5 Useful tax debt management techniques to lower your IRS tax debt

Know how you can reduce your IRS tax dues by following some simple techniques.

When you have any type of dues or outstanding balances mentioned on your credit report, it pulls down your credit score. In addition, you would face obstacles in qualifying for a loan, purchasing a home or even finding a job. IRS tax debts can turn out to be specifically awful warning signals to prospective lenders, spoiling your chances to obtain credit.

There are some helpful tax debt management techniques that you can adopt to reduce your IRS tax debt. When tax liens have been imposed on your property for recovering IRS tax dues, they might damage your credit history like a bankruptcy or foreclosure. Once the federal government serves the notice for a tax lien, your creditors are informed about this. You should try to eliminate these dues as soon as you can since it would help you enhance your credit score.

Given below are five useful tax debt management techniques that you can follow to lower your IRS tax dues:

1) Apply for a currently uncollectible status

When you feel that you don’t have the capacity to pay your IRS tax dues, then you can apply for a currently uncollectible status. This would prevent the collection proceedings till the time the statute of limitations (SOL) on your debt obligation expires. Nevertheless, if your financial condition shows signs of betterment, then the Internal Revenue Service would take you out from the currently uncollectible status list and initiate collection proceedings once again.

2) Make a monthly installment plan

You can simply arrange a monthly installment plan to repay your IRS tax dues through the Internet, provided your overall outstanding balance isn’t more than $25,000.

3) Offer in compromise

This technique allows you to bargain a lowering of tax debt. The drawback here is that you have to make a huge down payment and substantiate that you absolutely don’t have the means to pay off the remainder since you’ve used up all your funds.

4) Ask for a part payment plan

A part payment installment plan permits you to pay a lower amount than what you’re required to pay back. Once the payments are made as per the contract, the rest of your tax dues is pardoned by the Internal Revenue Service.

5) File for bankruptcy

Your outstanding tax balances would be discharged if you file Chapter 7 or Chapter 13 bankruptcy. However, it’s also a warning signal for the potential lenders. Filing bankruptcy is harmful for your credit and it remains on your credit report for up to 10 years. In addition, you need to be lagging behind on your tax payments for a minimum period of 3 years to be eligible for a Chapter 7 bankruptcy filing. When you have a steady source of income, you might need to file Chapter 13 bankruptcy. This permits you to formulate a repayment plan. You can save your home from being foreclosed but you need to keep on making mortgage payments for the entire duration of the bankruptcy procedure.

IRS tax debt is a significant debt burden. Knowing the abovementioned techniques might help you reduce this burden.