Reduce IRS Debt – IRS Settlements
Okay, you’ve faced up to the fact you owe back taxes and the IRS isn’t going to go away. You need to reduce the IRS debt, which means looking at IRS settlements.
Reduce IRS Debt – IRS Settlements
First off, you need to be careful with IRS settlements. The IRS will have a different view of your situation depending upon what it is. Let’s take a look at some scenarios.
You’ve filed all of your tax returns, but simply don’t have the money to pay the amount due. This is a simple situation. You can contact the IRS and ask for a payment plan. They will almost always be happy to oblige. You’re one less headache and they really don’t care as long as you are in the system. There is only one problem with this approach. IRS payment plans are like credit card payments. If you pay the monthly amount due, it is going to take forever because most of the payment goes to interest. A payment plan should be viewed as buying you time. Try to pay off the debt as soon as possible.
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Let’s assume you haven’t filed a tax return for the previous year and haven’t paid any tax. Should you contact the IRS to settle? It’s an “iffy” proposition. You are going to have to file a tax return for the previous year and the IRS may or may not give it a close review. If you barely made any money for the time in question, you are probably alright. If you made a bunch, but didn’t file, you need to get a tax professional to protect you. The IRS understands people can have budget problems. They don’t understand taxpayers who are flush, but just don’t pay.
Now let’s assume you have filed a tax return or paid taxes for four or five years. Do NOT call the IRS on your own to settle. The IRS could take a very aggressive attitude and try to get you to incriminate yourself. Again, do not talk to the agency. Instead, you need to find a tax professional that has experience handling such situations. This can be a CPA or an attorney. Let them layout your options, the risks and a recommended course of action. Also, let them handle all communication with the IRS. You may be able to wrap up the matter with an offer in compromise, but one never knows how the IRS will react. As a result, it is important to get representation.
IRS settlements are fairly commonplace. If you’re going to try to reduce an IRS debt, just make sure you are careful.