If you are struggling with rising tax debts, you can get relief with IRS tax settlement services. The IRS understands some taxpayers have tax debt due to extreme financial constraints that prevent them from paying back taxes.
An IRS tax settlement is a way for delinquent taxpayers to work with the IRS to either settle tax debt for a lesser amount or pay it off over an extended period.
What Is a Tax Settlement?
A tax settlement is a payment arrangement between you and the IRS for you to repay your outstanding tax debt for less than the current amount or for you to be able to make smaller payments over many months.
The IRS accepts offers after establishing a taxpayer has a financial hardship that prevents them from paying back taxes now and in the future. The agency reviews individual financial situations to determine whether they qualify for a tax settlement and what type of settlement.
What are the Benefits of an IRS Settlement?
There are several benefits. These include:
- You Pay Less Than You Owe: If you are eligible for an Offer in Compromise, you will pay less tax to the IRS. Once you pay the lower back taxes amount, your balance is considered fully paid.
- Helps You Avoid Tax Liens and Levies: Once approved for a tax settlement, the IRS will not issue a tax lien and/or will stop wage garnishment and bank account levies if you make your tax settlement payments on time.
- May Help Your Credit: IRS penalties such as tax liens and levies may hurt your credit score. This can impact buying/selling a house or qualifying for a personal loan. When you reach a tax settlement with the IRS, you will not have to worry as much about these penalties and a lower credit score.
- Provides a Fresh Start: IRS tax debts can severely affect your finances. A tax settlement provides a much-needed fresh start by reducing your tax debt or your monthly payment amount to the IRS. This way, you get an opportunity to do more with your money.
How Does Tax Settlement Work?
The IRS can approve a settlement for less than the amount you owe or spread your repayment over time to lessen your immediate tax debt burden. To be approved for any of these tax relief options, you must meet the requirements of one of the tax settlement programs provided by the IRS.
The following are the steps involved with tax settlement:
- The taxpayer chooses the type of tax settlement program to apply for and then submits the required forms to the IRS for review. You can fill out these forms yourself or get help from a designated tax professional – like Wiztax.
- The IRS reviews the information it receives from the taxpayer. If the IRS requires additional information or discussion, they will contact the individual taxpayer or a designated third party if the taxpayer receives assistance from a professional tax settlement service.
- Once a tax settlement is reached, the taxpayer is considered in good standing with the IRS for the tax years the settlement covers. Going forward, the taxpayer must avoid defaulting on the terms of the IRS settlement agreement to remain in good standing.
What Settlement Options Does the IRS Offer?
The following are the various options the IRS offers:
- Offer in Compromise (OIC): An IRS Offer in Compromise allows taxpayers to settle their tax liability for less than the total balance due. You may significantly reduce the amount that you owe with an OIC. To have your offer accepted, you must show the IRS that you do not have the income and assets to pay your original tax debt and still cover the cost of basic living expenses.
- Currently Not Collectible (CNC): CNC may be preferred if the IRS has determined you are currently unable to make any tax payments. With Currently Not Collectible status, the IRS temporarily ceases collections, including wage garnishments, bank account levies, asset seizures, and federal tax liens. To qualify for CNC, a taxpayer must prove they have no realistic way to pay what they owe without incurring adverse and damaging financial hardship.
- Installment Agreement: IRS Installment Agreements allow taxpayers to pay back taxes within an extended timeframe. If you believe you are unable to pay your taxes in full in a single payment, you can request an installment agreement. Note that to qualify for this monthly tax settlement option (or any settlement), your tax returns must be current.
Who Qualifies?
The IRS offers these options to taxpayers struggling with tax debts and who have valid financial hardship reasons to seek tax relief. The IRS considers factors such as income, assets, expenses, and tax return history when reviewing tax settlement applications. Keep in mind that tax settlements are not negotiated. Whether you qualify is solely based on your finances and specific IRS calculations.
IRS Tax Settlement Help
A settlement lessens your IRS debt problem while allowing you to avoid harmful tax collection activities such as liens, property seizure, various levies, and wage garnishment.
If you need help choosing the ideal tax settlement option appropriate for your financial situation, get started with us for free. We never charge for ‘investigations’ or consultations.
You can also call us at (866) 568-4593 to learn more about how we can help.
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