Dealing with the IRS can be an overwhelming experience for many people. From tax audits to collection notices, the thought of having to resolve a tax issue with the IRS can cause sleepless nights and endless anxiety. However, there are options available that can help individuals and businesses settle their IRS tax debts. In this blog post, we will discuss the various IRS tax settlement options available to taxpayers and how they can help resolve their tax issues.
1. Installment Agreements
One common IRS tax settlement option available to taxpayers is an installment agreement. This option allows taxpayers to pay off their tax debt in monthly installments over an extended period of time. Depending on the amount of tax debt owed, the IRS may require a financial statement from the taxpayer demonstrating their inability to pay the full amount immediately. An installment agreement can help taxpayers avoid the consequences of an IRS levy or garnishment.
2. Offer in Compromise
Another IRS tax settlement option available to taxpayers is an Offer in Compromise (OIC). This option allows taxpayers to settle their tax debt for less than the full amount owed. An OIC is available to taxpayers who demonstrate they are unable to pay their tax debt in full, even with an installment agreement. The IRS will evaluate the taxpayer’s ability to pay based on their income, expenses, assets, and liabilities. If the OIC is accepted, the taxpayer will make a lump sum payment or payments over a period of time.
3. Currently Not Collectible (CNC)
For taxpayers who are unable to pay their tax debt due to financial hardship, a Currently Not Collectible (CNC) status may be an option. This option allows taxpayers to temporarily stop making payments on their tax debt while the IRS agrees not to take collection actions. However, the tax debt continues to accrue interest and penalties during this time. Taxpayers will need to provide the IRS with their financial information proving their inability to pay.
4. Innocent Spouse Relief
For couples who file joint tax returns, Innocent Spouse Relief may be an option for those who were unaware of the other spouse’s tax misdeeds. This option allows the innocent spouse to be relieved of any tax debt, penalties, and interest owed due to their spouse’s actions. However, this option is only available if the innocent spouse can prove they had no knowledge of their spouse’s errors.
5. Taxpayer Advocate Service
The IRS provides a Taxpayer Advocate Service (TAS) to assist taxpayers experiencing administrative issues. TAS acts as an independent entity and helps taxpayers who are experiencing hardship, provide guidance on tax-related issues, and liaison between taxpayers and the IRS. TAS can be used when a taxpayer’s case has been at the IRS for an extended period, and the taxpayer has been unable to resolve their tax issue(s).
Navigating IRS tax settlement options can be a daunting task. Before you decide on a settlement option, consult with a qualified tax professional to find out which option may be best suited for your situation. Keep in mind, there are consequences to unpaid taxes, and penalties and interest can accrue over time, increasing the amount owed. However, with the right IRS tax settlement option, you can put an end to the tax issue and move forward with your financial future. Remember, the worst thing you can do is nothing at all.