Individuals and companies with overdue tax balances may be subject to severe fines from internal tax offices (IRSs), including in some cases for the attachment of personal or business assets. To deal with this dilemma – which can trigger a serious financial crisis – a new type of business has emerged to help taxpayers in arrears deal with tax debts. Can I settle with the IRS?
The compromise offer allows you to pay your tax debt less than the full amount you owe. This may be a legitimate option if you cannot pay the full tax liability or if it causes financial difficulties. We consider your unique set of facts and circumstances:
- Solvency;
- Income;
- Expenses;
- Equity assets.
We generally approve a compromise offer when the amount offered represents the highest amount we can expect within a reasonable time. Check all other payment options before submitting your compromise offer. The Offer in a compromise program is not for everyone. If you hire a taxpayer who will help you make an offer, be sure to check his qualifications.
The IRS explains how the compromise offer works
Taxpayers who have a tax debt they are unable to pay could hear that they can settle their tax liability for less than the full amount due. This is called a compromise offer.
Before submitting a compromise, here are some things to know:
In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay back what is owed. Taxpayers should first check other payment options. A payment plan is one option. Visit IRS.gov for information on payment plans – installment agreements.
The taxpayer must first submit all required tax returns before the IRS can consider a settlement offer. Taxpayers may need to make their first payment when submitting a settlement offer. The IRS will apply submitted payments to reduce taxes due.
IRS has a pre-qualification tool in the Compromise offer at IRS.gov. Taxpayers can find out if they meet the basic qualification requirements. The tool also provides an estimate of the acceptable amount of the offer. The IRS makes the final decision on whether to accept the offer based on the application.
Taxpayers who want to make a compromise should visit the IRS on the compromise offer page for more information. There, taxpayers can find step-by-step instructions as well as required forms. Taxpayers can download the forms at any time on the website / forms or call 800-TAX-FORM (800-829-3676) and ask for form 656-B, the brochure Offer as a compromise.
Installment plans
Installment plans are like mortgages, but instead of paying the lender every month, you pay the IRS every month.
The tax installment plan is an agreement with the IRS. To implement an installment plan, you must meet the IRS requirements, including:
- You are up to date in completing tax returns.
- Your income taxes and late fees are mostly paid.
You can make the monthly minimum payments required by the IRS.
Qualifying for a tax installment plan is not always possible. The IRS, as a tax collection agency, always prefers to receive tax payments rather than not to receive them. But he is also not interested in entering into a payment agreement with the truant taxpayer who is unable to pay the monthly installments.
The IRS will not take care of you if the arrears exceed USD 50,000. If you meet the debt criterion and have submitted your tax returns, the IRS will use the formula to receive a monthly payment. You should consult a certified tax specialist or a lawyer specializing in tax debt to check your options and negotiate a payment plan with the IRS.
