When you have a financial liability with the IRS, beginning your settlement is often the toughest step. Penalties and interest build daily, so it’s important to get started right away. If you’re not sure how to proceed, don’t fret. There are tax debt solutions for every situation, no matter the level of complexity. Whether you offer a compromise, set up a payment plan, or defer your debt to a later date, there’s an answer for every taxpayer.
Below is a video rundown on the basics of tax debt solutions. Keep reading for more in-depth analysis.
For taxpayers in debt, the very first decision is to either go it alone or hire a tax attorney. Hiring a tax attorney is easier and if they are competent ensures you are getting the best result, but is not required. You also should still resolve your case if you cannot afford an attorney.
In lieu of hiring a tax attorney, some taxpayers choose a tax relief company that advertises the services of tax attorneys. Beware of tax relief companies that don’t offer good legal representation or those with high fees. Also, watch out for extremely expensive tax attorneys who charge high fees but work slowly. Last, there are some tax attorneys that are not experts in the back due to tax debts but will still take the case so they can bill it. Tax law is a large area with many subsections, and you want an expert in the back due to tax debt for tax debt solutions, not a tax planning attorney.
The IRS provides several options in tax debt solutions. Simple cases where the debt isn’t extreme are often easy to handle yourself. Saving the money that a tax attorney will cost is an obvious advantage. We also have a comprehensive tax help guide that covers doing many tax collections procedures on your own such as Offer In Compromise, including forms.
Tax debt solutions are harder to come by on your own in complicated cases. You’ll likely want to hire a tax attorney to help navigate the landscape. Though a tax attorney can’t guarantee the outcome you desire, they will get the best result possible if they are competent. They also save you the time and energy of dealing with it yourself. Even though a tax attorney’s fee or hourly rate may seem high, you are not having to spend your time learning new information. It is likely that for each hour your tax attorney spends on your case, it may take you up to 10 hours of time.
Whether you hire a tax attorney or handle your own tax debt solutions, the process is the same, but the results can be different. A tax attorney helps you decide the best option provided by the IRS. Then does the filing on your behalf. Below are the settlement options as per the IRS dubbed Fresh Start Initiative.
Perhaps the best tax debt solution if you qualify is the Offer In Compromise or OIC. The advantages for eligible taxpayers are twofold. First, you take care of your tax debt as a whole. Second, the IRS agrees in these cases to accept less than the total amount due. Be aware that you’ll need to provide the required IRS forms and financial documentation to prove that you can’t afford the total tax debt. You should contact a tax attorney if you have issues with dissipated assets as OIC options can be hard to determine.
Offer In Compromise might not be the best option if your tax debts are old and expiring soon.
If you don’t qualify for an OIC or the IRS declines your offer, an Installment Agreement is still an option. Interest will still accrue over the period you pay off the debt. Currently Not Collectible Status is another option discussed below and can be better than an installment agreement, depending on the situation.
Anytime as a taxpayer that tax debt accrues, the IRS will apply penalties. These are in addition to the interest that accrues over time. A first-time penalty abatement request can be made in the majority of cases and granted easily. If you can provide good cause as to why you haven’t been able to pay your tax debt, the IRS may accept a penalty abatement for other years as well.
This is a common option for taxpayers with an asset that disqualifies them from an Offer In Compromise, but their expenses surpass their current income, the IRS may approve Currently Not Collectible Status. This requires you to file the proper forms which prove an inability to offer payment. Once the IRS designates a Currently Not-Collectible Status, it will review your finances every two years.
The IRS will usually be willing to drop an imposed levy after you make arrangements. A lien may also be avoidable or withdrawn depending on the circumstances of your case. Taxpayers with lesser debt may be able to handle these cases on their own. In more complex situations, it’s a good idea to consult with a tax attorney.
As is evident from the examples above, there are several tax debt solutions currently available to taxpayers. The key is to do your due diligence before contacting the IRS or filing any forms. Make certain that the solution you decide upon is the best for your case. Take advantage of the Free Tax Guide we at Tax Resolution Professionals provide to the public. Visit our Contact Us page, or call us at (888) 515-4829 to set an appointment. A free consultation is only a moment away! Even if we cannot help you, we will point you in the right direction.
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