IRS settlements may seem to be the way out of tax debts that appear too huge for a taxpayer who might be in dire straits financially. Michael White, a truck driver failed to file his tax returns for a period of five years. The simple reason was that he was busy making money and kept neglecting to file his quarterly and yearly returns. The result was that he now faced back taxes to the tune of $25,000. The IRS sent him notices about tax levy. Since he was always on the move, he did not receive the notices. His savings account had a lien placed by the IRS. By the time Michael realized that he needed to pay his tax debt, there was no other way out and it was already too late. He felt as if he had been buried under the mountain of IRS debt.

Finally finding no means of paying the IRS, he called the IRS. He was advised of his IRs debt and how it got accumulated to such levels. Michael then asked the IRS to reduce the debt stating his inability to pay the huge amount. The executive at the IRS who attended his call advised Michael about IRS settlements of tax debt. What Michael understood was that there was no running away or wishing away of the IRS tax debt. The maxim that the IRS would make sure that one paid one’s taxes seemed to be true. He now needed to work out the best means to pay the IRS what he owed in back taxes. The lesson he learnt from the experience was that it would be in one’s best interests to file one’s tax returns and make any tax payments due in time. Since Michael did not have any property which the IRS could levy or seize, the IRS and Michael came to an agreement for paying the tax debt including the interest in installments spread over a period of five years.

Some of the ways to achieve IRS debt settlement would be, payment installments, partial installment payments, to propose an offer in compromise, to let the IRS withdraw monthly amounts from one’s account, penalty abatement, filing tax collection appeal or filing bankruptcy. When one applies to the IRS for payment of the tax debt in installments, depending on the merits of the case the IRS might agree to let the taxpayer pay the tax debt including penalty in installments that might be spread over a five year period. In some instances if the taxpayer disputes the total tax debt and proves the validity of dispute, the IRS might agree to forge a portion of the tax debt and might allow the taxpayer to pay the remaining amount in installments. However, the onus of proving one’s inability to make payments towards the huge tax debt as a single payment or proving the dispute in the taxpayer’s favour would rest on the taxpayer’s shoulders.

Another form of IRS debt help that can be obtained is in the form of offer in compromise where the taxpayer offers to make payment to the IRS of the dollar amount that the taxpayer would be able to afford. It would work similar to a debt settlement process where the taxpayer offers to make a lump sum payment of lower dollar amount towards settling one’s tax debt. The option of penalty abatement might also be sought where the taxpayer requisitions the IRS to forgive all or part of the penalties levied on the tax debt. This form of payment might be agreed for by the IRS after considering the taxpayer’s financial situation. Penalty abatement might reduce one’s tax debt and might make it easy to pay the tax debt. Filing for tax appeal might also be resorted to in case the taxpayer receives a tax levy notification. A tax appeal would be presented to an Appeals officer who would have to decide on the appeal within the next five working days. Finally filing for bankruptcy might be resorted to if all else fails. However not all tax debt might be exempt from payment in case of bankruptcy. Consulting an experienced bankruptcy attorney might be beneficial while settling tax debt via bankruptcy.

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Category: Finances
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