Internal Revenue Service Tax Settlement Options
Arizona taxpayers who have Internal Revenue Service (IRS) debt and back taxes that have not been paid do have options. If the Internal Revenue Service is hounding you for payment or if they have begun aggressive debt collection efforts, you may have several tax settlement options to repay your federal tax debt.
The Internal Revenue Service, in an effort to settle the federal tax debt, may be willing to negotiate a reduced payment amount. If you are considering a tax settlement there are a variety of professionals such as enrolled agents, certified public accounts or tax attorneys who may be able to help.
Tax professionals can help answer your questions, review your federal tax returns, help file late returns and determine what options you may have to settle IRS tax debt.
Offer in Compromise
Offer in Compromise (OIC) is one of the most popular options for Arizona residents to settle IRS tax debt. Offer in Compromise may allow you to settle your IRS tax debt for much less than the original debt amount. Unfortunately, the Internal Revenue Service does not accept every offer. Many OIC offers are won after filing an appeal.
Offer in Compromise can be complicated and very time consuming. Experienced tax professionals can help complete the paperwork and help you drastically lower your tax debt. The Internal Revenue Service will consider your Offer in Compromise if you can prove one of the following conditions:
- Doubt as to Collectibility- The Internal Revenue Service may accept your Offer in Compromise if they think they will not be able to collect the tax debt. Under this rule, there is not a question of the amount or the accuracy of the liability, only their ability to collect.
- Effective Tax Administration- The IRS may accept your Offer in Compromise if they determine collection of the tax obligation will cause “economic hardship which is unfair and inequitable”. This condition is mainly used for the disabled or elderly.
- Doubt as to Liability- If your tax debt has been inaccurately assessed, the Internal Revenue Service may accept your OIC application and review the tax liability.
To qualify for Offer in Compromise the following qualifications must be met:
- Individuals must pay all of their taxes on time for the next five years
- The Offer in Compromise plan must be done accurately
- Federal Tax returns must be filed in a timely manner
- All federal tax refunds will be used to pay federal tax debt obligations
Another tax settlement option is the installment agreement. Installment Agreements allow Arizona residents to pay their federal tax debt in monthly installments. The Internal Revenue Service will generally agree to an installment agreement if tax debt is $25,000 or less. There are several types of installment agreements which can vary based on the amount of tax debt owed. An Arizona Tax professional should be contacted if you owe more than $25,000 to help negotiate the best installment plan for your tax situation.
How do I qualify for an installment plan?
- You must pay quarterly tax estimates if you are self-employed.
- All tax returns for past Internal Revenue Service tax debt have to be paid
- You must file all of your tax returns and pay all federal tax debt for the last five years before the current federal tax debt you can not pay.
- You are not allowed to have another Installment Agreement with in the last five years
Partial Payment Installment
In the last few years, the Internal Revenue Service has created the Partial Payment Installment plan. The Partial Payment Installment plan will stop IRS collection efforts and allow you to repay your federal tax debt in partial payments. The Internal Revenue Service will review the plan every two years and if your financial condition improves, they may choose to stop the Partial Payment Installment plan or force you to begin paying higher payments.
Currently Not Collectible
Certain Arizona taxpayers have faced unusual financial situations. A job loss, unexpected medical crisis or death may make payment of federal tax debt impossible. In certain cases, the Internal Revenue Service may review your tax debt and determine it is “not currently collectible”. The debt does not go away and penalties and interest will continue to accrue, but the Internal Revenue Service will cease their debt collection actions and release levies.
If you fail to pay your federal tax debt, the Internal Revenue Service will impose severe penalties. Penalties may also be imposed for under reporting IRS tax debt, failing to file your tax forms, misstating your income or assets on your federal tax return or falsely filing for a tax refund.
Arizona taxpayers may be able to request their penalties be lowered or erased by filing for a Penalty Abatement. There must be a valid reason to not pay penalties and all penalties may not be dismissed. Arizona Tax Lawyers, tax accountants and other tax professionals will be able to help determine your eligibility for a Penalty Abatement.
Do I Need Texas a Tax Professional?
The Internal Revenue Service is not going to forget you owe them money. Aggressive debt collection tactics can include: bank levies, garnishing your wages and taking your assets. Do not ignore the problem hoping it will go away, it won’t. Contact a tax professional to get started on a resolution to your tax problems. A certified public accountant, enrolled tax agent or a tax attorney can help:
- Complete past due federal tax forms
- Avoid Arizona personal bankruptcy
- Reduce your personal or business tax liability
- Review tax settlement options such as: Partial Payment Installment plans, Penalty Abatements, Installment Agreements, Offer in Compromise, Currently not Collectible