The Tax Cuts and Jobs Act of 2017 made sweeping changes, including reductions to tax rates for most individual tax brackets and limits on many tax breaks. Problem is, employers may not calculate federal withholding changes properly or have updated W-4 forms from workers. This can leave many taxpayers owing more than they expected.
Sometimes, the amount owed is relatively small and painless to pay. But when you have a large tax debt, it can seem impossible to pay without a special arrangement in place.
Use one of the following six options to deal with an income tax debt that you can't pay:
Option #1: Offer in Compromise
With an offer in compromise (OIC) your tax debt is reduced based on your income, necessary expenses, assets, and equity in assets. To qualify, you can't have any delinquent taxes, estimated tax payments, or be in bankruptcy.
Option #2: Partial Payment Plan
If the IRS won’t budge on the tax amount you owe, they may give you an installment agreement, which allows you to make partial payments on a set schedule. This arrangement lets you gradually eliminate your tax debt.
Option #3: File an Amended Tax Return
If your tax debt results from an overstatement of your financial liability on a tax return from the past three years, you can correct it by filing an amended return.
Also, filing tax returns for years that you didn't file could reduce your tax liability. You might discover that you owe zero or should receive a refund.
Option #4: Non-Collectible Status
If you have a financial hardship and your expenses exceed your income, you may qualify for non-collectible status. This doesn’t reduce the amount you owe but gives you more time to pay. So, it's a good option when you know that you'll have the ability to pay your debt in...
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