Know Your Tax Settlement Options
Know Your Tax Settlement Options – Concurrently with stepping up their efforts to identify taxpayers who owe back taxes, the IRS has been introducing new tax settlement programs to help these individuals resolve their tax debts. Because ignoring overdue taxes can result in such serious consequences as wage garnishments, tax liens and tax levies, in addition to the accrual of interest and penalties, delinquent taxpayers should be encouraged to resolve their back tax balances as quickly as possible. The worst choice a taxpayer can make is to ignore an outstanding tax liability and allow the consequences imposed by the Internal Revenue Service to escalate!
The following list outlines some of the alternatives available for resolving a back tax balance:
Paying the Balance in Full When sufficient liquid funds are not immediately available to pay the full balance of a tax debt, a delinquent taxpayer can often pay a the entire amount by applying for a bank loan, charging the outstanding tax balance to a credit card or taking money out of a retirement account.
Requesting an Extension A taxpayer who will have the necessary funds to pay a back tax balance within 120 days can request a short term administrative tax extension. Although interest will continued to be charged during the period of the extension, the IRS will not impose penalties or initiate enforced collection activities during this time.
Applying for a Penalty Waiver A Penalty Waiver is tax settlement option offered by the IRS for the purpose of reducing or eliminating previously assessed penalties. Penalty Waivers are normally granted only when a taxpayer is able to show that they were unable to fulfill their tax obligations due to circumstances beyond their control. (winandoffice.com)
Requesting an Installment Agreement An Installment Agreement is a tax settlement option that allows a delinquent taxpayer to pay off a back tax balance in installments when they are unable to pay the full amount at one time. Such an agreement is approved almost automatically if the total amount of the tax debt is less than $10,000 and the taxpayer is in good standing with the IRS. The length of the repayment period and the size of the installments are generally based on the total amount of the back tax balance together with the taxpayer’s financial situation.
Negotiating a Partial Payment Installment Agreement A Partial Payment Installment Agreement is a tax settlement option whereby the IRS agrees to accept partial payment of an outstanding tax liability. Because the collecting tax agency is agreeing to settle a tax debt for less than the full amount owed, the delinquent taxpayer is required to submit documentation substantiating the fact that they are financially unable to pay the full balance of the debt. The payment terms of a Partial Payment Installment Agreement are normally based on of the amount of the back tax balance in addition to the financial condition of the taxpayer requesting settlement.
Submitting an Offer in Compromise The Offer in Compromise is another tax settlement alternative that enables a delinquent taxpayer settle a tax debt for less than the full amount owed. Although it can be an excellent way to resolve a back tax balance, the qualification criteria are very specific and are strictly adhered to. In order for an Offer in Compromise to be accepted by the collecting tax agency, the delinquent taxpayer must submit documentation showing that they will be unable to pay the full balance of their tax debt within a reasonable amount of time.
Qualifying for Innocent Spouse Relief Innocent Spouse Relief is a tax resolution option that is available to a spouse who has incurred a tax liability on a joint tax return due to items improperly reported on the return by the other spouse without their knowledge. Such items could include the omission or inaccurate reporting of income or the misuse of tax credits or tax deductions, among other things.
If you have a back tax balance that you are unable to pay, our tax settlement professionals will assist you in resolving it. Visit us today at www.professionaltaxresolution.com for more information about our services. With over 50 combined years of experience in the business of resolving tax debt, we can help you determine which tax settlement option will be the best fit for your specific set of circumstances. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.