IRS Debt Settlement - Is It The Best Route To Take?
Are you in debt to The Man? It's a rough situation, but you have some options for IRS debt settlement. It's almost too easy to fall into debt when filing taxes. You might have made a simple mistake on your return, or you are behind on payroll taxes, or maybe you just can't afford to pay your taxes. It happens to almost everyone at some point. Don't let it get you down too much, there is help available. The worst thing you can do is to ignore the debt and allow the penalties to build up.
Your current financial situation will determine what your options are for IRS tax debt settlement. The options and help are better the more broke you are. It may seem like The Man is always out to get you, but they do offer some breaks. If you qualify for these IRS debt settlements you stand to save yourself a lot of money in back taxes and clear the debt that you owe. For guidance in these proceedings, you should hire the help of a tax attorney if you can afford it. They have experience dealing with the IRS and will help you decide which debt settlement you qualify best for.
Let's take a look at some of the IRS debt settlement options that are available to you.
Offer In Compromise
Offer in Compromise or OIC is the most common type of IRS debt settlement that people apply for. Unfortunately, most of the people who apply do not qualify. If you are applying for OIC, having a tax attorney will help you figure out if you qualify or not. The acceptance of OIC by the IRS has been reducing rapidly, as was as low as 16% in 2004.
In order to qualify for OIC you must be able to prove that repaying all of your debt would be impossible (including income and assets) in your current financial situation, or prove a "doubt as to liability" which demonstrates that the owed taxes are not your fault or you don't have any records of your financial history. Again, this is something that a tax attorney will be a great asset to prove.
While this isn't necessarily a tax debt settlement, and you'll have to pay all of you tax debt back, you will be able to make reasonable monthly payments to the IRS to clear your debt. With Installment Agreements, almost everyone who applies qualifies, so if OIC isn't available to you this is. One caveat with the Installment Agreements is that if you qualify for a tax refund any year during your terms, you will not receive it. It is paid directly to the IRS towards your debt, instead of into your pocket. Obviously, you want to get rid of your IRS debt, but it would still be nice to get that extra cash at the beginning of the year.
In Chapter 7 bankruptcy, any personal tax debt (form 1040) that is older than three years at the time of filing can be discharged. There are lots of loopholes and wacky terms in the IRS tax code, so they probably won't offer this to you. A tax or bankruptcy attorney would be extremely helpful if you choose to follow this path
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