Taxes are one of life’s inevitabilities. No matter who you are or what you do, taxes will be a part of your life. Settling tax debts can become difficult if you don’t deal with them promptly. Many people make a mistake in one year’s filings and find themselves with a penalty that they can’t or don’t pay. When next year’s taxes come around, the problem is inevitably compounded. If you operate a business, you will have a whole bunch of other taxes that you need to account for and even more opportunities for errors to be made.
Settling Your Debt With the IRS
While many people are unaware of it, there is a process whereby you can settle your tax debt with the IRS for less than you owe. This is possible because of something called an Offer in Compromise. An offer in compromise is an offer made by a debtor to the IRS to settle their debt in a manageable way.
Naturally, the IRS doesn’t just hand out OICs; they are there to provide a safety net for those who need it and the IRS must be satisfied that they have no realistic prospect of recovering the full amount owed. As such, the OIC usually represents the maximum that a debtor can afford to pay.
If you think an OIC might be suitable for you, check out levytaxhelp.com. They can help you to ascertain whether an OIC is suitable for you and can help you go about applying for one.
Who is Eligible for a Settlement?
Not every taxpayer is eligible to pursue a settlement arrangement. For one thing, you must be up to date with your tax filings and not currently have any open bankruptcy proceedings against you. You also need to have received at least one bill for the debt that you want to settle with the IRS. If the IRS determines that you are able to pay the debt via an installment arrangement, they will require one of those instead.
If the IRS determines that you have sufficient assets to sell and cover the debt, they will likely require you to do so. The IRS won’t consider a settlement offer from anyone who already has outstanding debts with the IRS, unless they are included in the offer, of course.
Things You Need to Consider
Filing an OIC will not prevent you from accumulating penalties and interest charges. During the period that the IRS is considering your settlement offer, they will still apply penalties and interest charges. From the moment the offer is accepted, these penalties will no longer be applied.
If you have an open bankruptcy case, you won’t be eligible for an OIC. This is because bankruptcy proceedings are designed to resolve all of your debts. You will have to wait for any open bankruptcies to resolve before you can make an offer.
If you owe money to the IRS but don’t think that you will be able to pay, you should investigate whether an OIC is the right option for you. Consult with resources such as levytaxhelp.com to discover whether an offer in compromise is suitable for your financial situation.