How to Settle with the IRS

Owing back taxes can be really difficult. Having the IRS on your back is pretty much the one organization you don't want nagging you for money.

Because the experience of owing back taxes can be so difficult, many taxpayers will just attempt to settle with the IRS to get the debt paid. If you are one of these individuals, here are some options to settle.

1.Pay the Amount in Full

One option that you have to get your tax debt paid is to just pay the amount in full.

For some, this means taking out a low interest personal loan or home equity loan for the amount. Others decide to charge the amount to their credit card. While both options can be effective in getting the debt resolved; however, the loan option usually offers a lower interest rate than the credit card, so before making either choice it's good to make sure that you will be able to pay offyour bills to avoid digging yourself deeper into debt.

2.Ask for an Extension

Another option that you may be able to take advantage of is getting a tax payment extension. Sometimes you may be to get a 45-day extension, or you may receive as much as a four-month extension to pay.

The amount of extension you receive usually depends on the amount you owe versus your monthly expenses. To set this up, you would need to work with an IRS representative.

3.Get an Installment Agreement

Another way that you may be able to settle with the IRS is to set up monthly payments.

In order to set up the installment agreement (if you qualify), you would need to either fill out Form 9465 or visit the IRS website and fill out the Online Payment Agreement Application (OPA).

4.See If You Can Receive a Partial Payment Installment Agreement

Similar to the installment agreement, the partial payment installment agreement allows you to make monthly payments.

However, your debt amount will not be paid in full. Instead, you will have negotiated down before making the installments so that the amount will be a fraction of what you originally owed. Here are some tips on how to get the partial payment installment agreement.

5.Consider the "Offer in Compromise"

Some taxpayers consider the Offer in Compromise to settle their debt. This is similar to a partial payment installment agreement because it helps you settle your debt for less. The Offer in Compromise, however, allows you pay the debt in full, rather than in installments. This can be accomplished through Form 656 and Form 433-A.

If you are not able to take advantage of these settlement options, the last resort may be to declare bankruptcy. However, because it hurts your credit, it's good to first see if there are other ways to settle your debt before the IRS comes to officially collect.