your options and taking proactive steps to communicate with the IRS, you can effectively manage your tax debt and regain financial stability.
