Are you drowning in back taxes and unable to pay what you owe? Have you considered a tax settlement to help you get a handle on your finances?
While it’s true that the IRS appears to be a big, scary, all-powerful entity that could (in theory) take your money, your assets, and even your home, wage garnishment and tax levies are actually the last resorts to collect unpaid tax debt.
In reality, the IRS is often happy to reach an agreement that gives the agency a portion of the tax money owed and allows the IRS to close out your case. Such an agreement is called a tax settlement. (And the same goes for state tax debt. Your state tax organization is most likely willing to listen to a settlement offer, too.)
A tax settlement may allow you to settle your case for less than the original amount of money owed. You might also negotiate for a more favorable payment plan.
An offer-in-compromise is another agreement you can reach with the IRS. This option is even more favorable, because it could actually lower your tax bill.
In many cases, tax debt is not included in a bankruptcy. In addition, a bankruptcy stays on your credit report for 10 years and can make it more difficult to finance a vehicle, obtain a mortgage, rent an apartment, or even find a new job. We do not usually recommend bankruptcy to get out of debt, including tax debt.
However, if your income tax debt is at least three years old, and meets other requirements, you may be able to include it in a Chapter 7 bankruptcy filing.
Not necessarily. You have the option to negotiate an offer-in-compromise, in which you offer to pay the IRS an amount that is less than your full tax bill. In some cases, you can also negotiate to have any fees and penalties waived. You may negotiate an installment agreement as part of the OIC, or make one lump sum payment to the IRS.
However, it’s important to note that, after March 27, 2017, you must have filed all required tax returns to be considered for an OIC. Additionally, an OIC is not likely to be accepted unless the offer is equal to or greater than the total of the taxpayer’s assets, which can be seized by the IRS. These assets include real estate, automobile, bank accounts, and anticipated future income, minus basic living expenses.
If you owe up to $250,000 in taxes, or perhaps even more, you may qualify for tax relief. A tax relief firm can help businesses or individual tax payers.
The IRS may accept an OIC in three separate circumstances. If there is doubt as to liability the IRS may accept an OIC. This means there is a dispute as to whether the tax debt is accurate and correct. If the IRS doubts the amount is fully collectible, the IRS may accept an offer that is in line with what they taxpayer can reasonably afford. Finally, the IRS may accept an OIC if the taxpayer can prove that payment in full would create an economic hardship or would be unfair due to exceptional circumstances.