Make a New Year’s Resolution to Take Care of Your Tax Debt

After you purchase a gym membership discuss your tax debt with a professional.

By David Semanchik, Esq.

New Year’s brought with it resolutions – lose weight, exercise more, quit smoking, drink less, find a new job.  The list of popular resolutions, some of which we’ve said year after year, goes on.

But many Americans failed to make one very important New Year’s resolution:  eliminate tax debt.  Considering 26.3 million Americans owe the federal government back taxes, such a resolution would not only benefit our nation but also our mental well-being.

Many of those 26.3 million Americans will never make such a resolution because they overestimate their situation.  With thousands, sometimes hundreds of thousands, of dollars hanging over their heads, they believe settling up with the Internal Revenue Service will bankrupt them and ruin their lives.

They’re wrong.

Although free rides do not exist in the United States, the IRS in recent years has shed its reputation as a fear-mongering tax collector.  In fact, today’s IRS promotes customer service – and you, believe it or not, are among Uncle Sam’s customers.

In an effort to eliminate tax debt while providing customer service to Americans, the IRS now offers options that allow Americans to settle up without destroying their lifestyle.  The most attractive option is called an Offer in Compromise, and it is indeed exactly as it sounds.

Realizing that settling for less without having to chase down taxpayers benefited the agency, the IRS enhanced this program to allow agents and indebted taxpayers to come to an agreement, or compromise.  This is how it works:

• A qualified tax professional will review your tax years in question, to be sure the time the IRS is allowed to collect the tax hasn’t run out.
• From here, it becomes tricky, but a tax professional can help you navigate these treacherous waters.  The tax professional will review your finances with you to determine your potential for making an Offer In Compromise.  You might be surprised that the best time to make an Offer is when your finances are at their worst.  If the agency accepts or counters the offer, the taxpayer saves a substantial amount, sometimes – paying just pennies on the dollar.
• An Offer in Compromise, may also be established with a payment plan built in, allowing you to settle your debt with monthly installments over a period of time.

Although it may be hard to believe, the process is that simple – not much different from the negotiations you go through when purchasing a car or house.

Having tax debt is a terrible feeling, one you’re reminded of most often after the passing of a year. This IRS dread can have a negative impact on many areas of your life, not just your finances.

So as you sign up for that gym membership or call that cigarette your last, you should also see a tax professional for a free consultation.  You’ll have the same feeling you had when you first put that gym membership in your wallet, but it will last a lot longer. 

David Semanchik a member of the American Society of IRS Problem Solvers and a New Jersey Attorney.  You can contact him at 732 240 4055 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.