Best Tax Settlement Companies: Negotiating Your Tax Debt

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Many taxpayers do not know how to pick one of the best tax settlement companies to help them negotiate their tax debt. Owing back taxes can be unsettling, and it is easy to become overwhelmed, especially when dealing with the IRS. Unlike your other creditors, the IRS has a broader boundary when it comes to debt collection. The penalties associated with any tax debt can put you and your family in a financial crisis. What is the impact of owning taxes? What are your options? Who can help you?

Tax settlement agencies are like debt settlement companies, except they serve consumers who owe the IRS more money than they can pay. Like debt collection agencies, some firms exploit consumers facing IRS debt collection for their gain. If you are at the point where you need help, there are factors you need to consider before selecting an agency:

  • What are your tax debt relief options?
  • Who are the critical players?
  • Who can represent you?
  • How to select the right firm to represent you?

When to Seek Assistance for Your Tax Debt

The worst action you can take is inaction. Do not ignore tax notices. Contact the IRS as soon as you know you are not in the financial position to pay your taxes. There are programs for taxpayers who cannot meet their tax obligations. The IRS website lists all your options. Failing to communicate with the IRS can lead to severe consequences, including:

  • Tax garnishment
  • Assets seizure
  • Property liens

No matter how paralyzing it is, take the option of doing nothing off the table. The good news is that as intimidating as the IRS seems, it wants to work with you. There are taxpayer advocates within the IRS whose sole job is to help you with your tax problems.

Your Tax-Debt Relief Options

Each year, you are expected to file a tax return by the filing deadline. If you owe money, you are required to pay the full amount you owed when you filed your tax return. The IRS recognizes taxpayers may have unforeseen situations where they are not able to pay their tax debt immediately. The IRS has one goal: to collect the taxes you owe. Fortunately, the IRS will work with you as long as it is confident it will eventually get the money owed.

Unfortunately, as long as you owe money, you will continue to accrue interest on the debt. If you find yourself in a place where your financial situation prohibits you from paying your tax debt, consider one or more of the following seven options:

  1. File your return and pay what you can.
  2. Negotiate a payment plan with the IRS.
  3. Obtain a Not Currently Collectible status.
  4. Request a levy and garnishment release.
  5. Claim Innocent Spouse Relief.
  6. Claim bankruptcy.
  7. Wait it out.

File and Pay What You Can

As soon as you discover you cannot pay your taxes with your return, you can discover your first set of options by either calling the IRS or by looking at its site. Its primary tactic is to collect all the money as quickly as possible. The IRS encourages you to pay as much as you can of your taxes and to do it before the tax deadline, warning you that after the tax period, you will incur interest and added penalties over time. The IRS recommends the following:

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  • File for an extension. However, it still expects on-time payment.
  • Make a partial payment before the deadline and receive an automatic file extension.
  • Check to see if you claimed all allowable deductions.
  • Adjust future withholdings so you do not owe on subsequent tax returns.

Negotiate a Payment Plan

The IRS has a payment plan to fit your needs, whether you owe $10,000 or $100,000. The Fresh Start Initiative offers a suite of repayment plan options you can combine with other options, such as an offer in compromise, which allows you to pay less than you owe. You can either pay in large installments or negotiate smaller payments for a more extended period.

As your options increase, the paperwork complexity and the red tape do as well. Qualifying taxpayers can receive free help from a tax advocate, or they may hire a qualified tax professional to help them come up with a feasible alternative.

Best Tax Settlement Companies: Negotiating Your Tax Debt

Offer in Compromise

An offer in compromise is a coveted IRS program that allows you to pay less than the amount you owe in taxes. It will enable you to settle the amount you owe in taxes for less than the amount owed. The IRS considers an offer in compromise only when it has low confidence that a taxpayer will ever have the ability to pay the full debt. A few key points to keep in mind include:

  • An offer in compromise requires a detailed analysis of a taxpayer’s financial data, including income, expenses, and assets.
  • It is hard to qualify for this program.
  • You are expected to make a lump sum payment or short-term installments.
  • The process can take months to complete.

An offer in compromise requires:

  • Thorough paperwork
  • Strict guidelines
  • Familiarity with the tax laws

Seek professional advice from a tax advocate or a reputable firm that has experience with handling tax settlement cases.

Not Currently Collectible

Taxpayers who prove financial hardship can temporarily stop debt collection. This option is called a “Not Currently Collectible” status. You must demonstrate the payment amount will hinder your ability to take care of your essential living expenses. If approved, the IRS will stop debt collection. During this period, you will not have to worry about tax liens, wage garnishment, or any collection attempts. However, your debt interest will continue to increase the total amount owed.

If you do not foresee any improvement in your situation, then use the relief period to meet with a tax advocate or use this guide to find the best tax settlement companies.

Levy and Garnishment Release

The IRS has the power and authority to put a lien on your property, a levy on your financial accounts, and even to start garnishing your wages. If you find yourself in a situation where a tax levy or a wage garnishment is causing financial hardship, contact the IRS and request a levy or garnishment release. The IRS will release the levy or garnishment if you meet specific criteria. If the IRS denies your request, you can appeal the decision. If you successfully get a release, you must still make payment arrangements to avoid another levy.

