If you’re dealing with tax debt, an IRS tax settlement will probably make your ears perk up. Most people aren’t used to hearing good news from the IRS once they’re late with payments. However, there are tax debt settlement options available from the IRS that can bring relief. Let’s explore getting ahead of the problem instead of waiting for more penalties to accumulate.
What Is a Tax Settlement?
You may assume that a tax settlement is something you work out in a courtroom – but completing a tax debt settlement is almost always as simple as submitting the right forms to the IRS. An IRS tax settlement allows a taxpayer to settle a debt for less than what’s owed.
Additionally, some settlement options focus on small, manageable payments. The IRS looks at extenuating circumstances, a taxpayer’s ability to pay what’s owed, and applicable tax regulations when deciding to issue a settlement. Of course, you’ll benefit from professional help when choosing the right relief option, submitting correct documentation, and following up with the IRS during this delicate process.
Benefits of an IRS Settlement
A taxpayer has everything to gain from an IRS tax settlement. The immediate benefit is that the IRS will almost always freeze penalties and interest once you’ve been approved for a settlement. This can help you to avoid costly repercussions like asset seizures and wage garnishments. Additionally, you may be able to stop interest penalties that would make your overall tax liability much larger than the dollar amount you actually owe.
The other immediate benefit is that you’ll probably end up paying much less than you actually owe to the IRS. The fact that the IRS is typically pretty speedy when it comes to issuing approval means that your payout burden will be lower almost immediately. You will be able to budget the full amount you’ll owe under the revised terms without worrying about any late fees or interest that you’d be on the hook for otherwise.
Types of Settlements
Those with tax debt have a list of options to consider when seeking settlements from the IRS. Here’s a rundown of what’s available:
- Offer in Compromise (OIC)
- Currently Non Collectible (CNC)
- Installment Agreement (IA)
- Penalty Abatement
You will need to meet certain qualifications for each option. The IRS will take a deep look at your financial status to determine how realistically you can pay off what you owe. Being approved for Offer in Compromise means that you’ll be able to settle your debt for less than what you owe. Approval for Currently Non Collectible status means that the IRS will suspend collection tactics because it’s determined that you can’t reasonably pay what’s owed. An Installment Agreement gives you the opportunity to pay off your debt in smaller chunks over the course of about six years.
How Does Tax Settlement Work?
You essentially have two options for how to get a tax settlement. The first is to negotiate with the IRS for less than what you owe. The second is to come to an agreement for repaying what you owe over time. You will need to meet the IRS’s qualifications before you can pursue either option.
Of course, you can’t comply or apply until you determine which option is appropriate for your situation. It’s recommended that you explore options for an IRS tax debt settlement with a tax professional before making any decisions.
Who Is Eligible for Tax Settlement?
The IRS’s settlement program is open to all taxpayers, but not every taxpayer will qualify for a settlement. You’ll need to be struggling with a tax debt that is difficult to pay back based on your financial standing. Alternatively, you may be able to prove that you are deserving of penalty abatement.
Explore Your Options for an IRS Tax Settlement
It’s impossible to know how much the IRS will accommodate you until you get all of the paperwork done. At the Tax Group Center, we know that taxpayers benefit when they choose to take this journey with trusted and experienced tax professionals by their side. Our tax settlement services help taxpayers get settlement approval every day. Let us help you get your IRS debt settled as quickly as possible using the resources provided by the IRS. Reach out today!