Summary: There are various options to solve tax problems. Bankruptcy may help, depending on your circumstances. Offer in compromise and installment agreements are also options.
Owing more taxes than you can pay is common for both business owners and individual taxpayers. Coming up with a plan to deal with them lowers stress. The IRS is a powerful creditor with extreme collection methods. The IRS can garnish wages (even in Texas), levy bank accounts, and seize property. Relief from tax debt may be available through bankruptcy and non-bankruptcy alternatives.
Tax Bankruptcy
“Tax Bankruptcy” is essentially a bankruptcy solution to a tax problem. There is no special bankruptcy for taxes. But with proper planning and timing, bankruptcy can offer, in specific circumstances, relief to taxpayers. In limited circumstances, taxes that meet certain criteria may be dischargeable in bankruptcy!
Offer in Compromise
Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service to settle a debt for less than what is owed. This program was designed to offer a taxpayer a “clean slate.” The IRS will accept an Offer that they believe represents an amount that is the most a taxpayer has the ability to pay. Both income and assets are considered.
Installment Agreements
An Installment Agreement is an arrangement between the Internal Revenue Service and a taxpayer to make monthly payments on a tax owed. Can be up to 72 months — may be less than the full amount owed.
Read more about common problems related to taxes
Liens, levies, garnishment, and seizure
If you have received notice of intent to levy or garnish, you should call an attorney immediately.
Past due, unfiled tax returns
Past due, unfiled tax returns can be difficult. Missing the final deadline to file a tax can have some serious consequences. Most tax resolution options require that you file all tax returns.
If you have significant tax issues, consulting with an attorney may help you decide on an appropriate course of action. For those who cannot afford an attorney, the IRS does offer a Taxpayer Advocate Service.
Additional Reading
We have several blog posts on the topic of taxes if one of the pages linked above doesn’t satisfy your questions.