Options are available for those who are facing out of control back tax debt. When tax debt becomes more than a person can financially pay, exploring tax negotiation, also known as tax debt settlement may be wise. This option will make it possible for a taxpayer to settle for less than what they owe. The formal name for this program is Offer in Compromise.
It is important to understand which tax debts can be negotiated for less. There are different types of tax relief programs available. Not all are a good fit for everyone. Knowing if the debt can be settled or if another tax relief program is a better option, will help determine the best way to handle the debt. An experienced tax professional can help to determine the best tax negotiation option available for the situation.
A person’s financial status and particular situation will be used to determine if Offer in Compromise is the best option. Everything including income, assets and living expenses are investigated when attempting to negotiate a tax debt. A very small percentage of those who file an Offer in Compromise actually get approved to settle for less than what was originally owed.
The IRS will consider a tax settlement when a person’s financial situation is so bad, paying the full amount would be impossible. An example would be someone who recently became unemployed, disabled, experienced a significant decrease in income or someone with a low fixed household income.
Another method of tax debt negotiation is a Partial Payment Plan agreement. This is when you enter into an Installment Agreement with IRS but the required monthly payments will not pay your entire IRS back tax debt by the IRS Collection Statute Expiration Date. In many Partial Pay Agreement cases, the statute of limitations for collecting a tax debt is reached before the debt is fully satisfied. When this occurs, the remaining balance of the debt will be written off.
It may also be possible to reduce the total back tax liability by requesting or filing a petition for a penalty abatement. Generally, penalty abatement may be granted if you can show justifiable reasonable cause for not being able to file or pay taxes timely.
If tax negotiation does not work there are other options available. A regular installment agreement divides the total balance over a certain number of months. This type of agreement will stop the IRS from continuing with their collection attempts. Interest and tax penalties will continue to add up until the balance has been paid in full.
When negotiation fails, do not ignore other options available. Ignoring a tax bill can lead to further aggressive action by the IRS. Failing to take care of tax debt can lead to tax liens and levies, meaning the taxpayer could face seizure of property, assets and money in bank accounts. The IRS is usually willing to help those who are in need and ready to get help with their back tax debt.
For those who need help negotiating with the IRS it may make sense to seek the assistance of a tax professional. An experienced tax professional knows how to navigate the process and reach an acceptable agreement with IRS agents and collectors. Hiring a tax professional will make the process easier and will increase chances in getting approved for the best possible tax negotiation option.