Taxes Owed? Should You Settle Your Debt or Set Up Payments?

Taxes Owed: Payment Plan vs. Settlement

irs taxes owedIf you have IRS taxes owed, you are probably looking into ways that you can pay it off. Should you make monthly payments? Would your tax debt ever get paid off? Is there any validity to those "pennies on the dollar" tax settlement commercials? This page compares using an IRS Installment Agreement to pay off a debt against attempting to settle a tax debt with an Offer in Compromise.

Using an Installment Agreement to Pay Taxes Owed

There are three installment agreements used to pay taxes owed. If you owe less than $25,000, you can request to make payments calculated through dividing your taxes owed by 60 months or the months until your debt expires. The IRS will choose whichever is sooner. This is called the streamlined agreement. If your taxes owed are more than $25,000 or you cannot afford the payments offered by the streamlined agreement, you must disclose your finances for monthly payments. However, you will be paying until your taxes owed are fully paid. If you can prove that there is no way the taxes owed will be fully paid before they expire, you may qualify for a partial pay agreement. If you are required to disclose finances for a payment plan, it is a good idea to work a tax debt professional.

There are many advantages to using an installment agreement to pay taxes owed. To begin with, it is much easier to file for an installment agreement than most tax resolutions. In many cases, you only need to fill out a Form 9465. At most, you may be required to fill out a Form 433-A to disclose your finances. It is also less expensive to apply for an installment agreement. Your set up fee could be as little as $43. The most it will be is $105. There is much less personal risk involved, if you decide to use an installment agreement to pay your taxes owed. More people are accepted into installment agreements than many other tax resolutions.

Settling Taxes Owed with an Offer in Compromise

Those who want to settle taxes owed with an Offer in Compromise must prove to the IRS that they do not have the cash, accounts, or assets to ever pay off their debt. This is incredibly difficult to do. You will be required to fill out a complicated booklet called a Form 656-B. With this booklet, you are required to submit a $150 non-refundable application fee along with a non-refundable 20% payment of the offered settlement. The overwhelming majority of those who attempt to settle their taxes owed are denied by the IRS. Those people have also extended the amount of time before their tax debt expires, and shown the IRS exactly where they can be levied. If you are approved, you will have a short amount of time to pay the settled debt in full. It is imperative that you discuss using an Offer in Compromise to settle taxes owed with a reputable tax debt professional before sending anything to the IRS.

Do you need help figuring out what to do with your IRS taxes owed? Consult a professional. Call now or fill out the form below for a free tax debt consultation on the many options for taxpayers with taxes owed! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.

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