Options for Tax Debt Relief
What if you owe the IRS more money than you could ever possibly pay? Believe it or not, the IRS will actually consider offering you tax debt relief from the full amount due. This might sound like a wonderful loophole. The catch, however, is that you must have a seriously delinquent tax bill that has gone to collections before the IRS will consider giving you a break.
It’s called an offer in compromise, and it’s exactly how it sounds – a compromise between you and the IRS. But don’t get your hopes up just yet. The IRS resolves less than one percent of overdue tax accounts with an offer in compromise, so you better consider all other tax debt relief options first. Additionally, you have no legal right to a compromise; it is solely at the discretion of the IRS.
Your House Can Help You with Tax Debt Relief
Tax debt relief may be right in your own home. You see, mortgage debt is considered “good debt,” because the interest is tax deductible. The interest on a back tax debt, however, is not tax deductible. Therefore, a common method for tax debt relief is to use the equity in your home to consolidate tax debt. Talk to your bank or credit union about tax debt relief in the form of a home equity loan or line of credit. Some lenders will loan up to 125 percent of your home’s value, but be careful – your past tax debt is now secured by your home. As a caveat, you should consult your attorney about this tax debt relief strategy if you are planning on declaring bankruptcy.
Where to Go For Advice on Tax Debt Relief
One of today’s most savvy financial counselors is Suze Orman, whose books and TV shows have helped many with debt relief. Her Web site, Suzeorman.com, can be a powerful tool for understanding debt and how to eliminate it. If you have questions about tax debt relief, you can send her an e-mail, which she may answer during her weekly CNBC show.
Tax Debt Relief by Planning Ahead
One of the ways you can offer your children tax debt relief after you’re gone is by establishing a revocable living trust while you’re alive. This eliminates the requirement for probate costs, estate taxes and court fees to settle your estate. In the “old days,” all you needed was a will to delineate your wishes about your estate. Today, you simply must have a revocable living trust for tax debt relief purposes, unless you want to include Uncle Sam as one of your beneficiaries.
By Aaron McCullough