Several Methods to Settle Your Tax Debts
While the IRS can pursue taxpayers who owe unpaid tax liabilities, they can also settle the debt with them for a fraction of the original amount. This process is called an offer-in-compromise. A tax debt settlement may help you get the debt paid off faster. Here are some things to consider before making a decision. Read on to learn how to settle your tax debts. There are several methods for doing so.
Generally, taxpayers have a common misconception about the process of settling their tax debts. Most taxpayers assume that they can settle their tax debts for pennies on the dollar, but this is not the case. IRS settlements are determined by the amount of money you can pay and how much you can afford. By subtracting your average monthly expenses, you can calculate how much disposable income you can pay every month. This figure may be much less than what you owe, so you can’t lose much by settling your tax debts.
Generally, you can settle your tax debts by appealing to the IRS through the process of compromise. The IRS can’t file a federal tax lien for a taxpayer owed more than $50,000. However, if you do meet the criteria, the IRS will accept a settlement offer and give you two years to pay it. In the meantime, you have to keep filing your taxes for each new year. If your back taxes are very high, settling may be your best option.
While the IRS rejects most offers in compromise, some may qualify for a tax debt settlement. In these cases, the IRS will accept less than half of the amount owed and will give you a payment plan over time. In addition, some taxpayers are eligible for a debt settlement when they are destitute financially. There are some important things to keep in mind when settling your tax debt. You may have to compromise some of your assets and even give up your dignity.
OIC (offer in compromise) is one of the most popular tax debt settlement options. It enables you to make payments in installments and extra payments until your debt is paid. However, if you fail to pay on time, you’ll be liable for the original tax debt plus the penalties and accrued interest. Consequently, the IRS will be less likely to accept this option than other methods of settlement. However, if you’re looking to avoid paying on your debt, the OIC Periodic Payment Option might be the best choice for you.
Another option for settling tax debts is to pay the IRS in full. This is the most common way to get back in the IRS’s good graces. Not only will this prevent interest charges, but it will also stop IRS collection actions. A partial pay agreement will also eliminate tax liens. However, be aware that a partial pay agreement will not get you the entire amount that you owe. If you opt for this option, the IRS will still keep the penalties imposed on you but will allow you to pay a smaller portion. Ask your local Oregon tax debt attorney to explain to you the options.
If you’ve already filed your tax returns, you should consider settling your tax debts. The IRS will receive a 1099-C form detailing the amount of the debt that was settled. Usually, this form details how much of the debt was forgiven, but how much of it was taxable income. It’s essential to note that this method is not suitable for everyone. For example, if you have debt that is over seven hundred dollars, you may be able to get back more money than that by reducing your monthly payment.
The offer-in-compromise method may be the right option for you if you don’t have any assets but still owe more than you can afford to pay. If you’re living modestly and don’t have the funds to pay your debts in full, an offer-in-compromise can be a great way to settle your tax debt and save your finances. Another alternative is to file for bankruptcy. If you’re trying to figure out how to settle your debt, consult an experienced tax debt attorney.
You can settle your tax debt by contacting the IRS directly if your debt is less than $10k. However, if your debt exceeds $25k, it’s better to consult a tax professional or lawyer to determine if this is the right option for you. You can also get some relief by negotiating a repayment plan with the IRS. However, settling your tax debts does require a good amount of time and effort.