If you are looking for ways to win an IRS debt settlement, here’s what you should know. Falling behind on tax payments can be stressful.
However, there are ways of working out such challenges. While it isn’t easy for the IRS to let off taxpayers easily, the IRS can negotiate debt repayment and even reduce taxes owed provided you offer a reasonable plan.
Use an OIC (Offer in Compromise)
Since winning an IRS debt settlement (for many people) means being able to reduce tax debt, an OIC is a great tool to consider. If accepted, an OIC allows a taxpayer to settle their debt for a lower amount than the tax owed.
An OIC can be used successfully by a taxpayer who can’t settle their entire tax debt because they lack the ability to pay, or paying causes financial hardship.
To win debt settlement using an OIC, you must show your income and expenses accurately and other financial metrics such as asset equity. The IRS generally accepts OICs when they clearly see it is impossible to collect the entire amount owned within 120 months from the date of tax assessment (collection statute period).
The offer you suggest should also be reasonable i.e., equal or near the amount the IRS views as collectible in your current financial situation. Since the IRS has stringent guidelines for deciding who wins an IRS debt settlement using an OIC and who doesn’t, it’s important to seek professional help from tax experts.
Remember, OIC settlements can evolve into complicated negotiations that last months. The process needs an unmatched understanding of IRS regulatory guidelines and procedures.
Since a simple omission can compromise an offer and the IRS discounts many assets for different reasons, taxpayers should consult tax professionals before attempting to win debt settlements using an OIC.
Use Penalty Relief
The IRS can reduce or remove penalties charged on tax debt. You can accumulate penalties for many reasons ranging from filing or paying taxes late. Inaccurate returns also attract fines.
To win IRS debt settlement that includes lower penalties or complete abatement, you must focus on abatable penalties. The IRS usually removes penalties charged because a taxpayer has failed to file returns or filed late. Taxpayers who use reasonable cause and first-time abatement arguments are likely to win debt settlement.
However, the penalties in question must have been caused by failure to file and/or failure to pay penalties. The IRS is also lenient on first-time offenders when issuing penalty relief. However, there must be a good reason to request relief.
For instance, if you don’t file or pay because you were affected by a natural disaster or faced unforeseen illness, you can easily win a debt settlement. The same applies to individuals who have maintained a good compliance record with the IRS.
While using penalty abatement may seem straightforward, there are arguments that the IRS won’t consider as reasonable cause. For instance, blaming your penalties on a tax preparer isn’t a good reason for late filing. Therefore, the importance of consulting a tax professional can’t be overemphasized before you use penalty abatement to win an IRS debt settlement.
Get a CNC status
You can also stop the IRS from taking over your assets or getting access to money in your bank by getting a CNC status. A CNC (Currently Not Collectible) status is granted to individuals who successfully show the IRS they can’t repay debt because of financial hardship.
To do this successfully, a taxpayer must document their financial status to show their inability to defer IRS debt repayment to a later date. Proving to the IRS that you are unable to afford repaying tax debt is a challenge without professional help.
The IRS checks everything, including a taxpayer’s savings accounts, assets, necessary living expenses, among other details, to confirm your inability to pay. The IRS can also ask taxpayers seeking CNC status to file financial statements proving income and monthly expenses.
While CNC status may be reserved to unemployed taxpayers, tax professionals can successfully secure CNC status or propose better alternatives for individuals who show financial hardships in other ways.
In a nutshell, The IRS can allow reprieve for debt owed provided a taxpayer utilizes arguments, tools, or guidelines that fall within the IRS’s regulatory guidelines and procedures.
However, winning an IRS debt settlement is highly reliant on a deep understanding of what the IRS looks for when granting taxpayers reprieve. While you can use the above information on your own, tax experts are the best-suited professionals to guide anyone with IRS debt on how to win a debt settlement.
Call us or fill our form to get professional assistance via our trusted debt relief partners.