When you owe taxes to the IRS and cannot afford to pay them right away you are going to have to make a choice. The choice you will have to make is whether you will try to settle your tax debt for less or if you will pay the taxes you owe through installment payments. The IRS will never tell you to try to settle your taxes because this means they will collect less money, but the option does exist and people do settle very frequently. Your decision to settle vs. pay in installments should be determined by your current financial situation and your likely future financial situation. Below are reasons for when you should settle and when you should pay your taxes owed.
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When you Should Settle Back Taxes Owed
The IRS typically accepts settlements from individuals if they have a very poor financial situation. The IRS understands that individuals do need a basic amount of money to maintain a certain standard of living and they do not expect individuals to pay an amount that would leave them with less than the minimum amount to not let them meet that basic standard of living. In order to be successful in settling your back taxes for less than you owe, you will have to prove to the IRS that the amount you are willing to settle for is equal to or greater than the amount that they would ever be able to collect from you, even if they used forced collection mechanisms. The IRS tries to collect as much money as possible with the smallest amount of effort and the IRS knows that it does cost them money to consistently pursue non payers and they do accept the fact that sometimes it is better to accept a settlement from that individual and just write off the difference.
When you Should Pay Back Taxes Owed through a Payment Plan
Most individuals that cannot pay taxes owed at the moment they are due are required to enter into a payment plan with the IRS. Individuals will be required to enter into a payment plan if the monthly payments that they make will not leave them with less than the required amount of money they need to live. The monthly payment required is an amount that is greater than or equal to an amount that will pay off the total amount of tax owed plus interest in a period of 3 years or less. If that amount creates too much financial strain on the individual they may be able to settle their tax debt, if it doesn't create excessive financial strain, they will be required to enter into a payment plan.
What most people don't know is that the IRS has a method for every individual that owes taxes to the IRS to get back onto good terms with the IRS no matter what their current financial situation is. The IRS deals with hundreds of thousands of individuals every year that cannot pay their taxes owed and have therefore created several dozen methods of settlement and payments available. IRS tax code is extremely complex and it is recommended that individuals in tax debt contact a tax professional and have them figure out the best payment method or settlement method. The benefits of tax relief professionals today greatly outweighs their costs and individuals typically end up paying less than if they were to try handling the situation on their own.
The Internet has brought into our home many utilities, out of which the best is simplification of communication channels. You can do almost anything you want with the help of the Internet today, i.e. talk, chat, shop, bank, study, apply for jobs, apply for credit cards, house mortgages, etc. Since it is easy to use and negligible in cost, the Internet has become a hot favorite for those who are not comfortable with face-to-face applications of many sorts.
For a person who is hounded by creditors, this is indeed a great boon. The Internet gives you the opportunity to find out the best possible rates available and even apply for a loan online. This means that you do not need to get an appointment; you do not need to explain yourself or your situation to a granite faced man/woman who seems to only want to find fault with you (the interview is one of the most intimidating moments for most of the people who are heavily indebtedness, though it need not be so).
The online application option is best for those people whose past credit scores and history are not ideal and they are not very comfortable discussing about it. You need to keep in mind though, that when you have a less-than-ideal credit score, the interest rates will soar accordingly. If you want to avail of the best interest rates available, you would need to "repair" your credit first.
This can be done through a bill consolidation loan, which is an excellent way of having the cake and eating it too. This option usually groups all your debts into one, and then issues you a loan for that amount. You would be liable to pay the consolidation company from that day onwards, which would mean a lesser monthly installment and a lesser rate of interest.
As the repayments would be done regularly through the escrow of the funds by the consolidation company, your credit rates would improve considerably over a few months time. As this improves, so does your chance to avail of the loan. The first thing is, however, what you should do before applying anywhere for a loan - check very thoroughly for any mistakes that might have been crept into your statement of expenses. Very often, such erroneous bills can destroy a person's peace of mind. You would need to be very careful in this aspect in particular.
The online application would usually check out the information you furnished on the application and then get back to you the same day with the news on whether they are considering or they are not. When your credit score and record is bad, it is very difficult to get a loan - simply for the fact that you have no collateral and the past says that you are not Pay Smarter reliable.
If you are on the lookout for a good debt consolidation program, it is best you put all your cards on the table, i.e. what is your capacity of repayment; what would be best way to manage the income you receive; and how the debt repayment would be done in such a manner that it would allow you to still have sufficient money to run your home.
