If you’re going through a financial crisis and want an immediate solution to your huge Tax debt, consider opting for Tax Settlement Services by talking to IRS through professionals at Abraham & Rose. Tax settlement is a formal agreement between a taxpayer and the tax authority to resolve a tax debt for less than the full amount owed. This option is available to individuals or businesses who cannot fully pay their taxes. So, without wasting any time, let’s quickly dive into how you can avail of IRS Tax settlement and everything related to it.
A tax settlement is an agreement between the individual and the IRS to reduce debt amount in order to reduce the financial burden on the business/individual. This is done so that individuals can easily submit their daily taxes without any additional financial overload.
An IRS Tax settlement may sound easy but involves significant professionalism when dealing with IRS Agents.
To apply for IRS tax settlement, taxpayers must complete and submit Form 656, along with a detailed financial statement, supporting documentation, and a non-refundable application fee. The IRS will carefully review the taxpayer’s financial situation, including assets, income, and expenses, to determine the appropriate settlement amount.
The Internal Revenue Service has specific eligibility criteria for taxpayers seeking tax settlement. Meeting these requirements is essential for individuals to qualify for a reduction in their tax liabilities.
Here are the eligibility factors for IRS Tax Settlement:
1. Doubt as to Liability:
Taxpayers can request an OIC based on doubt about the accuracy of their tax liability. To qualify under this criterion, the taxpayer must have solid proof that the tax amount assessed by the IRS is incorrect. They must provide evidence, such as supporting documentation, to support their claim.
2. Doubt as to Collectibility:
This is the most common eligibility criterion for tax settlement. It applies when the taxpayer does not have the financial means to pay the full tax debt. To qualify under doubt as to collectibility, the taxpayer needs to show that their assets and income are insufficient to cover the entire tax liability.
This includes providing detailed financial information, including income, expenses, assets, and liabilities, to prove the financial hardship.
3. Effective Tax Administration:
Under this situation, the taxpayer has accepted the accuracy of their tax liability and their ability to pay the full amount.
However, enforcing full payment would cause economic hardship or be unfair and inequitable. To qualify, the taxpayer must present compelling reasons that justify the IRS accepting a reduced settlement amount.
4. Bankruptcy Status:
If the taxpayer is in an open bankruptcy proceeding, they are generally ineligible for an OIC. Bankruptcy proceedings have specific rules for handling tax debts, and taxpayers should address these tax issues with their tax attorney for better assistance.
The IRS goes through a brief procedure to ensure that the individual requesting a tax settlement is eligible for the requested program.
To verify this, the IRS Tax Settlement process is explained into 6 Main Steps.
Before pursuing tax settlement, the taxpayer must assess whether they meet the qualifications set forth by the tax authorities.
Generally, individuals facing financial hardship, doubt about their tax liability, or exceptional circumstances may be eligible. Understanding the eligibility criteria is crucial to avoid wasting time on an application that doesn’t meet the requirements.
Choosing the Type of Tax Settlement
Taxpayers have several options for tax settlement, including Offer in Compromise, Installment Agreements, and Currently Not Collectible status. Each program has specific conditions and benefits, depending on the taxpayer’s financial situation.
Submitting the Application
Once the taxpayer has determined the appropriate tax settlement program, they must submit the required forms and financial documentation to the tax authority.
The application process can be complex, and it’s best to seek assistance from a tax professional to ensure an accurate and complete submission.
Review and Negotiation
The tax authority will thoroughly review the taxpayer’s financial information, including assets, income, and expenses. They may request additional documentation or clarification during this process.
If needed, the taxpayer or their tax professional can negotiate with the tax authority to determine the settlement amount or terms.
If the tax settlement is approved, the taxpayer has different payment options. They can choose to pay the settlement amount in a lump sum or opt for an installment plan. Under a formal agreement, the taxpayer must fulfill the payment terms, which may include monthly payments over a set period.
Fulfilling the Agreement
The taxpayer must adhere to the terms once the tax settlement agreement is in place. This involves making timely payments and complying with all tax obligations during the settlement period.
Failure to fulfill the agreement could void the settlement and reinstate the original tax liabilities.
Getting an IRS Settlement has several benefits. These include paying less, getting longer periods for adjusting the total amount, and much more.
Here are three benefits of getting an IRS Settlement.
1. Reduced Tax Debt Burden:
The primary benefit of IRS settlement is that it allows taxpayers to pay less than the total tax debt owed. Upon qualifying for tax settlement through an Offer in Compromise or other methods, the taxpayer may negotiate with the IRS to settle their tax liability for a reduced sum.
This reduction can provide much-needed financial relief, especially for those facing economic hardships or unable to pay the full amount.
2. Elimination of Penalties and Interest:
When a tax settlement is reached and paid, the IRS considers the taxpayer’s account fully settled. This means the taxpayer is no longer subject to accruing penalties and interest on the settled portion of their tax debt.
This also helps the taxpayers avoid the compounding effect of penalties and interest, which could otherwise significantly inflate the total amount owed over time.
3. Avoidance of Collection Actions:
Another great benefit of IRS settlement is that it helps taxpayers avoid severe collection actions by the IRS. Without a settlement, the IRS may resort to aggressive tactics, such as placing tax liens on properties, levying bank accounts, or garnishing wages.
However, by successfully negotiating a settlement, taxpayers can prevent or stop these collection efforts, providing a sense of relief and protection.
Although it’s possible to handle the tax settlement on your own, trust us, you don’t want to take the risk all alone! IRS tax matters can be overwhelming, and that’s where Abraham & Rose can be the best solution to your problems.
Our team of tax experts knows the ins and outs of tax laws. With the latest knowledge and significant experience, we can tackle even the toughest cases providing the best result.
By hiring Abraham & Rose, you’ll get the following:
Contact our attorneys for a free initial consultation. Unlike other tax advisors, our firm prides itself on its ability to furnish direct contact between attorney and client throughout the entire process.
Yes, there is a non-refundable application fee for IRS tax settlement. As of 2021, the fee is $205 for most applicants.
However, taxpayers experiencing financial hardship may qualify for this fee waiver. Professional tax assistance may involve fees, but it can ultimately save you money by achieving a more favorable settlement outcome.
The processing time for tax settlement applications varies based on the complexity of each case. It can take several months for the IRS to review the application, request additional information if needed, and make a decision. The IRS has up to two years to decide on an OIC application.
The IRS carefully reviews tax settlement applications on a case-by-case basis. They assess the taxpayer’s financial situation, including income, expenses, assets, and liabilities. The IRS may request additional documentation to validate the taxpayer’s financial hardship or doubts about their tax liability. The IRS also uses national and local expense standards to determine taxpayers’ ability to pay the tax debt.
We Resolve Tax Problems Saving Our Clients Millions of Dollars and Headaches.