Settling Your Debt

• If you have a bill that you cannot afford, one of the options that you may want to consider is settling your debt. The IRS allows some individuals to settle their debt for less than they owe. This is known as an Offer in Ccompromise, and it could save you a significant amount of money on your taxes. This method will only be an option if the IRS believes that it cannot collect the full amount of the debt that you owe.
  
  

Making Payments

• Another option that you may want to consider is setting up an installment agreement with the IRS. When you do not qualify for the offer in compromise or you have already used it before, the installment agreement is the next best thing. With an installment agreement, you can set up a repayment plan with the IRS over an extended period of time. This plan gives you some time to pay, but it also costs money in interest fees.
  
  

Borrowing Money

• In some cases, it may be to your advantage to borrow money to pay off your tax debt. To do this, you can take out a personal loan or use a home-equity loan. Then you would eliminate your debt with the IRS, and you can focus on making the payments back to your lender. If the interest rate that you can get is lower than what the installment agreement with the IRS costs, this could make sense financially.
  
  

Tax Debt Companies

• In this situation, many people turn to companies that offer relief from tax problems. While some of these companies are legitimate, many of them are scams. They use the Offer in Compromise to help settle your debt, when you could easily do the same thing by filling out the appropriate paperwork. If you are considering using one of these companies, make sure that they are legitimate by checking with the Better Business Bureau.