How to Request IRS Tax Debt Settlement

The process of resolving tax debt has many potential pitfalls. Not only can it be very time-intensive, but there are many false enticements that claim to offer easier ways to sort out your affairs. While it’s possible to resolve your problems with the IRS, it’s important to know what options are valid so you can choose the right debt settlement strategy for you while avoiding dangerous misconceptions about how to escape tax debt.

There are a limited number of ways you can pay off tax debt. One is through an Installment Agreement, which is a monthly payment plan authorized by the IRS. There are four forms of installment agreements and your eligibility will be determined by your tax situation. The IRS must permit you to enter into an installment agreement if all your tax returns are filed, you haven’t had an installment agreement in the last five years and your monthly installment payments are set to pay off your balance in 36 months or less. Additionally, you must have filed and paid on time for the last five years and must continue to do so in the future.

If the minimum payment required by a standard guaranteed installment agreement is beyond your means, a partial payment installment agreement may be a better option. Under this plan, your monthly payment is determined after considering your essential living expenses. Yet another alternative is an Offer-in-Compromise. Under the terms of the Offer, you pay a stipulated amount that is less than your debt. The IRS may agree to an Offer-in-Compromise if your liability for tax debt or your ability to ever pay it off completely is considered unlikely. If you undertake an Offer-in-Compromise, you must agree to file your tax returns and pay your taxes on time. The IRS will keep all prior tax refunds and credits that apply to your debt, as well as tax refunds you would have received the year your Offer is approved.

The process of sorting out your tax debt-related affairs can be laborious and tiring. Depending on the extent of your debt and the complexity of your financial situation, it may be necessary to hire a professional expert to assist you. In order for a person to be considered a qualified tax professional, the IRS requires that he/she be a Certified Public Accountant (CPA), Enrolled Agent, or tax attorney. Whereas Enrolled Agents are licensed by the IRS and may practice anywhere in the country, tax attorneys and CPAs are licensed within specific states. Being aware of the credentials held by the tax professionals who you work with will increase your involvement in settling your tax debt and help you understand what services they can offer you. The most valuable service that you can receive is strategic advice about which form of debt settlement you should pursue. Given that CPAs and Enrolled Agents often charge either by the hour or at a flat rate for all services, learn what tax forms you can fill out for yourself. Not only can this help reduce costs, it might familiarize you with IRS paperwork that can often be confusing. Resolving tax debt is a tricky issue, but staying aware of your options and being proactive will help identify the solution that’s right for you.

Siddarth Nagaraj

Siddarth Nagaraj is a junior at the University of North Carolina-Chapel Hill. He is currently pursuing a double major in Global Studies and Political Science with a minor in Geography. Originally from Winston-Salem, North Carolina, he is interested in socioeconomic inequity and cultural diversity in developing nations. He is also a Section Editor for The Hill, UNC’s only nonpartisan political review, and has written multiple articles on international affairs for the quarterly publication.

Since the summer of 2010, he has volunteered as a Savings Officer for the Community Empowerment Fund (CEF) in Chapel Hill, which seeks to promote financial literacy and help fiscally strained individuals achieve self-sufficiency. Apart from writing, Siddarth enjoys reading, travel, and watching British television programs. Upon graduation, he plans to earn a graduate degree and seek employment in the field of international development.

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