IRS debt settlement is a term used to describe a process in which delinquent taxpayers who are eligible under tax code rules and restrictions to negotiate with the federal government to pay their owed taxes over a longer period of time or potentially for a lower amount. Taxpayers with IRS tax debt often end up owing the government for a variety of reasons. Some may have received inheritance money that complicated their annual tax returns, while others may have failed to file or pay their income taxes for various reasons. Each year, people across the United States realize that they have a serious problem and need IRS tax debt settlement help.
Community Tax Relief works with taxpayers to resolve IRS tax debts. The IRS has three basic tax debt settlement programs in place for taxpayers to apply for: the Installment Agreement, the Offer in Compromise (OIC) and Currently Not Collectible Status. Installment Agreements have several payment options depending on an individual’s finances, but essentially are monthly payments made to the federal government each month for a period up to six years.
An Offer in Compromise is an agreement between the IRS and taxpayer in which the federal government agrees to allow an individual to pay back their debt in a lump sum less than the total taxes owed. The OIC must be completed within two years and is only granted to those individuals that the federal government believes would not be able to pay any more should the IRS pursue other collection avenues. Out of the thousands of OICs requested by individuals each year, the IRS accepts roughly 15% of these tax debt settlements because most taxpayers are not eligible financially.
Only certain taxpayers are eligible for an Offer in Compromise. The IRS will permit an Offer In Compromise if there is a doubt as to liability, meaning the federal government may have assessed the amount owed incorrectly. In addition, if the amount the IRS assessed is not likely to be collected by the government, the IRS will likely accept an Offer in Compromise. Finally, the IRS will accept an OIC if collecting the tax debt would cause undue financial hardship for the taxpayer. To determine these three factors, the IRS often requests financial and tax information from the taxpayers that will determine the Reasonable Collection Potential. The reasonable collection potential of an individual takes into account all cash, investments, assets and real estate, expenses and income to determine what amount could be collected from that taxpayer without causing undue hardship. To determine the RCP, the IRS often examines an individual’s monthly budget and projects how much they can collect in the future. A thorough and extensive financial report of a taxpayer’s monthly expenses can provide a strong foundation when negotiating for an Offer in Compromise.
Currently Not Collectible Status, is a resolution program offered by the IRS for individuals facing extreme hardship. It requires the IRS to completely cease collection efforts unless the taxpayer’s financial situation changes greatly. Individuals who qualify for a CNC may have a zero or negative monthly income each month. The IRS requires detailed financials to prove the hardship that is faced by the individual in question. The IRS also requires these individuals to resubmit financial information every two years to ensure that no change in status has taken place.
Contact Community Tax Relief today for more information about IRS tax debt settlements help and to learn if you might be a candidate for an offer in compromise. Taxpayers who have received notice of an IRS lien or levy should take immediate action to get assistance with resolving their IRS problems. IRS debt settlements that benefit individual needs based on finances and expenses can be achieved with the help of a professional tax company. Call for a free consultation and learn more about tax settlement options and whether or not you might be a fit for these programs. Remember, that qualifying for an IRS debt settlement program is the hardest program to qualify for.