Innocent Spouse Relief

In some cases, the IRS will grant you an innocent spouse relief. You must prove the debt is a result of something your spouse (or ex-spouse) failed to do. There are specific criteria you must meet to qualify for innocent spouse relief. The IRS may hold any tax refunds while considering your request.

Bankruptcy

Some situations allow you to include your tax debt in Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy allows you to discharge all allowable debt, while Chapter 13 removes part of the debt while you pay the remaining portion on a structured payment plan. If you file Chapter 13, there are several things to consider:

  • You must submit all tax returns within four years of your filing.
  • You must file all your tax returns while in bankruptcy.
  • If you owe taxes during bankruptcy, you must pay it on time.

Failure to pay your taxes can lead to case dismissal.

The Statute of Limitations Expiration

The IRS has 10 years to collect back taxes, starting with the assessment date. A savvy tax professional, such as a Certified Public (Tax) Accountant or an experienced tax attorney, can implement strategies to help you reach the statute of limitations.

The Key Players

Not all tax settlement firms work in your best interest. Unscrupulous firms may deliver empty promises to mask their primary objective: to get the maximum money they can get from you. When seeking counsel, there are a few critical players in the tax settlement game:

  • The IRS
  • Tax Advocate Service
  • Tax CPA
  • Tax Attorney

Tax Advocate Service

The Tax Advocate Service (TAS) is an independent organization whose sole objective is to work on your behalf with the IRS. TAS helps both individual taxpayers and businesses who are facing financial hardship and cannot pay their taxes. Reach out to your local TAS office to see if you are eligible for its help. The services are free.

Tax CPA and Tax Attorney

When seeking outside representation, select a tax CPA or an attorney with proven tax settlement experience. Tax laws are complicated and confusing. Some firms may have an unqualified team “working” on your behalf. While they may claim to have attorneys or accountants, most of the staff are inexperienced, scripted customer service representatives.

What Are Tax Settlement Firms Companies?

Tax settlement companies are also called tax settlement firms or tax debt relief companies or agencies. These firms specialize in resolving IRS tax debt. Many of these firms claim to send their tax experts (accountants and lawyers) to negotiate on the taxpayer’s behalf to settle their tax debt “pennies on the dollar.” However, a good portion of these companies does not deliver on its promise. It is such a big problem that the IRS has warnings on its site about dealing with these types of companies. Even so, a reputable firm can help you get the best settlement.

How to Tell A Firm Is Not Reputable

Finding the best tax settlement companies may be challenging for consumers. Many companies claim to have former IRS agents working for them, but the majority of their workforce may be unqualified. They play on their client’s vulnerability and desperation and try to reduce their client’s tax debt using an offer in compromise as their strategy. While their strategic approach is valid, their claims may not be. They do not set their client’s expectation; instead, they cash in on their hope. You may recognize unqualified firms by patterns such as:

  • Usually charging a nonrefundable fee that often mirrors their client’s available funds.
  • Misrepresenting the fees, only to come back and ask for more funds.
  • Having complaints lodged against them with the Better Business Bureau (BBB) by past clients who felt defrauded.

Characteristics of a Reputable Firm

Not all tax settlement firms have ulterior motives. Ask your tax or financial advisor to refer you to a qualified tax attorney or a firm experienced in dealing with tax debt. There are fundamental characteristics you should look for in the best tax settlement companies:

  • The firm should work with reputable tax attorneys and certified public accountants.
  • They should be honest about the process. It is work intensive. You will have to provide detailed information regarding your finances.
  • They should set realistic expectations. The IRS is likely not going to wipe all your tax debt away.
  • Check their BBB rating.
  • They should be upfront with their fees and should be able to give you a range.
  • Check to see if they have any professional accreditation.

What You Should Do While You Negotiate a Settlement

As you are negotiating your settlement, take the following points into account:

  • Have patience, as the process is long and arduous.
  • Continue to file your taxes.
  • You may get denied before settling.
  • There will be a lot of paperwork and financial analysis involved.
  • Adjust your tax deduction so you do not increase the amount you owe in future returns.
  • Stay in communication with the IRS. If you feel the IRS is not working with you, then contact your local TAS office to see if you are eligible for its free services.
  • Consider working with a tax debt settlement firm. Some intermediaries can match you with a reputable firm that has verifiable credentials.

If you need help finding a reputable tax settlement company, let our team help you find the best match. At Solvable, we have done the hard work for you. We use our digital platforms to review the best companies after we have performed an extensive verification. Do not waste your time spending hours searching for a tax settlement company when you could be working on settling your IRS tax debt.

 

Jowanna Daley is a Startup Micro Business Coach, Consultant, and Affiliate Marketer. She helps lay the foundation for startups, which requires her to know just about everything it takes to launch a micro business. It's by no accident Jowanna has over 30 years in information technology, business analysis, business plan writing, project management, and marketing. She has an MBA in entrepreneurship, and she is a Project Management Professional. While she can design websites, write blogs, and devise the most effective strategic plans, she is most passionate about empowering startups.

Jowanna lives in McDonough, GA, and though she and her husband, Robert, are official empty nesters, their nest is not empty. She hosts many guests, and her niece, sister, and two dogs live with her.

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