For many, the idea of dealing with the IRS and settling an outstanding debt is stressful. Often, taxpayers seek out other agencies who help, but for a fee. This approach can often put your sensitive information in jeopardy. On the other hand, you can come to a beneficial resolution directly with the IRS without revealing too much. Below are three different options that serve many people.
Offer in Compromise
An offer in compromise is an agreement between a taxpayer and the IRS to settle a debt for less than the original and full amount. About 25% of people can qualify for an offer in compromise. To initially qualify, you need to have submitted all necessary tax forms, you must have received a bill of debt from the IRS, and you ought not to have made any required estimated payments. In addition, the IRS considers the following to determine your eligibility: ability to pay, income, expenses, and asset equity.
However, if you are in open bankruptcy proceedings, this option is not for you.
For many, setting up a payment plan is the best option. As an eligible taxpayer, you can apply for this option online via the IRS website. There is a $0 to $149 set up fee, depending on the option you chose. To apply online, you’ll need some basic information like:
- Your name as it appears on your tax forms.
- A valid email address.
- Your date of birth.
- Filing status.
- Your address from your most recent tax return.
- Your balance due.
- One of the three methods offered to confirm your identity.
Temporarily Delay Collection
Another option, specifically for those in sudden or momentary financial distress, is to temporarily delay collection. Normally, this option is reserved for those who are unemployed or underemployed. Another method is to prove that paying your fee will put you in trouble financially. The IRS can determine if you are unable to pay and hence change the status of your account to currently non-collectible, or CNC. The debt does not go away, but is put on some sort of freeze because a taxpayer is currently unable to pay.
Along with temporary delay, you can also pay month-by-month or through partial agreements. You can do month-by-month payments if you have debt that’s less than $50,000. If you have over $10,000 in debt you can settle a partial payment agreement.
These three most common IRS tax resolution methods can offer taxpayers a more manageable means to repay a debt and settle an obligation. The IRS works with taxpayers to find an equitable form of repayment to help maintain quality of life for the taxpayer and keep them out of financial distress. Using these methods, or some other options, when working with the IRS can help you avoid going into further debt and begin your ascent towards financial stability.