Lack of information is the main reason behind the failure to keep up with the tax rules. If you do not settle the debts, a legal procedure might come your way. And that can cost more than your original obligations. However, if you’re not in a position to pay the debts, there are some Internal Revenue Service (IRS) debt relief options that can help you.
IRS Tax Relief Settlement is one of the debt relief options. With this option, you can settle your debts by paying percentage of owed amount. However, settlement will depend upon age, personal budgets and assets.
The other option is Offer in Compromise (OIC) that allows you to pay debts in one go by paying fraction of actual amount to IRS. Amount will be finalized after considering your case in accordance with certain guidelines and your consent to settle the debts for certain amount. There are some criteria that you’d need to pass before your tax debt gets reduced.
IRS can settle federal tax liabilities for less than the true obligations only in case of exceptional circumstances. Financial hardship, unfair and inequitable tax collection are some of the circumstances. OIC is the best debt relief tool available. However, IRS settles hardly one percent cases through OIC. You can hire a professional to submit your OIC application as the process of getting concession is quite complex.
There are three categories that completely justify the reduction of the overdue debts. You can submit OIC application, if you’re not sure whether tax is due or not. You can also submit the application, if you’ve a doubt that you’ll never be able to remit the complete amount. Last category is financial hardship. In other words, tax calculations and assessments are correct but you don’t have money to pay the debts. If you’re submitting application, you’d need to show that the amount can not be paid-off in next 5 years. IRS will evaluate the circumstances and decide a reasonable amount that you can eventually pay.
Apart from OIC, you’ve the Payment Plan option. In which IRS give you an option to pay debts in installments. However, first you need to convince them you’d not be able to settle the debts in lump sum. IRS will flag your account with “not currently collectible” status which means collection process will not take place until you accept the payment plan. In case, you’re unable to pay the outstanding tax debt because of certain circumstances that are not in your control you can challenge the penalties and interest that have been levied on your account. This option is known as Penalty Abatement which will help you in reducing the amount of the debts.
You can submit the application, if there is any error made by IRS. Reasonable causes such as serious illness or death also allows you to submit application to reduce the debt amount.
IRS provide options to reduce debt amount however, they are bit complex. Therefore, appointing an experienced tax advisor will be a good idea to get advice and submit the application.
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