Tax Settlement Methods
There are many methods of tax settlement with the IRS. They have created tax settlement possibilities for every type of financial situation. There are thousands of people that cannot pay their back taxes. The worst thing you can possibly do is ignore the problem. If no agreement is made with the IRS or your state, penalties and interest grow very quickly. Below are some of the tax settlement methods available under the IRS for those who require back taxes help.
Paying Tax Bill in Full: This is the most obvious tax settlement method and the most desired by the government. If taxes are paid in full all IRS actions will stop. Sometimes in order to come up with the money it may take a little thinking outside the box. One common method for getting the money to pay taxes back is to borrow money from your home through a home equity loan, which will provide tax settlement with the IRS and allow you a low monthly payment at the rate of your mortgage to pay off the taxes. Some also consider borrowing from family and friends or selling some assets. It is advisable to consult a tax professional before settling a tax debt in full as other options in order to pay back taxes may be available.
Offer in Compromise: An offer in compromise is a tax settlement method used for settling tax amounts owed for less than the original amount owed when eligible. This is one of the most difficult programs to qualify for as it is a hardship program. If a taxpayer will not likely be able to pay the full amount of back taxes given their income and economic circumstances, then this program could be a viable option.
Installment Agreement: An installment agreement is the most common form of tax settlement. Once an installment agreement is accepted, the IRS will consider the client to be in good standing as long as the taxpayer continues to make the agreed upon payments on time each month. Using a qualified professional to evaluate and negotiate a payment plan will ensure that the payment plan is manageable and affordable, alleviating the liklihood of further defaults and problems.
Partial Payment Installment Agreement: This method is available for people that are unable make the payments required with an installment agreement. The partial payment tax settlement allows for smaller monthly payments that may add up to less than the total amount of tax owed. The situation may be reviewed to see if the IRS can increase payments or terminate the agreement.
Declared Uncollectible: The IRS can determine that you are currently uncollectible, and once this happens they will halt all collection actions against you and will review your financial situation after a given period of time. People may end up paying no taxes at all in this type of tax settlement if the situation doesn’t change. This is also a hardship program, and most people will not qualify.
Penalty Abatement: If you owe back taxes there are usually large amount of penalties and interest on top of the tax amount owed. These penalties may grow quickly and can make up for the majority of the tax amount owed if no tax settlement is negotiated. The IRS allows individuals to abate part of or all of their penalties accrued on their tax debt if they can show a legitimate reason for not being able to pay they are assessed to much tax.
Financial Hardship: Taxpayers may not be able to pay their taxes because they have no cash, assets, or any ability to pay. They maybe constantly harassed by the IRS regardless of their ability to pay. Individuals do not have to keep taking this constant harassment from the IRS. When financial hardship is proven a tax settlement for less than the back taxes owed is possible.
These are only some of the possible tax settlement methods. When you owe back taxes, it is always best to use a tax professional. A tax professional’s job is to analyze your unique financial situation and help you make the right choices for specific tax problem. Invariably, a tax professional saves individuals time and money by using their services over handling the situation on their own.
Prince Ahmed writes for Community Tax Helpers which offers IRS or State Tax problems with a wide range of services e.g. Release Tax Lien and Tax Settlement
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