Being indebted to the IRS is no joke. Sometimes, various unexpected life experiences can render people unable to pay back the money they owe, so they immediately turn towards alternatives of reaching mutual resolutions with the agency. Surely, it is a better thing to do that than to wait helplessly for a tax lien, for
A settlement with IRS may not absolve you totally of your debt. Still, it can offer you some precious time to come up with better solutions of approaching them or some solutions to muster somehow the amount of money you owe and clear yourself of debt. The idyllic situation would be an IRS forgiveness of debt, but that has many implications and applies only in exceptional cases. There are some tax debt relief methods for you to try out and bend the circumstances in your favor.
Negotiating with IRS – Most Common Choices
If you pursue settling your IRS debt for less than the amount you actually owe, you should be familiar with some economic techniques. One of these is the IRS tax settlement offer in compromise.
Offer in compromise (OIC)
An offer in compromise is by excellence one of those tools you can use to get the IRS to accept less than you owe. However, you must be eligible for the OIC in the first place. This tool is designed more for the elderly, the disabled and in general for those who simply cannot pay their debt in full without ending up enduring famine and homelessness. The IRS will consider your income and your expenses, and if the resulting sum after taking the money you owe would be too low, they would accept your offer in compromise. In such a case, this would clearly benefit both parties: you have money to pay your bills and eat, and they get at least some of the money back. A professional tax attorney can teach you how to negotiate with the IRS, so that you make an offer they cannot refuse.
This alternative enables you to make monthly payments instead of having the IRS rain down their weapons on you and demanding payment-in-full. In order to be qualified for it, you must owe less than $50.000 (this sum encompasses everything: penalties, income tax, and interest). If you owe money through your business, you have to owe less than $25.000 to be eligible for this tax settlement. The agreement ends when you pay off your debt in full.
Filing for bankruptcy
This IRS settlement is viable when you owe money on income tax; it does not apply for any other type of tax. Also, bankruptcy doesn’t help if you’ve indulged in fraudulent actions. For more on this, you can study Chapter 7 and Chapter 13 from the Bankruptcy Basics.
“Currently not collectible” status
This is an IRS settlement that is used by millions of Americans. When you get it, the IRS can’t get their hands on you and compel you to pay. You are eligible for this status when you can prove that the collecting would cause extreme economic hardships. Since so many people apply for it, the IRS demands concrete proof on that. If you do get it, you will have to file and pay your taxes in the future. Of course, they will look at your income for years to come. If it increases, they will contact you again. If your situation is truly poor and marred by hardships, you can protect your “currently not collectible” status until the debt is wiped off (it takes ten years for the IRS to remove and forgive a debt).
The “Innocent spouse” tax settlement works when you’ve “inherited” the faulty taxes of your spouse. You are eligible for it if you have strong reasons to believe that only your spouse/ex-spouse should be liable for those taxes the IRS is forcing down on you. The application is called Form 8857, and once it’s been accepted, you won’t be paying someone else’s taxes, which is a huge relief.
A lot of unpleasant things can occur if you don’t pay your taxes or you don’t settle your tax debt with the IRS. They have many tools of either forcing you to pay up: levies, increasing interest charges (these can make your debt twice or thrice its initial sum), collection enforcement, wage garnishments, tax liens and an astounding number of penalties.
These are the main settlements you can make with the IRS. One must understand that it’s their job to collect the money, it’s nothing personal. As you can see, they are people you can talk with to settle your tax problems – and it’s recommended you do. One of the greatest mistakes you can make is to run away from them.