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Dealing with tax debt? Be aware of your options

How you deal with your tax bill depends on your specific circumstances. Even if you cannot pay it all at once, there are several different steps you can take. But you need to be sure that the response you choose is the one that makes the most sense for you.

A knowledgeable tax attorney can guide you in making that decision. In this post, we will take note of some recent IRS tips on tax-bill payment to consider as you weigh your options.

For one thing, if you receive an IRS notice about owing taxes, it is important to take action. After all, putting off efforts to resolve your tax debt will only add to the interest and penalties you may already face.

If you have the money, the IRS certainly tries to make it easy to pay by encouraging online payment. And of course the IRS is also willing to take your check or money order.

But even if you can't pay your bill in full, there are other options.

One of those is an installment agreement. If the IRS approves it, such an agreement allows you to pay your bill over time. Applications are available online or in paper form through Form 9465.

If you are committed to using a payment plan, it may be possible to arrange for a direct debit arrangement. Both individuals and businesses are potentially eligible to make payments to the IRS in this way.

But what if you are experiencing financial hardship and are in need of mitigating the sheer size of your tax debt? If you are in that situation, an offer in compromise (OIC) may be your best approach.

If approved by the IRS, an OIC allows a taxpayer to resolve tax debt for less than the full amount owed. And as we noted in our January 21 post, acceptance rates for OIC applications have been going up in recent years.

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