Tax Settlement - Here's How It Works!

While many taxpayers receive refunds around tax time, it is common for them to miss complete payments. In recent years, about 20% of taxpayers, filed a tax return with at least $3,000 of the balance due.
Fortunately, since the IRS wants what is owed to the government, there are ways out of tax debt problems. Despite its intimidating reputation, the IRS has no intention of punishing you out of spite. IRS is aware that it can only raise money if the money is there, hence the Department of tax settlement services has payment options for taxpayers in troubled situations.

What is tax debt settlement?

Tax Debt settlement is a comprehensive concept that includes many options to achieve the best possible settlement between defaulting taxpayers and the IRS. Tax Debt settlement usually comes in the form of a payment plan, also known as a compromise offer.

Who might need tax debt settlement?
• Taxpayers who have defaulted and lack the funds to pay off their debts through personal loans, mortgage loans, credit cards, investments, etc.
• Defaulting taxpayers caught by private debt collectors hired by the IRS.
• Those who have not filed taxes for several years but have (so far) managed to operate under the IRS radar.
• Taxpayers whose debts are so "seriously delinquent" ($50,000 or more) that the IRS has ordered the State Department to refuse, revoke, or confiscate their passports.

Tax Settlement Options

As mentioned above, the Department of tax debt and financial settlement services offers several options for delinquent taxpayers: payment plans, settlement offers, and filing as currently uncollectible.

Installment contracts work like any other loan: you pay a fixed amount each month for a period (up to six years) until your tax bill is paid. The conclusion of an installment agreement ends the susceptibility to penalties, but like any loan, interest is paid. Note: processing fees also apply.

If you owe less than $50,000 combined in taxes, interest, and penalties, you can request an installment agreement online through IRS.gov. The advantage of installment payment agreements:
avoid garnishment and other debt collection activities.
Taxpayers showing that paying the entire amount due would be ruinous, now or in the future, may opt for an Offer in Compromise (OIC) which is an agreement to settle their tax liability for less than the amount due. The IRS weighs several factors, including solvency, income, expenses, and equity. The Department of tax debt and financial settlement services will only approve a compromise offer if the amount offered is the maximum you can expect to receive in a reasonable amount of time.

Under certain circumstances, delinquent taxpayers who are out of money each month after making essential expenses (rent, utilities, groceries, transportation, and other payments may qualify for a deferral. If the Department of tax debt and financial settlement services determines that the taxes are "currently uncollectible," the agency will halt the collection effort, giving the taxpayer some breathing room and relieving the fear of the IRS stepping on their necks.

Payment method

Your initial payment varies depending on the offer and payment option you choose:

• Lump sum cash payment: Submit a deposit of 20% of the total amount offered with your application. If the Department of tax debt and financial settlement services accept your offer, you will receive written confirmation. You must pay the balance due for the offer in five installments or less.
• Recurring Payment: Submit your first payment with your application. Continue to pay the balance monthly while the Department of tax debt and financial settlement services reviews your offer, if the Department of tax debt and financial settlement services accepts your offer, you will continue to pay monthly installments.

Conclusion
However, there are disadvantages: the tax debt remains; interest and late fees will continue to accrue on balance; and the IRS can file a lien against the taxpayer's property (which will appear on credit reports). Oh, and remember that the refund expected by taxpayers in later years is applied to unpaid taxes. Words to the wise: File your taxes! Even if you cannot make the payment, contact the Department of tax debt and financial settlement services to get out of the federal tax lien.