Tax Settlement: Can You Negotiate Your Tax Debt?

Tax Settlement: The Real Facts

tax settlement helpMany taxpayers feel overwhelmed by the total tax debt that they see on their IRS notices. They see commercials claiming they can settle their tax debt for "pennies on the dollar" and wonder if they could possibly be one of those tax settlement success stories. If you are considering hiring a tax firm to negotiate a tax settlement, you need to get the real facts. This page will help you make the right decision.

The Offer in Compromise Tax Settlement

The idea most people have of an Offer in Compromise tax settlement is that a skilled tax attorney can talk the IRS into settling a tax debt for a low amount. This is not how it works at all. An Offer in Compromise is accepted, if one of three conditions is met.

  • Doubt as to Collectibility - You must prove in detail that you will never have the funds to pay your debt in full. This is done by filling out a Form 433-A.
  • Doubt as to Liability - You must prove that the tax debt was assessed to you incorrectly. This is done with a Form 656-L.
  • Effective Tax Administration - You must prove that paying your tax debt in full or in installments would cause enormous financial hardship.

Very few people meet the requirements of any of these three conditions. When you file for an Offer in Compromise tax settlement, you must pay the $150 application fee and the initial 20% of your offer payment. Both of these payments are non-refundable, whether your request is accepted or not.

Another drawback to filing for an Offer in Compromise tax settlement is that you have to fully disclose your finances to even apply. Now, the IRS knows your bank accounts and has the contact information to levy them. They also know where you work and can garnish your checks. Filing for an Offer in Compromise tax settlement has often led to aggressive action by the IRS.

The Partial Payment Plan Tax Settlement

If you cannot pay your tax debt in full, an IRS installment agreement is a great alternative to an Offer in Compromise tax settlement. With most installment agreements, you have 5 years or less to pay your debt in full. However, with a partial payment plan tax settlement, you pay only what you can afford monthly until the collections statute runs out on your tax debt. This means that you would be protected from any aggressive action without paying your tax debt completely. The partial payment plan tax settlement also requires that you disclose your finances, so it is probably best for you to contact a tax debt professional to make sure that this is the right decision.

If you are contemplating a tax settlement, consult a professional. Call now or fill out the form below for a free tax debt consultation on what tax settlement options may work for you! 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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