We review how tax relief works and the four most common steps taken to bring your back taxes current.
So, you got a bill from the IRS. No problem, right? You can write a check to pay it off. There’s just one little problem: you don’t have enough money to pay your tax bill.
Tax relief might cross your mind, but you might not be sure how it works.
We’re here to walk you through the process of how tax relief works. By the end of this article, you’ll understand what tax relief is, how to get tax relief, and where to get help if you’re in over your head.
You’re here because you already know about the power of the IRS, their power to garnish wages or file a tax lien on your property, and it’s reached the point where you need to act.
You’re in the perfect place!
By the end of this article, you’ll be able to make a great decision about your next step whether it will be attempt this on your own or choosing to hire an expert to help.
The Nitty Gritty of Tax Relief
Tax relief can be an option for anyone who owes money to the IRS. If you can’t afford to pay your tax bill, tax relief is like a life preserver to keep your finances afloat.
I know what you’re thinking.
Tax relief sounds great. Where do I sign up?
Give yourself a break. 8% of all U.S. taxpayers are delinquent. You are not alone!
But here’s what you need to understand:
Despite its name, tax debt relief doesn’t erase your tax debt.
However, tax relief makes taking care of your back taxes easier. To help manage your balance, the IRS lets you:
- Set up a payment plan
- Explore tax forgiveness
- Negotiate a settlement
If you’re overwhelmed already, take a deep breath. You don’t have to do this alone! We’ve vetted the best tax relief companies to help you with what you owe.
Whether you plan to hire a pro or attempt the harrowing task of DIY tax relief, keep reading to see your options.
Top 4 Real-Life Solutions for Tax Debt Relief
Owing back taxes can feel overwhelming. But don’t panic.
The IRS has systems in place to make paying your back taxes easier.
Here are the four most common methods of tax relief to consider.
1. Break It Down Into Smaller Payments
Payment plans make it possible to break down your high tax debt into an easy-to-manage amount.
Monthly payments are usually less than $200 a month when you’re dealing with tax debt of $10k to $15k, which is affordable for most people.
You could also be eligible for a payment plan if you owe a lot more than that, so there’s still hope if your balance is $16k or more.
Once you start an installment plan, you will have a harder time qualifying for a debt reduction request later. We recommend you speak to an expert to see if you qualify for tax relief first.
Payment plans aren’t free.
The IRS charges up to $149 to set up monthly installments. Plus, interest and fees are tacked on every month until you pay your balance in full.
2. Ask for Tax Forgiveness
If you’re struggling to come up with the cash to take care of your tax bill, there is another option. It’s called an offer in compromise, and it’s when the IRS forgives some or all of your tax debt.
But there’s a catch.
To be eligible, you must prove that paying your tax bill would create a financial hardship.
The IRS looks at your:
- Ability to pay
Here’s where you might hit a snag.
If the IRS doesn’t think you meet “financial hardship” status, then this won’t be an option for you.
3. Create Some Wiggle Room
Depending on the size of your tax bill, having some extra time to come up with the cash might be all you need.
And if that’s the case, here’s some good news.
The IRS can extend your due date by six months.
But there’s bad news, too.
Interest and fees are added to what you owe. Interest compounds daily, which means your balance grows a little every day until your tax bill is paid in full.
4. Personal Loan
Using a personal loan to pay off your back taxes can be a smart move.
And I’ll tell you why.
The interest and penalties the IRS charges can be really high.
How high is “really high?”
The IRS interest rate is the federal short-term rate plus an additional 3%. The interest compounds daily. On top of that, you’re charged a failure to pay penalty of 0.5% every month, up to a 25% max.
Getting a personal loan to pay off your tax bill might be cheaper.
Sure, you’ll pay interest on the money you borrow. But there’s a decent chance the rate will be less than what you’ll pay the IRS.
If you’re approved for a personal loan, you can use the funds to pay off your tax debt.
Talk about tax relief!
You’ll have to make payments to the bank until your loan is paid in full.
But the best part?
If you use a personal loan to pay off your taxes, you won’t have to worry about the IRS garnishing your wages or putting a tax lien on your property or assets.
Examples of success:
I browsed through dozens of testimonials from tax relief companies to find these. Of course there were dozens and dozens I found for a higher starting balance.
Initial Amount Owed
Resulting Amount Owed
Tax Relief Company Used
Eric Owed $15,000
|OPTIMA TAX RELIEF|
Miguel Owed $11,000
|COMMUNITY TAX RELIEF|
David Owed $15,000
Less than $1,000
|OPTIMA TAX RELIEF|
Gary Owed $13,000
|COMMUNITY TAX RELIEF|
Top Picks for Debt Relief Companies
Taxes are complicated, and talking to the IRS can be intimidating.
But have no fear.
A tax debt relief company can help save the day.
We’ve partnered with the top three tax debt relief companies to help you deal with the IRS.
Our top pick is Optima Tax Relief. They have over 895 5-star reviews on Trustpilot and an A+ rating with the Better Business Bureau (BBB).
It won’t cost you an arm and a leg, either.
Offer in Compromise Mistakes:
Tax relief expert (and former IRS revenue officer). Jeffrey McNeal says when he processed offers, he saw tons of mistakes made on the forms, even when prepared by CPAs and enrolled agents!
Optima will give you a free consult. If you want to continue with them, you’ll pay an initial fee of $495 to get the ball rolling.
Anthem Tax Services Review has the same A+ rating from the BBB. The price is a little lower and comes in at $250 for the initial cost.
Our third pick is Community Tax Review. They also have an A+ BBB rating. Community Tax Review focuses on more than just tax debt relief, so they are a good all-around tax solution.
Benefits to Hiring a Tax Relief Company:
You might think the only benefits to using a tax relief company would be to help reduce a balance. But after reading hundreds of reviews of tax relief companies, we’ve discovered that tax relief companies help Americans in a variety of ways:
- provide guidance on audits
- help set up payment agreements with the IRS
- help get current on any unfilled tax returns
- some may be able to stop potential penalties such as wage garnishments
Most importantly, they pause the stress of dealing with the IRS – Typically any case submitted to the IRS takes months (or years) to review. While waiting for their response, the IRS typically suspends any collection activities, and will often life wage garnishments, as is the case with an Offer in Compromise submission.
Our #1 choice for tax debt relief is Optima Tax Relief. Click here to set up a free consultation.
What’s Your Next Step?
If you owe less than $10,000 in debt, there’s a pretty good chance you can take care of your back taxes without calling in the professionals.
But do you know what?
Doing it yourself isn’t always the best solution.
Sometimes, taking a DIY approach can do more harm than good. In those situations, you’re better off calling a professional tax debt relief company.
After all, most offer a free consult so you can get an expert opinion.
Even if you decide to handle it on your own, make sure you communicate with the IRS.
Because here’s the bottom line.
The IRS can help. But only if you face the music and make arrangements to pay the taxes you owe.