Tax Settlement

written by Claudia Grant
reviewed by Drew O. Mark
June 12, 2023

So you find yourself having a tax problem. Fortunately, the IRS provides options for taxpayers to resolve their debt. There are many options to help reduce, and in some cases eliminate, tax arrears, ranging from filing or correcting a tax return to arrangements like penalty abatement, installment agreements, or offers in compromise.

Does the IRS really settle for less?

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or doing so creates a financial hardship. Consider your unique set of facts and circumstances: Ability to pay.

Innocent Spouse Relief

Relieves responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return.

Offer in Compromise (OIC)

Offer in Compromise program, under 26 U.S.C. § 7122 allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed.

Tax Debt Forgiveness

The IRS tax debt relief or forgiveness program allows taxpayers who owe unpaid taxes to reduce part of their debt, according to their circumstances.

Currently Not Collectible

Being currently not collectible does not mean the debt goes away, it means the IRS has determined you cannot afford to pay the debt at this time.

Penalty & Interest Abatement

Taxpayers can request that the IRS “abate” the penalties. Abatement is simply removing the penalties after they are assessed to the taxpayer.

Negotiating with the IRS

Most taxpayers have find that working with a professional, can significantly impact the odds of reaching an acceptable settlement with the IRS.

Fresh Start Program

Help taxpayers who owe much more than they can reasonably afford to pay. This can significantly reduce their federal tax debt; they may be able to reduce 90%.

IRS Installment Agreement

IRS installment agreements allow taxpayers to pay their tax debt over time, easing financial strain while meeting tax obligations. This usually is only allowed to happen once.

Tax Settlement Options: Navigating the IRS with Hope

Facing the IRS due to tax debts can be a harrowing experience. The power of this federal agency is undeniable, with the authority to enforce stringent measures against defaulters. However, amidst this daunting scenario, there is a beacon of hope: the IRS offers several tax settlement options for those struggling with tax debts. Understanding these options can provide a pathway to resolving tax issues without succumbing to despair.

The Formidable Reach of the IRS

The IRS, armed with extensive legal powers, can take severe actions against individuals and businesses with unpaid taxes. From imposing liens and levies to garnishing wages and seizing assets, the agency’s measures to collect debts are rigorous and unyielding. In 2019 alone, the IRS collected more than $3.56 trillion in gross taxes and issued 543,604 liens and 782,735 levies on third parties, as reported by their Data Book. These numbers underscore the seriousness with which the IRS approaches tax collection.

Yet, There is Hope

Despite its formidable reputation, the IRS understands that taxpayers can face genuine financial hardships. Consequently, it offers several settlement options to help taxpayers resolve their debts.

External Sources

Claudia Grant

Claudia Grant is a seasoned financial expert with a rich and diverse background. Holding a Master of Science in Taxation, Claudia's 15 years as a CPA and ten years as a financial manager have shaped her into a true industry authority. Departing from the traditional office setting, Claudia now thrives as a tax and financial consultant, catering to a wide array of companies. Her passion for sharing knowledge shines through her insightful articles, where she breaks down complex financial concepts into simple pieces. Claudia's expertise and dedication make her an invaluable resource for businesses seeking adept financial guidance in an ever-evolving landscape.
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