How Does a Tax Settlement Work?
In the 2018 fiscal year, it was found that US taxpayers owed a combined $131 billion in back taxes to the IRS.
Does that hit a little close to home for you? For many Americans, dealing with the IRS is one of the things they try to avoid most. It’s a surprise, then that 79% of people are satisfied with their dealings with the IRS in 2020.
If you have tax debt, and you’re looking to find a way to get the IRS off your back, you may have come across information about tax settlement.
Keep reading to find out what a tax settlement is and how it works?
What Is a Tax Settlement?
Given the word “settlement” many people believe that the process of tax settlement resolutions involves a courtroom. In actuality, it’s more or less a process of submitting the correct forms to the IRS.
A tax settlement is when the IRS agrees on an amount less than the original debt a taxpayer owed.
A tax attorney may be a better option for many taxpayers than trying to go it alone. They can help to negotiate a lower amount, avoid liens and garnishments, and negotiate a payment plan in installments.
How Does a Tax Settlement Work?
The IRS allows the taxpayer or a qualified, credentialed person to negotiate on their behalf. To be able to settle, the taxpayer must meet qualifications set forth by the IRS for various tax settlement programs.
The taxpayer can fill out the forms, or their qualified tax professional can prepare the forms for them.
Tax debt settlement usually means paying off the agreed amount within a specific time period. No late taxes or tax interest is assessed on the tax settlement during this period. Taxpayers may even be able to pay in a lump sum if they can.
Once the settlement is reached, the taxpayer will get considered in good standing with the IRS during the tax year or years the settlement covers.
Eligibility and Qualification
Not everyone is eligible for tax settlement. It’s meant as a tool for taxpayers to receive a measure of relief in dealing with overwhelming tax debt. It isn’t meant as a way for someone to dodge taxes they can clearly pay.
If the IRS determines that the taxpayer can, in fact, pay the balance without undergoing undue financial hardship, the tax settlement request could get rejected. Instead, they may offer to accept monthly payments.
Understanding Tax Settlement
Tax settlements aren’t for everyone and you might not get as deep a discount as you would have hoped. However, it’s great to know that the IRS is flexible and can show compassion. Not only that, you have help from tax attorneys and others that can help show the way and prepare the forms you need.
Did this article help you to understand tax settlements better and the process for dealing with them? Keep browsing to learn more about law, lifestyle, health, and business advice!
