As a tax resolution professional, I regularly receive inquiries from both individuals and business entities concerning their tax status. Most contact me asking for my help with IRS settlement after receiving a federal tax notice.
Ignoring tax debts only leads to negative consequences for the concerned party such as federal tax liens, punitive financial penalties as well as the possible seizure of assets. To avoid these setbacks, I advise my clients to work as fast as possible towards resolving tax related problems.
Before exploring the IRS settlement procedure, I will discuss some of the standard tax resolution methods.
Common Tax Resolution Methods
Tax resolution is a somewhat complicated process, so I will attempt to explain the most effective means available in the simplest way possible. Although most people might feel overwhelmed by the legal and financial jargon contained in their tax notice, ignoring it will only compound their problems.
Dealing with the IRS settlement as fast as possible is a sure way of avoiding future headaches. To assist with the process, I offer my clients various tax resolution options which include:
- IRS Installment Agreement
This method gives one the flexibility to pay their outstanding tax bill in relatively manageable portions. They’re also allowed a generous payment period of up to six years. If the taxpayer owes the IRS $100,000 or less, they can be eligible for a Streamlined Installment Agreement.
The other option is the partial pay agreement, which allows one to pay only part of their tax arrears. Among other requirements, the taxpayer must present full financial disclosure to show they qualify for this option.
I always encourage taxpayers who are currently in debt to consider either a tiered or full pay agreement. With the former, they can start paying in small installments and increase the amounts as they complete paying off their other debts. The entire pay agreement can allow an extension of the payment period for up to 10 years.
- Innocent Spouse
If a taxpayer receives a tax bill as a result of their spouse failing to file returns on a joint account accurately, he or she can apply for innocent spouse relief. In such instances, I encourage them to move with haste because this option is time sensitive.
- Penalty Abatement
Failure to pay tax might attract punitive penalties from the IRS. However, if the concerned taxpayer proves to the government that they did not intentionally set out to defraud the government by failing to pay taxes, some of these penalties might be waived.
- IRS Offer in Compromise (OIC)
This option enables taxpayers to settle their tax debts for a lower amount than what the IRS initially demanded from them. To qualify, applicants should show that they cannot reasonably settle their current tax debts without experiencing financial hardship.
Even after qualifying for an IRS offer in compromise, their financial status will regularly be monitored to ensure their income still puts them in a position of economic disadvantage. Under the Fresh Start Initiative, the IRS showed a willingness to compromise with taxpayers by relaxing OIC rules.
I encourage anyone with outstanding tax debt to seek the services of a tax resolution expert. From what I’ve observed with past clients, the advice they receive could end up saving them thousands of dollars.
IRS Settlement Procedure
The biggest mistake most people make with tax debt is ignoring the problem until it becomes unmanageable. I always caution against making this blunder, because sooner or later the IRS will catch up with the taxpayer.
Responding fast to a tax notice shows the taxpayer’s willingness to cooperate and makes it possible for them to receive any tax concessions they might apply for.
Once armed with the relevant documentation from the tax collection agency, the taxpayer should explore all of her options concerning payment of tax debt. For the best outcome, I recommend hiring a qualified tax resolution expert to assist with IRS settlement. A tax professional can weigh all of the client’s options and present her with the best.
Once you have picked the best course of action, the next step is to start filling out the necessary paperwork. The tax resolution option will determine the kind of documents the client will fill out. Before proceeding, one should be sure they qualify for that particular tax resolution option. The IRS has various ways of determining qualification.
For example, if applying for an IRS offer in compromise, our OIC IRS pre-qualifier asks questions to determine whether the applicant qualifies. One should only proceed after ensuring they meet all requirements, after which they can officially submit the offer.
As part of this offer, the applicant will also be required to choose a payment option. The initial payment is submitted with the application. After applying, it will be subjected to an evaluation. I keep my clients updated on any developments concerning their IRS settlement process until the assessment is complete.
If the IRS accepts the taxpayer’s offer, there will still be other offer terms to comply with. Any refunds due to them within the calendar year will go towards offsetting their tax debt. Furthermore, an accepted Offer in Compromise puts the taxpayer on what I refer to as “tax probation” for a period of 5 years. If the application is rejected, the taxpayer can appeal. The IRS provides guidance on how to request an appeal.
From the above description, the entire IRS settlement process can be a long process, depending on how complicated a client’s tax debt situation is. For that reason, I always advise anyone seeking tax resolution services to pick a firm that is honest, ethical and can sustain a long-term professional relationship.
The Need for Tax Professionals
From my interactions with clients over the years, I’ve discovered that most of them consider the IRS to be an intimidating organization. Many people dread getting contacted by the tax collection agency. A tax resolution expert can act as a valuable go-between and remarkably improve the correspondence between a taxpayer and the agency.
Our services also come in handy during the IRS settlement process. Great advice from a tax professional can easily lead to savings worth thousands of dollars in the final amount a taxpayer spends to clear his tax debt.
Another area I excel in is in interpreting tax law. Since the legal jargon contained in tax regulations and notices can be confusing to most people, tax resolution experts are better placed to explain to taxpayers precisely what is required of them. Sometimes people break tax laws without their knowledge.
The services I offer are designed to present clients with the best and most affordable solution to their IRS settlement dilemma.
We Can Help
To prevent manageable tax issues from snowballing into more significant problems, I encourage those who’ve received correspondence from the IRS to take immediate action to resolve any demands the agency might have.
At True Resolve Tax, we have unrivaled expertise in the field of tax resolution. Our adherence to high ethical standards means we have your best interests at heart. If you’re in Denver and have any questions regarding tax resolution, feel free to visit us.