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Home > Tax News > July 2010

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TAX NEWS - 2010

IRS Debt settlement

Many people simply forget to pay their taxes for a long time or may not find it possible to pay at a given time for various reasons. They wake up to find that they owe a fairly big amount to Internal Revenue Service (IRS) i.e. they are in a tax debt. Opting not to pay the amount is a bigger risk as you stand to lose even more than you owe. Some people think that filing for bankruptcy will pull them through but they are gravely mistaken. The laws are too strict to excuse any tax debt. Rather than running away from IRS one could do better and approach IRS who can offer solutions to the tax debt.

When one intends to settle the tax debt he should have a look at the tax returns to see if any tax waivers have been missed. This would help reduce the tax liability to some extent. There are many schemes available to settle the tax debt. You could approach the local IRS office to start the procedure or consider consulting a tax attorney. Before you decide to go alone and work out on the tax debt settlement, it is advisable to do an in-depth study of the various options available. Taking the help of tax attorneys is a better option. They would be better equipped with the minute details of any tax waiver that may be used and the appropriate settlement method to be used to pay the least.

IRS Tax Debt Settlement is fast becoming the popular form of debt relief. It is well known that by following certain IRS guidelines one can actually pay less than what is owed. An average settlement is of 12 cents on a dollar, though some may have to pay lesser or higher than the average. IRS allows this tax debt relief on the premise that the taxpayer would in future stay in compliance and pay the taxes on time.

This comes out of the consideration that however much the IRS tries they would not be able to collect the entire amount. This type of relief program is called as Offer in Compromise, which can be availed for personal, as well as business tax debt. Depending on the final amount that is reached you may pay the amount as an initial payment and remaining through regular tax payments. You can get the amount reduced which you currently owe and the remaining is paid in the long-term plan.

There are times when you may have lost some records. In such situations the IRS Tax specialists can assist you in making a fairly accurate calculation of back tax returns. There also exists an IRS Installment plan that allows the taxpayer to pay the tax amount over a period of time. The taxpayer has to pay the correct amount at the set date so that no further legal tool remains in the hand of IRS. The only drawback of this scheme is that the future installments also include additional interest and penalty amount, taking the tax liability much higher.

If you or your tax attorney is able to present a fairly neat and clear case of why you have not been able to pay tax, the option of Penalty Abatement can be used. It means that you may not have to pay at least some part of the penalty. The final option is to get placed in the IRS's Currently Not Collectible status, which stops the IRS from collecting any further. Under this, even if after 10 years the IRS is unable to recover then the debt cannot be recovered after that.

IRS makes sure that they get back whatever tax the person is liable to pay. However, they make all possible efforts through various plans to ensure that people pay.
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