In 2021, the IRS collected roughly $4.1 trillion in taxes. However, some people didn’t pay their taxes.
The IRS will attempt to collect tax money when people fail to pay the money they owe. But, unfortunately, this isn’t a good place to be. Owing money to the IRS can lead to wage garnishment, property liens, and extra fees.
As a result, you should evaluate the available tax debt relief options. Tax debt relief helps Americans who owe back taxes but can’t afford to repay them.
Here is a guide explaining how tax debt works to help you understand your options.
The IRS Offers Extra Time
When you file your tax return and owe money, the IRS expects you to pay it by the federal filing date. However, the IRS will give you extra time to pay the money if you request an extension.
In most cases, they’ll give you 120 days to pay it. They won’t file a tax lien or pursue other collection efforts during this time.
This option is good if you can pay the debt within this timeframe. Unfortunately, many people can’t pay their tax debts within three months.
As a result, this option only works for some people, as many can’t pay within this timeframe.
Consider an Installment Agreement
The IRS offers a Fresh Start Program designed to help people who owe back taxes. This program offers several ways to pay back taxes, and the first is through an installment agreement.
You might need time to pay the back taxes you owe. Through this program, you can create an installment agreement with the IRS. This agreement lets you pay your taxes through monthly payments.
You can ask a tax debt relief company for more information about this program. These companies understand the rules and procedures for creating an installment agreement.
They’ll review your financial information to see if you qualify. If so, they’ll set up a plan that works for you.
Evaluate an Offer in Compromise
Additionally, the IRS offers settlement options called offers in compromise (OIC). An offer in compromise lets taxpayers settle a back tax debt for less than they owe.
As you review the tax debt relief options, you might be drawn to this choice. The primary benefit of an OIC is that you’ll pay less money for the debt.
However, you must meet specific criteria to use an OIC. You can read a tax guide to determine if you meet the criteria. You can also learn by meeting with a tax debt relief specialist.
Seek Tax Debt Relief From a Professional
The IRS will send letters when you owe back taxes, and they’ll tell you when it’s due. However, they will take further action if you can’t pay it. Therefore, it might be helpful to seek tax debt relief quickly.
Are you struggling with tax debt and unsure about how to settle it? Contact us at Clean Slate Tax. We can evaluate your situation and offer advice and options for settling your tax debt.
Q1. What was the total amount of taxes collected by the IRS in 2021?
A1. The IRS collected approximately $4.1 trillion in taxes in 2021.
Q2. What happens if someone fails to pay their taxes to the IRS?
A2. If someone fails to pay their taxes to the IRS, they may face wage garnishment, property liens, and additional fees.
Q3. What options are available for tax debt relief?
A3. The options for tax debt relief include requesting extra time to pay, creating an installment agreement with the IRS, considering an offer in compromise, and seeking professional tax debt relief.
Q4. Can taxpayers request an extension to pay their taxes owed to the IRS?
A4. Yes, taxpayers can request an extension to pay their taxes owed to the IRS. In most cases, the IRS will give them 120 days to pay.
Q5. What is the Fresh Start Program offered by the IRS?
A5. The Fresh Start Program offered by the IRS is designed to help people who owe back taxes. It offers several ways to pay back taxes, including an installment agreement, and may be worth exploring with the help of a tax debt relief specialist.