Ohio taxpayers who have outstanding Internal Revenue Service (IRS) tax debt may be able to settle their debt by using one of the IRS tax settlement options. The United States federal government has given the Internal Revenue Service the legal authority to collect and settle tax debt. With this power, the IRS has a variety of aggressive debt collection tactics such as wage garnishments, bank account levies and repossession which it can use to collect taxes.
Ohio residents may be able to use an IRS tax settlement option to negotiate a settlement with the IRS. The IRS is willing in many cases to negotiate a settlement for federal tax debt in hopes that a settlement will allow the taxpayer to meet all future tax obligations. In certain cases, the negotiated amount may be a fraction of the full tax debt.
Ohio residents who are considering an IRS tax settlement may want to consult with a tax professional such as a certified public accountant, tax attorney, or enrolled agent. There are a variety of tax settlement programs available and a tax professional can review the taxpayer’s financial situation to identify which program may be best.
Installment Agreements for Ohio Taxpayers
Another common IRS tax settlement option is the installment agreement which allows taxpayers to repay debt with a monthly installment payment. Installment agreements will vary depending on the amount of debt an Ohio taxpayer has to settle. Ohio residents who owe $10,000 or less excluding penalties and interest, can use a guaranteed installment agreement which requires the sum be paid with in three years. Ohio taxpayers who have IRS tax debt of less than $25,000 can use a streamlined plan which will require the tax debt to be paid in five years. Ohio taxpayers who owe more than $25,000 should discuss their payment options with a tax professional.
The Internal Revenue Service will continue to charge penalties and interest for the duration of the installment agreement. It is always more cost effective to pay all federal tax debt as soon as possible.
Offer in Compromise
Offer in Compromise (OIC) is one of the Internal Revenue Services most popular tax settlement options. Offer in Compromise allows an Ohio taxpayer to make an “offer” to the IRS to settle tax debt. This offer is considered a compromise and may be substantially less than the full tax debt owed. If the IRS accepts the taxpayer’s offer, the tax debt which is outlined in the Offer in Compromise is considered settled.
The Internal Revenue Service currently accepts approximately 25% of the OIC offers at the initial application stage, more offers are accepted on appeal. Ohio taxpayers who are considering Offer in Compromise must meet one of the following criteria:
- Doubt as to Liability – If the Internal Revenue Service believes there is a doubt in the accuracy of the amount of tax debt an Ohio taxpayer has been assessed, they may be willing to accept an Offer in Compromise. This condition is not often met.
- Doubt as to Collectibility- The IRS may be willing to accept an Offer in Compromise if they believe they will not be able to collect tax debt owed from an Ohio taxpayer. This condition differs from doubt as to liability because only the ability to collect is in question, not the amount of IRS debt owed.
- Effective Tax Administration- Certain Ohio residents may be able to prove that paying their federal tax debt will result in an “economic hardship which is unfair and inequitable”. If the Internal Revenue service agrees they may accept the taxpayer’s Offer in Compromise. This is most often used for the handicapped and elderly.
Ohio residents must also meet the following requirements:
- Ohio residents must pay all of their federal tax debt on or before the federal tax deadline for the next five years
- All the Offer in Compromise requirements must be completed as outlined
- Ohio tax residents must file all personal tax returns on or before the federal tax deadline
- The IRS will use all future refunds to pay the federal tax liability
Partial Payment Installment Agreement
Partial payment installment agreements (PPIA) can be used by Ohio taxpayers who can not make monthly payments for the full of amount of tax debt. The Internal Revenue Service will review the partial payment installment agreement every two years to determine if the Ohio taxpayer could pay more or if the PPIA could be terminated. Interest and penalties will continue to accumulate under a PPIA. It will always be less expensive to pay all federal tax debt in one lump sum payment.
Currently Not Collectible
Certain Ohio residents may not be able to make federal tax payments due to a financial crisis or the current economic climate. In certain cases, the IRS will determine that tax debt is currently not collectible. The IRS will stop all debt collection efforts for Ohio taxpayers who have debt considered currently not collectible, but the interest and penalties will continue to accrue and the tax debt will not disappear.
Ohio residents who fail to file tax returns, file fraudulent returns, or request a fraudulent tax refund may be assessed penalties by the Internal Revenue Service. Under certain conditions, the Internal Revenue Service may be willing to dismiss or abate the penalties. Ohio taxpayers with excessive penalties may want to consult a tax professional for help in negotiating penalty abatements.
Should I use a Tax Settlement Option?
Ohio taxpayers may use a variety of tax settlement options to settle their IRS tax debt. Tax settlement agreements may also stop the aggressive collection tactics of the IRS and allow the taxpayer to eliminate some of the stress associated with owing the federal government money. Contact a tax professional for more information.