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3 ways to settle your IRS tax debt

As you work hard just to pay the bills and put food on the table, it's tough to keep up with Uncle Sam at the same time, and you may fall behind on taxes if you aren't prepared for the expense when it comes time to file. IRS debt isn't something that goes away if you ignore it, and eventually your wages may even be garnished to help pay for what you owe the government.

In 2013, the IRS offered up a Fresh Start initiative to help those who were struggling to pay their taxes. This gives expanded relief to those who owe back taxes that they can't pay. While this initiative can provide penalty relief, set up payments in installments and give the option of an offer in compromise, there are other ways to settle your IRS tax debt.

1. Installment agreement

Rather than paying the total amount you owe up front, you can work out an installment agreement with the IRS to pay your debts off in smaller monthly payments. While this may require that you pay extra interest on your taxes owed, it can also provide you with more time to figure out another solution without the IRS breathing down your neck. With the help of an attorney, you may even be able to negotiate lower monthly payments and a reduced amount owed.

2. Wage garnishment

When you don't pay your taxes, the government may come after you in the form of a wage garnishment, taking the money out of your paycheck before you even see it. This is a way of forcing you to pay your taxes, but many feel the sting when they go to buy groceries or pay rent. If your wages are being garnished, there are ways to bargain with the IRS to modify or release these garnishments if you can't survive without your entire salary.

3. Filing for bankruptcy

Under Chapter 13 and Chapter 7 of the Bankruptcy Code, some income tax debts may be discharged. Bankruptcy can offer you a fresh start and take the load of smothering debt off your shoulders, but can also greatly affect your credit score and what possessions you get to keep. You should always discuss bankruptcy with a professional before deciding to file.

There is no one size fits all approach to paying off tax debt, and every situation is unique and different. If you are drowning in debt and want to know which options you have, it may benefit you to speak to an attorney to have your questions answered before making any big decisions.

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