Post-Divorce Tax Debt: Payment Plans and Relief Options

The difficult and emotional process of being divorced can have a big effect on your financial condition. Tax debt is one of the most important problems that might develop following a divorce. 

Unpaid taxes due by one or both spouses before or during the marriage are a common cause of tax debt. This can have severe financial repercussions--such as wage garnishment, levies, and liens--if it is ignored. 

However, there are several payment plans and relief options available to help you manage your post-divorce tax debt.

This article explores the various payment plans and relief options available to manage post-divorce tax debt and avoid potential financial consequences.

Payment Plans

One of the most common ways to address tax debt is through a payment plan. A payment plan is an agreement between you and the IRS to pay your tax debt in installments over time. 

The IRS offers several payment plan options, including the following:

1. Installment Agreement

You can pay off your tax obligation using an installment agreement, which is a payment schedule that lets you make monthly payments. This plan is available to taxpayers who owe less than $50,000 in tax debt and can pay off the balance within six years. 

To qualify: You must be current on all tax returns and have no outstanding tax debt from previous years.

2. Partial Payment Installment Agreement

You can pay off a portion of your tax bill over time with a partial payment installment agreement. This plan is available to taxpayers who owe more than $50,000 in tax debt and cannot pay off the balance within six years. 

To qualify: You must provide financial information to the IRS to prove that you cannot pay the full amount owed.

3. Offer in Compromise

A settlement agreement known as an "offer in compromise" enables you to pay a smaller portion of your tax liability to the IRS. This plan is available to taxpayers who cannot afford to pay their entire tax debt and meet certain eligibility requirements. 

To qualify: You must provide financial information to the IRS to prove that you cannot pay the total amount owed.

Relief Options

In addition to payment plans, there are several relief options available to help you manage your post-divorce tax debt. These options include the following:

1. Innocent Spouse Relief

You may be qualified for innocent spouse relief if you and your spouse jointly filed a tax return while you were married. 

If your spouse neglected to declare income, reported income incorrectly, or unknowingly claimed erroneous deductions or credits, you may be eligible for innocent spouse relief, which can relieve you of your tax liability.

2. Currently Not Collectible

If you are unable to pay your tax debt due to financial hardship, you may be eligible for currently not collectible status. Currently not collectible status allows you to temporarily stop making payments on your tax debt without facing penalties or interest. 

You need to show the IRS that you are financially unable to pay your tax bill in order to be granted currently not collectible status.

3. Bankruptcy

In some cases, filing for bankruptcy may be a viable option for managing your post-divorce tax debt. Bankruptcy can help you eliminate or reduce your tax debt, but it can also have long-term financial consequences. 

It's crucial to speak with a bankruptcy lawyer before declaring bankruptcy to be sure it's the best course of action for you.

Conclusion

If you are struggling with post-divorce tax debt, it is important to take action as soon as possible to avoid penalties and interest. Assess the best course of action for your circumstance by speaking with a tax expert or lawyer. 

With the right plan in place, you can take control of your finances and move forward with confidence.

Tax debt programs can help alleviate the stress that comes with tax problems. At Advance Tax Relief LLC, our tax attorneys in Houston, Texas, are well-equipped to assist you with filing back taxes and resolving your tax debt. 

Don't let tax problems continue to weigh you down. Contact us today to learn more!

The 3 Kinds of IRS Letters You’ll Get and How to Respond

Regarding taxes, the IRS is known for sending letters to taxpayers for various reasons. These letters can be intimidating and confusing, but it's essential to understand what they mean and how to respond to them, especially if you have a chance at hiring a tax relief service. You may receive three IRS letters: CP501/CP503, CP504, and LT11. Each one serves a different purpose, and the actions you take in response to them will differ significantly. 

The CP501 or CP503

These letters are typically sent when you have a balance due on your tax return. The CP501 is sent as a reminder to pay your taxes, while the CP503 is sent as a final notice before the IRS takes action to collect the debt. If you receive a CP501 or CP503, you should act immediately. Ignoring these letters can lead to more severe consequences, such as wage garnishment or the seizure of assets.

To respond to a CP501 or CP503, you should first review your tax return and confirm that the amount owed is accurate. If you believe there is an error, you can dispute it with the IRS. If the amount owed is correct, you should pay it immediately. The IRS offers various payment options, including payment plans and online payments. You should contact the IRS to discuss your options if you cannot pay the full amount owed. They may be able to offer a payment plan or other arrangements to help you pay the debt over time. 

The CP504

This letter is sent when you have a balance due, and the IRS intends to levy your assets to collect the debt. The CP504 is a final notice before the IRS takes action, so acting quickly is essential. If you receive a CP504, you should immediately review your tax return and ensure that the amount owed is accurate. If there is an error, you can dispute it with the IRS. If the amount owed is correct, you should pay it immediately.

To respond to a CP504, you should contact the IRS immediately. You may be able to negotiate a payment plan or other arrangements to avoid asset seizure, like enlisting the help of tax relief services. It's essential to communicate with the IRS and make arrangements as soon as possible to avoid further consequences. If you ignore the CP504, the IRS may seize your assets, including bank accounts and property.

The LT11

This letter is sent when the IRS has not received your tax return and has no record that you filed one. The LT11 is a notice that the IRS intends to assess a tax liability based on their estimate of your income. If you receive an LT11, you should act quickly to avoid additional penalties and interest.

To respond to an LT11, you should review your records and ensure you have not filed your tax return. If you have filed your tax return, you should provide proof of filing to the IRS. You should do so if you have not filed your tax return as soon as possible. Filing your tax return will help avoid additional penalties and interest. Communicating with the IRS and promptly providing any necessary information to avoid further consequences is essential.

Get Advanced Tax Relief Today

Each letter serves a different purpose, and your response to them will differ significantly. Act quickly, communicate with the IRS, and arrange to pay any amounts owed are essential. Ignoring these letters can lead to more severe consequences, such as asset seizure or wage garnishment. By understanding these letters and responding promptly, you can avoid additional penalties and interest and resolve any tax liabilities with the IRS.

Our tax attorneys and Enrolled Agent (EA) team have a combined experience of 30 years and have successfully settled over 100 million dollars of tax debt. We comprehend that managing tax problems and filing back taxes can be distressing and daunting, so we are here to help. Advance Tax Relief has earned a reputation as one of the top tax resolution firms in Houston, Texas. Call us for tax relief services now!