Tips to handle your tax debt:

If you owe money to the government, you`re not alone. According to IRS statistics, Americans default on approximately $290 billion in taxes each year. In the current economic climate, millions of households are unable to pay their taxes because of poverty, unemployment and illness.

The good news is that there`s plenty of help available to assist you in managing and paying off your tax debt. A variety of sources, including the IRS, can help you pay off your back taxes without jeopardizing your livelihood.

Here are a few tips to handle your tax debt:

Find out exactly how much you owe. This is a crucial first step in taking charge of the situation. To determine the exact amount, call the IRS and ask to have it in writing. The IRS will verify how much you owe for the current year, in addition to how much you owe in back taxes. Picking up the phone and making this call may be difficult, especially if you`re strapped financially, but you`ll be glad you made this important first step on your road to tax debt relief.

Pay in installments. The IRS has an installment plan available that can help you settle your debt in monthly payments. If you want to spread out your payments, call the IRS and ask about Form 9465. You can also go online at www.irs.gov and fill out the payment agreement application on the website. The IRS will then contact you to confirm the details of your payment plan.

Call the IRS if you aren`t able to make payments. The IRS has set up its Taxpayer Advocate Service to help people who are struggling financially. If you need more time to make a payment, contact the IRS to see if you can get a grace period until you`re back on your feet. You may also be eligible for assistance from your local Low Income Taxpayer Clinic, an organization set up by the IRS to help low income taxpayers deal with payments and audits.

Set up a budget. If you owe $10,000 or less, tax specialists advise setting a goal of three years for repaying your back taxes. After you make your installment agreement, you`ll need to sit down and determine exactly how much you`ll pay every month and what day you`ll send the payment in.

Decide how you`ll pay. In recent years, the IRS has streamlined its payment system to facilitate its customers. In addition to using a check or a credit card, you can also have your installment payment deducted every month from your checking account. Many taxpayers choose to pay the IRS online by using the Electronic Federal Tax Payment System (EFTPS). The EFTPS is available 24 hours a day, seven days a week and you can access it either by telephone or by the Internet.

Talk to a tax accountant or attorney. A qualified tax consultant can help you set up a payment plan you can afford. You may also be eligible to file an Offer in Compromise, which allows you to make a one-time payment settlement that could be considerably lower than the amount you owe.

Whether you use a loans calculator or other tool to calculate your debt/income ratio, you`ll find that with a common sense approach and some realistic budgeting strategies, you`ll be able to pay off your tax debt, even if you can only pay a little at a time. By eradicating your tax debt you`ll give yourself peace of mind, in addition to a fresh start before it`s time to file next year`s returns.