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Dealing with tax-related debt

Possibly one of the scariest forms of debt is debt that is owed to the Internal Revenue Service. When facing a big company, such as a bank that holds the mortgage on your home, it might seem like you have no options. But dealing with the IRS can seem even worse.

Here's the good news: There are options for dealing with debt, no matter whom you owe the money to. Here's the bad news: You can't discharge tax-related debt through processes such as bankruptcy. That being said, you can negotiate with the IRS and the agency does allow eligible tax payers to enter into installment agreements to make paying taxes more affordable.

No matter what type of debt you are facing, one top tip remains true: You must take action. Simply sitting on the notices about the debt won't get you anywhere. In fact, depending on the type of debt you are dealing with, you might end up with wage garnishments or a foreclosure if you do nothing.

If the debt is with the IRS, continue filing tax returns and other documents on time to avoid paying high penalties for failing to do so. Apply for an installment agreement if the problem is simply coming up with a lump sum all at once or work with a professional who can help you deal with negotiations and an offer in compromise to pay less taxes than the IRS states that you owe.

If you are also dealing with other debts, you might want to contact an attorney that specialized in debt management, settlement and bankruptcy. Such professionals can offer a range of options that can stop foreclosures and provide you the time and room you need to create a plan to get back on track.

Source: IRS Taxpayer Advocate Services, "I Can't Pay My Taxes," accessed March 04, 2016

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