If you owe back taxes, you might feel like that amount on that notice is set in stone. You owe it, the IRS wants it, and that is the end of the story. But that is not always the case.
So, can you settle IRS tax debt for less?
Depending on your financial situation and the details of your tax debt, you may be able to settle your IRS tax debt for less than the full amount you owe. This is known as an Offer in Compromise.
Keep in mind that not everyone who owes the IRS can offer a smaller amount and walk away. The IRS has specific requirements for settling tax debt. Here is how it works.
What Is an Offer in Compromise?
An Offer in Compromise allows a taxpayer to settle certain tax debts for less than the full amount owed. The IRS considers an offer when it believes it may be difficult or unlikely to collect the entire tax debt within the time allowed for collection.
In these cases, the IRS looks at your overall financial situation. This includes:
- Income
- Expenses
- Assets
- Ability to pay
With an Offer in Compromise, that can provide a way to resolve a tax debt that may feel impossible to pay in full.
Who May Qualify?
The IRS will only consider an Offer in Compromise in a few situations. For example, you may have a legitimate dispute about how much you actually owe. This is called doubt as to liability.
Another option is doubt as to collectability. This means you do not have enough income or assets for the IRS to reasonably expect that it can collect the full amount you owe.
Another option is based on effective tax administration. This can apply in certain circumstances even when the IRS believes it could technically collect the debt.
Your eligibility is not determined by the size of your tax bill alone. Your financial circumstances play a big role in whether you qualify.
You May Have Other Options
An Offer in Compromise is not the only way to deal with IRS tax debt. Sometimes, you may qualify for an installment agreement that allows you to pay the debt over time.
In some situations, taxpayers also qualify for Currently Not Collectible status. This happens if paying the IRS would create a financial hardship.
Be Wary of “Settle for Pennies” Promises
You have probably seen the advertisements. “Settle your IRS debt for pennies on the dollar!”
While it sounds pretty appealing when you’re staring at a tax bill you can’t afford, you want to be cautious.
Not everyone who owes the IRS will qualify for an Offer in Compromise. These companies cannot guarantee that the IRS will accept an offer.
Before paying someone to handle your tax debt, you want to know what they’re offering, what it will cost, and whether you actually appear to qualify for the program.
With the help of a reputable tax debt resolution attorney in Tennessee, they can review your situation and help you understand your options before you make a decision.
What Should You Do If You Owe the IRS?
First, you never want to ignore the problem. Remember that IRS notices don’t get better with age. Interest and penalties may continue to accumulate. Plus, the IRS has collection tools it can use when tax debts remain unresolved.
If you are in a tight financial position, can you settle IRS tax debt for less? There are some options. The key is finding the option that fits your financial situation.
If you’re struggling with IRS tax debt, you want to get advice right away. At DeVore Law PLLC, we can see whether an Offer in Compromise is right for you. Reach out today to schedule a consultation.
