IRS Taxes and Debt Consolidation

IRS TAX RELIEF OPTIONS

You have a number of choices when you have to deal with IRS debt which you can utilize to improve the chances of not getting into problems with the IRS. You need to know about these choices and be better informed to take full advantage of them. If you are unable to understand specific aspects, you can always fall back to take the advice of tax experts.

Some of the options are as under:
Setting up an Installment agreement with the IRS
The IRS is aware that not all can make lump sum payments and settle the taxes they owe in full at one go. They therefore are willing to discuss and arrive at a plan that allows staggered payment which is affordable and agreeable to the tax payer. This is a win-win situation for both the individual as well as the IRS. You need to sign an agreement though and the advantage is that if you fulfill your payment obligations on time. The IRS will not levy charges and extra interest.

Partial Payment Installment Option

This option is similar to the installment agreement except that the individual need not pay the entire amount due at one go as the review is only once in 2 years. In between, if the financial situation improves, the agreement can be closed.

Offer in Compromise

This is an understanding reached between the individual and IRS, which enables the individual to pay less than what he owes. This is normally not acceptable to IRS, but they agree to it as a last resort, since they know that it is better to get something than nothing at all. They do however try to offer the plans of installed agreement and partial payment before agreeing to this.

You however, have to fulfill certain criteria to qualify for an Offer in Compromise Plan:

• If IRS is not sure about your total liability figures
• If IRS feels that you are in no position to make the due payment.
• If above two constraints are not there, but the individual is able to convince the IRS that the payment of the taxes can create huge issues that would not be fair.

You may need the help of a tax expert to apply for an OIC.

Innocent Spouse Relief
This relief is for those who have been burdened with a tax debt due to the mistake or carelessness of their wife. This is applicable only for those who have filed a joint tax plan. There are conditions that need to be met here also:

• When you filed for joint return, you were unaware of the tax being undeclared.
• You were unaware that your wife had hidden certain items pertaining to the payment of tax.

You need to fill out IRS form 8857 to find out if you qualify for this and the help of a tax expert can also be sought by you.

Mortgage Debt Consolidation

Carrying a debt burden is extremely worrying and cause for tension. Most of us wish to become debt free and are in a constant race to earn enough so that this is achieved. This challenge can be overcome through a financial instrument called the debt consolidation mortgage loan program. You can qualify for such a program if you own a house.

How does this work?

House owners can merge their debt burden by offering their house as collateral against which you get a lump sum amount. You can use this amount to payoff the long pending card balances, car debt, other personal debt. The moment the credit balance runs out, you need to make the monthly contribution as repayment for the loan consolidation amount.

The benefit is that the rate of interest under this arrangement is very low and many people are able to settle the loan and keep to their schedule. Normally, the tenure is spread over a period of six to sixteen years. Due to low interest rate, you tend to save on the monthly payments and depositing these savings back into repayment can enable you to settle the loan quicker.

Under the loan consolidation program, you can opt for either mortgage refinancing or opt for house equity loan. In the former, you can choose for cash-out mortgage refinance where you can refinance your house at far lower interest rates thus effectively reducing your home loan payment or opt for a cash-out refinance plan where you can borrow against the equity of the real estate you own and utilize that amount to settle the high interest debt. You must be aware though that in doing so, you will be increasing your mortgage payment.

Under the house equity loan program, you have two options – a line of credit against your home equity and simple loans given against your home.

In the first option, you can procure cash to merge your loans and settle them. The amount you get is related to the equity of the house and since this falls under the secured category, even people with weaker credit rating can get their loans sanctioned.

The second option involves the disbursement of a block amount that can be used to settle high interest cost personal and card debts. The credit line extended is of a revolving nature and needs to be settled before it spins out of control.

You can thus utilize your real estate equity to good effect by leveraging the benefit of lower interest rates to settle high interest debt and this enables you to ease your debt burden to a great extent.