Tax debts can be very intimidating financial obligations. Those who fall behind on their income taxes are often unsure of what to do next. After all, the Internal Revenue Service (IRS) is quite assertive about obtaining payments in full for any amount owed.
Not only do taxpayers have to pay the amount of income taxes determined due and payable by the IRS, but they may also be responsible for sizable penalties and interest. A small mistake repeated several times over multiple tax returns could lead to a seemingly insurmountable level of income tax debt. People may worry about how the IRS could attempt to collect on that debt.
Can people ever arrange to pay less than the full amount owed in past-due income taxes?
The IRS accepts offers in compromise
The IRS technically has many tools at its disposal to enforce income tax regulations. The IRS can request property liens and account levies that endanger the resources of individual taxpayers. In some scenarios, people may owe so much that they simply cannot come up with a solution that allows them to pay what they owe completely.
Sometimes, they may be eligible to make an offer in compromise to the IRS. The IRS accepts both plans based on regular payments and lump-sum offers in certain scenarios. When there are questions about tax liability or concerns about the ability to recoup the full amount owed, the IRS may accept an offer for less than the total amount owed by a taxpayer.
An offer in compromise typically requires disclosures that clarify what resources and income the taxpayer has available. They usually need to dedicate most of their disposable income toward resolving their income tax debt for the IRS to seriously consider their offer. If the IRS accepts an offer in compromise, the taxpayer can settle what they owe for less than the full amount of the unpaid taxes, penalties and interests.
Making an offer can be difficult
Proposing an offer in compromise is a complex process that requires a thorough financial review and an understanding of IRS procedure. Individuals hoping to amicably resolve tax debts may need to partner with someone familiar with federal tax regulations to improve their chances of success. Those facing tax controversies often need assistance in case they cannot resolve the matter, as they may be at risk of aggressive collection efforts or possibly even prosecution.
Getting help when proposing an offer in compromise can increase the chances of success. Taxpayers who settle their tax debts can fulfill their obligations and reduce their risk of a tax controversy leading to more serious consequences.