There are few things more worrisome then going into Federal tax debt. But that is the unfortunate reality for millions of Americans living either on a fixed income or paycheck to paycheck. In a word, they just don’t have the cash to pay the IRS and therefore, they go into debt with the federal government.
Fortunately, there are several ways to settle your tax debt. Say the experts at Rush Tax Resolution, a back tax solution service, you can reduce your debt to the IRS by agreeing to an offer in compromise or OIC. In essence, this is a contract between the IRS and the taxpayer to settle for less than the full amount of back taxes owed.
Since the IRS generally does not forgive debt, an OIC is said to be as close to a tax amnesty program as the federal government gets. It is said to have greatly expanded over recent years as a part of the IRS’s Fresh Start Program.
That said, the U.S. Congress just passed a bill placing almost ninety thousand new IRS agents into service, many of them armed. More agents means more audits and more audits will likely expose regular working people who have fallen behind on their tax bills due to high inflation, spiking prices, and working wages that haven’t increased in years.
According to a new article by Yahoo Finance, bearing the burden of a big debt balance is never good. However, it can cause you many sleepless nights when you owe a ton of money in the form of back taxes to the IRS. But if you hire a reputable tax resolution expert to fight on your behalf, you might be able to come up with an agreement or an offer in compromise.
If approved, you will be capable of settling your tax debt for less than you owe. But keep in mind, you need to work with a tax solution professional or financial advisor when responding to an IRS audit since they possess the knowhow to navigate you through a tax settlement.
How Back Tax Debt Settlement Works
Tax debt settlements occur between a person who owes back taxes and the IRS. They can happen if you’ve improperly filed your taxes, committed fraud, or you’re simply behind on paying your tax bill.
The best way to avoid tax problems is by not getting into tax debt in the first place. You need to work with a certified accountant who can prepare your taxes and who won’t miss any deductions you are owed. Conversely, he won’t improperly file for deductions you are not owed and that will show up later in an audit.
If you do get audited and issues comes up, you are responsible for paying what’s owed plus interest that’s accumulated over time. The interest has the potential to add up to become a significant liability. If arrangements aren’t made for paying your debt, the IRS possesses the power to withhold future tax returns, seize your assets, or garnish your wages.
However, a tax settlement has the potential to lessen the amount you owe to the IRS. It’s likely the IRS will agree to a settlement offer if they believe that is the most money, they will reasonably get out of you over a specific amount of time.
Qualifying for a Tax Debt Settlement
Yahoo Finance states that the IRS has established rigid rules for who can and can’t qualify for an offer of compromise. They also have a pre-qualification tool you can utilize online to check on your eligibility.
You are eligible for a tax settlement if you have filed all your tax returns including estimated taxes, aren’t embroiled in bankruptcy proceedings, or have made a formal request for an extension for the year’s tax return.
If you own a business and are seeking a tax debt settlement, you need to have paid taxes on the past two financial quarters before you can legitimately apply for a tax settlement. More than anything else, if you owe back taxes to the IRS, do not ignore their phone calls, emails, or snail mail.
Applying for a Tax Debt Settlement
It’s theoretically possible to submit for an offer of compromise on your own, but it’s a far better idea to work with a reputable tax solution company. The tax settlement process is said to be complicated.
If you’re already guilty of errors with the IRS, it’s a good decision to have your work reviewed by someone who knows how to legally handle the back tax situation. Bottom line? Don’t get behind on your taxes in the first place.