Tax settlement is a vague term, but one that people use often. One of the most common uses of the word \u201csettlement\u201d refers to lawsuits. When both parties come to an agreement before the trial, it\u2019s a settlement.<\/p>\n\n\n\n
Similarly, a tax settlement is an agreement between the Internal Revenue Service (IRS) and the taxpayer to resolve back tax debt. The IRS offers multiple ways to reach a settlement. However, they designed them for people with severe financial hardships.<\/p>\n\n\n\n
The trick is to anticipate what the IRS perceives as a financial hardship. They review and decide on each case individually. While some hardships are obviously in need of debt forgiveness, the need in other cases aren\u2019t as clear.<\/p>\n\n\n\n
Although, not all IRS programs offer tax settlement, many do achieve meaningful relief for the taxpayer. What\u2019s the difference between tax settlement and tax relief? We\u2019ll explain.<\/p>\n\n\n\n
Tax settlement<\/a> allows a select few taxpayers to resolve their whole tax debt for less than they owe. In other words, the taxpayer qualifies for a program that results in partial debt forgiveness.<\/p>\n\n\n\n Although settling your debt for \u201cpennies on the dollar\u201d is virtually unheard of, it is possible with the Offer in Compromise. This technical possibility is what the old ads on television<\/a> were referring to.<\/p>\n\n\n\n The companies behind these ads generally listened to clients\u2019 stories. After filling out the application with reported hardships, they\u2019d submit it to the IRS. The IRS denied the majority of these applications.<\/p>\n\n\n\n The IRS offers very few qualification guidelines for these applications. They only approve applications for especially severe hardships.<\/p>\n\n\n\n The IRS reserves tax settlement for very few taxpayers. On the other hand, tax relief is accessible to most taxpayers. Examples of tax relief include a filing deadline extension, monthly installment plan, and first-time penalty abatement.<\/p>\n\n\n\n The IRS announced the Fresh Start Program in 2008. The Fresh Start Program was a collection of relief programs.<\/p>\n\n\n\n About four years later, the IRS revamped and improved the program. They announced the changes as the Fresh Start Initiative and they\u2019re still available today.<\/p>\n\n\n\nWhat is Tax Relief?<\/strong><\/h3>\n\n\n\n