Mississippi taxpayers who have outstanding tax debt may be able to settle their debt with an IRS tax settlement option. IRS tax settlement options may allow Mississippi taxpayers to pay only a portion of their IRS tax debt.
The Internal Revenue Service (IRS) has the authority not only to collect federal taxes but to use a variety of aggressive tactics to ensure taxes are paid. These tactics can include: wage garnishment, personal or business property repossession, bank account levies or imprisonment. Mississippi taxpayers who owe back taxes can contact a tax professional for information about their IRS tax settlement options.
Offer in Compromise
Offer in Compromise or OIC is one of the most popular IRS tax settlement options available. OIC allows the taxpayer to make an offer to the Internal Revenue Service. The IRS can either accept or deny the offer. If the IRS accepts the OIC, the payment amount is considered a “compromise” and all tax debt that is part of the OIC agreement will be settled after the taxpayer completes the OIC requirements. If the IRS does not accept the Mississippi taxpayer’s Offer in Compromise, the taxpayer will not have the authority to sue or take the IRS to court.
The IRS will stop their collection efforts and penalties and interest will all stop accruing if the Offer in Compromise is accepted. Offer in Compromise is one way to settle IRS tax debt and pay less than the full amount of tax debt owed, but it can be expensive and difficult to implement. The IRS will need a large amount of financial information from the Mississippi taxpayer to complete the Offer in Compromise and the IRS can use this information to continue their tax collection efforts if the OIC is denied.
Qualifying for Offer in Compromise
Mississippi taxpayers will have to meet one of the following conditions for the IRS to accept their Offer in Compromise:
- Doubt as to Liability- The IRS may be willing to accept an Offer in Compromise if they believe the amount of tax debt may be incorrect. Tax errors can be a result of a misapplication of the tax laws, new financial information provided by the taxpayer or an error in calculating the tax debt. This condition is not frequently used.
- Doubt as to Collectibility- The IRS may accept an Offer in Compromise if they believe they may not be able to collect the tax debt either now or in the future. They also may accept an OIC if they believe the cost to collect the debt will be too high.
- Effective Tax Administration- If the taxpayer could suffer a hardship which could be inequitable or unfair if they pay their federal tax debt the IRS may be willing to accept the Offer in Compromise. The elderly and the handicapped most often use this condition.
The following must also be done:
- Mississippi taxpayers must pay their IRS tax debt before the federal tax deadline for the next 5 years.
- Mississippi taxpayers must complete the Offer in Compromise requirements.
- Mississippi taxpayers must complete their federal tax returns and submit them to the Internal Revenue Service by the federal tax deadline.
Installment agreements are the most popular method used by taxpayers to settle their IRS tax debt. Installment agreements allow Mississippi taxpayers to pay their tax debt in monthly installment payments. There are a variety of installment agreements available and the amount of time allowed to repay the tax debt varies based on the amount of taxes owed.
If the Mississippi taxpayer owes $25,000 or less, the IRS generally will accept an installment agreement. Taxpayers who owe more than $25,000 may want to consult with a tax professional such as an enrolled tax agent, certified public accountant or a tax attorney. Tax professionals have experience negotiating the best possible installment agreements for their clients.
An installment agreement will not stop interest and penalties from accumulating on all outstanding tax debt so it will always be better to pay IRS tax debt with one lump sum payment if possible. An installment agreement will however, stop debt collections.
The IRS can cancel an installment agreement for a variety of reasons including:
- If the taxpayer fails to make the full monthly installment payment each month. First time violators may be granted a 30-60 day grace period.
- If the taxpayer does not file their federal tax return each year.
- If the Mississippi taxpayer’s financial situation improves substantially.
- If the Mississippi taxpayer provides incorrect financial information to the IRS for the installment agreement application.
- If the taxpayer is self-employed and fails to submit their federal tax returns each quarter or make estimated quarterly tax payments.
- If the taxpayer does not pay their federal tax payments for the 5 years before the tax debt which can not be paid.
- If the taxpayer has had another installment agreement within the last five years.
Partial Payment Installment Agreement
Mississippi taxpayers who can not qualify for an Offer in Compromise or who can not pay the full amount of tax debt with an installment agreement may qualify for a partial payment installment agreement or PPIA. Partial payment installment agreements will allow the Mississippi taxpayer to pay their tax debt with partial monthly installment payments. The IRS will forgive the tax debt which is not part of their partial payment installment agreement.
PPIA will not stop penalties and interest from accruing on the outstanding tax debt, but the IRS will stop all collection actions against the Mississippi taxpayer. Every 2 years the IRS will review the financial condition of the taxpayer to determine if their financial status has improved. If the taxpayer’s condition has substantially improved the PPIA can be updated or cancelled.
Currently Not Collectible
If tax debt can not be paid by Mississippi taxpayers, the IRS may be willing to change the taxpayer’s tax status to currently not collectible. This status change will stop all tax collection actions but penalties and interest will continue to accrue.
Under the currently not collectible status the IRS will send the taxpayer a written notice every year detailing the amount of tax owed. The letter from the IRS is not considered a tax bill. The IRS has ten years to collect the tax debt before the statute of limitations expires and the tax debt is forgiven.
Mississippi taxpayers may be assessed tax penalties if they fail to file a tax return, provide incorrect tax information on their tax return or request a false refund. The IRS may be willing to reduce or abate penalties if the Mississippi taxpayer can provide a valid reason for the penalty abatement. Valid reasons might include: personal duress, poor mental or physical health, or incorrect financial advice from a tax professional. The Internal Revenue Service may not be willing to lower or abate all penalties.