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!
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