Settle Tax Debt
When it comes to settling tax debt owed to the IRS, you have many options. The IRS has made sure that there is a way to settle back taxes for every type of financial situation that a person may have. Your unique financial situation will determine what method of settlement will work best. Below are ways to settle tax debt. The methods below are in order by best method for your financial standing, going from good financial standing to bad financial standing. By ‘good financial standing’, I mean you have enough money to pay taxes and still enough money to pay all other bills after tax bill is paid. ‘Bad financial standing’ means that you cannot make any payments towards the tax amount owed because it would leave you with less than enough for a minimum standard of living.
o you need to settle IRS taxes? Are you in a bad financial position that is making it difficult for you to pay the IRS as well as other creditors? If so, you need to look into all your options for settling your debt. To settle IRS taxes you have to make the right move. If you don’t, you could end up paying more than you should have or not doing anything at all. Either way, you are going to find yourself in more trouble as the days go by. One of the best ways to settle IRS taxes for less than you owe is with an offer in compromise. While many people have their sights set on an offer in compromise, not everybody has the ability to use this to their advantage.
When the IRS determines a taxpayer’s capacity to fulfill their tax debt obligations, they weigh the individual’s income against their allowable expenses to calculate the Reasonable Collection Potential of the individual. Expenses are considered allowable for consideration of repayment of tax debt when they are deemed necessary for a taxpayer and his/her family’s health, welfare, or income.
For most individuals having accrued tax debt, the IRS does not look at the particular situation of the individual to determine a personalized list of allowable expenses to determine the Reasonable Collection Potential. Rather, a collection official will refer to a series of national and regional standards of living. Some of these standards are further defined by the household size, which is often the same number as on the individual’s most recent tax return.
The IRS tax settlement program, or Offer in Compromise, reduces the amount owed for taxpayers that cannot afford to pay before the statute of limitations (time to collect on the debt) runs out. It is an agreement between the taxpayer and the IRS that settles the tax liability for less than the full amount owed. Anyone can apply for an Offer in Compromise for tax debt help. However, not everyone is going to be approved. You need to know the steps and the paperwork required for a tax settlement to increase your chances of actually securing this form of tax debt relief.
Though the IRS is not so comfortable in sharing this information, there are various ways to settle tax debts. To quote an example, you have an option to request an audit reconsideration of a closed audit. You may reopen an audit which generated a huge tax debt which you are not in a position to pay due to certain unavoidable circumstances at the time when the audit took place. A peculiar example of such circumstances is that you were unaware of the audit and had not attended.