Can I Settle Tax Debt for Less Now Because of COVID-19?
A reader wonders if the current situation means he can renegotiate to settle his IRS and state back taxes.
Jacob Dayan
7 minute read
Explore Tax Debt Solutions
If you owe back taxes the IRS or state taxes, it can be a serious financial burden. Tax agencies can garnish your wages, drain your bank accounts and place liens and levies on any property – all without a need for a court order. In addition, penalties can stack up quickly. The IRS can add penalty APR up to 25% of what you owe every month that you don’t pay. And it’s not as easy to hide from tax collectors to avoid paying what you owe. If you want to avoid significant and lasting financial damage, you need to find a solution as quickly as possible.
[On-screen text] Tax Debt Solutions Center
Welcome to Debt.com’s Tax Debt Solutions Center.
Tax debt can be one of the most damaging debts to have hanging over your head. The IRS and state tax agencies can garnish your wages, place liens and levies on financial accounts and property. And the longer you wait to get help, the worse it can be. The IRS adds interest and penalties daily on amounts owed to them.
Like most debt, there are ranges of solutions available. Which solution you choose really depends on your financial situation, including your income, budget and ability to repay what you owe. In this section, we’ll explain the spectrum of solutions and programs available. From Installment Agreements to penalty abatement and tax forgiveness, we’ll explain the options.
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DON’T WAIT TO FIND THE TAX DEBT SOLUTION YOU NEED!
Finding the right option for relief quickly is critical when it comes to tax debt. Let Debt.com connect you with certified tax debt resolution specialist for a free evaluation.
Video Transcript
[Community Tax co-founder Jacob Dayan]
Why do I have to pay taxes on a debt that’s been written off? And this is Taxing Questions.
Hi, I’m Jacob Dayan, CEO & Co-Founder of Community Tax
Your credit card might be plastic, but the company that issued it to you deals in paper. So, you can’t write off any cancellation of debt until the credit card company issues you a form called a Cancellation of Debt. This isn’t an uncommon situation, but it is a confusing one to many people.
In fact, if I’m asked to rate the difficulty of this topic on a scale from 1 to10, Cancellation of Debt is around a 7.
You might ask, why so high? Because the IRS and your credit card companies don’t advertise the solutions to your problem. And while they aren’t hiding them, either. Trying to figure out a Cancellation of Debt on your own is both time-consuming and confusing.
Having someone on your side, looking out for your best interests, can save you thousands of dollars. If you call Debt.com, you can consult with myself or a member of my team right away.
Featured Video: Avoiding Taxes After Debt Settlement
If you reach a settlement agreement with a creditor, lender, or debt collector, it doesn’t mean that your work is done. If you don’t file an exclusion with the IRS, the discharged amount may count as taxable income. This could lead to income higher taxes next year, which could decrease your refund or lead to tax debt. Our resident tax expert Jacob Dayan explains how taxes work on cancelled debt in this Ask the Expert video.
Learn MoreTax Debt How-To Guides
Debt.com always recommends that you should at least consult with a certified tax professional before you attempt to resolve any issues with tax debt. This is true even if you have an issue that the IRS tells you can be resolved on your own. Still, even if you work with a team of professionals, it’s still a good idea to understand how common tax solutions work. These guides will walk you through solutions step-by-step, so you can know what to expect.
FILING TAXES
The way you file your taxes each year can actually affect whether you receive a refund or a bill from the IRS. There are some key things you need to know about how to set your payroll tax withholding and how to file each year. The more you understand your annual income taxes, the less likely the IRS will come back with an audit.
UNDERSTANDING TAX DEBT
Tax debt doesn’t exactly work like other types of debt, and you don’t really learn how it works until you have it. That can make it tough to act quickly to find solutions, because you don’t really understand your debt. These resources can help you understand tax debt, so you’re better equipped to solve it.
TAX DEBT COLLECTIONS
The IRS collection office can move quickly to come after your wages, assets, and accounts. These resources can help you understand the collection process and the consequences you may face because of tax debt. Acting quickly will help minimize any financial damage you may face.
FINDING TAX DEBT RELIEF
If you owe back taxes to the IRS, it’s probably weighing heavy on your mind and your finances. The good news is that there are a range of solutions available that can help you find relief, even if you can’t afford to pay the IRS right now.
CONNECT WITH A TEAM OF CERTIFIED TAX EXPERTS NOW
Working with a team of licensed tax professionals can ensure you get out of tax debt as quickly as possible without overpaying. Request a free evaluation now to explore your options for relief.
Have Questions about Tax Debt?
Debt.com's panel of certified tax experts answer questions from consumers about tax debt. Whether you have questions about the IRS Fresh Start program, how to stop liens and levies or you simply want to know the best way to get out of tax debt in your situation, we can help. Here are some of our most popular questions about tax debt.
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DISCLAIMER: Debt.com does not provide tax relief services, but, upon request, acts as a locator service for BBB registered companies. Such tax specialists offer tax relief solutions for those worried about or experiencing tax liens, wage garnishments, bank levies, or other IRS tax-related collection measures. While Debt.com endeavors to connect individuals and families with appropriate tax relief professionals and resources, individual financial circumstances and tax situations will vary from person to person. It is ultimately up to you to determine whether the companies that we may introduce you to are appropriate for your situation.
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