Question: My tax debt is extraordinarily high: $242,000. Don’t ask how it got that high. I’ll explain later. But my question is this: With the hot real estate market, I could probably sell my investment/rental house for about $130,000. That still leaves a little over $100,000. I don’t have that much cash, but I could probably pay it over time — say, in five to seven years. Is this an option for me?
Answer: Yes, absolutely it’s an option for you. While selling your investment property might be a good way to eliminate a large chunk of your tax debt, it might not be necessary. If keeping the property — and the rental income — is important, you should discuss options with a qualified tax professional.
Whether you decide to sell the house or not, an Installment Program could be an option for you. After years and years of chasing deadbeat taxpayers, the IRS has learned that knock-on-doors enforcement doesn’t necessarily work better than flexibility.
If your current income potential would allow you to pay off the debt over time, IRS agents might be agreeable to letting you pay in installments. The program works very much like a mortgage or car payment: The IRS analyzes your assets and income and comes up with a figure that would allow you to satisfy the debt without forcing you to alter your lifestyle drastically. (If you have a $800-per-month BMW, that might have to go. But your house, your kids’ university tuition, etc. — all are fine.)
Having large tax debts over your head can be one of the most stressful situations in life. Believe me, I know. Every day clients come into my office feeling as if the world is about to close in on them. The stress becomes overwhelming.
It doesn’t have to be that way. Most tax problems can be settled with the help of a qualified tax professional. The trick is to come in and start working on a solution as quickly as possible. That’s what I do. I’m an IRS Problem Solver. I’ll be happy to discuss your problems with you and help you find a solution.