6 Effective Ways to Settle Tax Debt with IRS
Updated on September 2, 2021 | by James Stone
First of all, you have to be eligible to settle your tax debt. Your tax filings must be current (even if you can’t pay), you must make all required tax payments for the current year (delay payment or settle), you should tap an expert for assistance and many more. IRS (Internal Revenue Service) works with those who could not pay taxes not because they intend to cheat the government but because they did not have enough money to pay taxes. Tax Debt Settlement is possible with the IRS if payroll services for small businesses guide you well. The Internal Revenue Service offers options for those who wish to resolve their tax debt and cannot directly pay what they owe. You need to understand the strategy and options that work for you. The following are the six ways to settle your tax debt with the IRS for pennies.
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1. Installment Plans
Installment plans are like home agreements; you will pay the Internal Revenue System every month. A tax debt installment plan is an agreement with the IRS. You need to assure IRS requirements to go in for an installment plan. The requirements are:
- Your tax filings must be current
- Your late fees and state income taxes are must pay
- You must make all the monthly tax payments that the Internal Revenue Service requires
You also have to qualify for a tax installment plan. The IRS usually prefers the collection of tax payments but is not interested in going in for a payment agreement with a taxpayer who isn’t eligible to make the monthly installments. You should pick a certified tax professional who reviews your options and arrange a payment plan with the IRS.
2. Offer in Compromise (OIC)
The IRS allows you to pay a lesser amount of what you owe in previous taxes. It is familiar as an offer in compromise. If you cannot afford to pay what you owe, you must persuade the IRS and offer to pay the lesser amount in short-term installments. You might have seen ads that it is easy to pay the IRS pennies on the dollars, such commercials are fake and misleading you. To settle tax debt in the IRS, first, you need to apply for an OIC form with a $186 filing fee. The form requires details about your assets, spending habits, income, and any equity you might have in investments. The IRS will also examine your sources of credit and net worth then compare your income with your monthly expenses. If you are agreeable to an agreement, in two years, you will settle your tax debt.
3. Release Wage Garnishments
If you are an hourly-based worker or working for yourself, the IRS will garnish your wages. To evaluate your pay, you need to give a collection information statement. IRS can also garnish federal payments such as tax refunds, social security, etc. It proceeds until the legal time limit for collecting has passed. If you cannot afford to live on the money left over and you are at loss with a garnishment, you can contact the IRS for modification. The number of garnishes might be lesser if the IRS accepts.
4. Innocent Spouse Programs
Internal Revenue Service considers that, if you register a coupling tax return with your spouse, you are individually responsible for defrayment. For married couples, the IRS provides some ease, even if the couples are legally separated. If you can illustrate that your partner report income improperly and took credits or deductions, you can seek ease from tax liability. For furtherance, seek insights from CPA Tax Services. You must show proof that your partner misled you by not reporting income and taking credits or deductions to qualify for innocent spouse programs.
5. Statute of Limitations
Tax lawyers sometimes try to utilize the statute of limitations to rectify a tax case. If the IRS tries to accumulate a tax debt, the taxpayer can arrange collection appeals. It is to try to stall a tax lien to the statute of limitations deadline. The IRS has 10 years from the date of assessment, which is usually soon after the filing date, to collect tax penalties. However, the statute of limitations is a risky scheme. Your unpaid penalties will increase if you fail.
6. Currently Not Collectible
The IRS can set your case on hold if you provide reasons why you are not prepared to pay your tax now. But this process is temporary, and you have to pay when the IRS asks you. The benefit is that the difference pouts a hold on wage garnishments and liens on your property.