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How
to Position Your Tax Debt with the IRS for a Successful
Outcome
In today’s struggling economy, many have heavy tax debt
obligations. Without addressing them properly, it’s
plausible the IRS will become aggressive in seeking payment.
Avoiding this scenario requires dealing directly with the
IRS or a loan officer to minimize debt through loan
modification or a reasonable payment plan.
Before going directly to the IRS, one option is to take
advantage of the Obama modification plan to modify loans.
This plan allows approved loan holders to lower interest
rates and extend the length of their loan, ultimately
lowering monthly payments. This may free up more money in
the loan holder’s budget to pay off tax debt, keeping the
IRS at bay.
However, if one is not eligible for government loan
modifications, another option is to go directly to the IRS
to work out an installment agreement. There are four
possible installment agreements, each involving strict
requirements. Despite the requirement obstacles, each
installment agreement offers benefits for the holder.
Guaranteed installment allows the debtor to pay off debt in
monthly payments of the total amount of debt divided by 30.
The benefit to obtaining this agreement is that the IRS will
not file a tax lien against the holder — minimizing the risk
to a debtor’s credit. The IRS will also not require the
debtor to fill out a financial statement used to scrutinize
his or her financial situation. Streamline installment
agreements divide debt by 50 to determine minimum payments —
a plan designed for a higher amount of tax debt. The
benefits are the same as a guaranteed installment plan.
Partial payment installment agreements may involve a tax
lien and a financial statement, but work with a debtor’s
budget and result in payments agreeable with that budget. As
a last resort, one may also obtain a non-streamlined
agreement — a payment plan that puts the debtor under heavy
IRS securitization. This plan is not preferred and comes
with very few benefits — besides the fact that the debt is
being paid off.
Whether obtaining loan modification or an installment plan,
those with heavy tax debt obligations have options to work
with the IRS to settle debt.
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