Different Types of Tax Settlement
What You Need to Know About Different Types of Tax Settlement
Handling IRS back taxes may feel walking through a minefield blinded with so many things to maneuver around that could you up lost for days with high chances of getting blown when you step on a mine. However, there are several different ways to settle your tax liabilities. Read on to know more about them, all without needing to be a CPA to understand how they work.
Get Rid of as Much as You Can
If there’s an opportunity of paying off a percentage of your tax liability and you are in stable position financially to do so, you may want check if you’re eligible to make an offer in compromise to the IRS. Taxpayers offer to pay a large proportion of their back taxes either all at once or within a short period of time and in case the tax collector determines if that meets or exceeds the reasonable collection potential on your account, the IRS will offer you the ability to clear out the entire tax debt through a settlement for at least a portion of what you owe. Although it does require the most money upfront, it’ is the fastest way to clear your back taxes.
Take Your Time
If your financial condition does not allow you to pay a large lump sum up front, offering to enter into a long-term installment plan with the IRS can still make some headway against your tax liability. The tax agency encourages individuals to come to it to pay their debts instead of having to chase them down. It’s a less of a strain on resources and time and as a result the IRS makes it a rather pleasant experience to make monthly payments of your debt. There’s a high probability that a tax collector may even waive fees and penalties provided you pay your debt in full.
Defer That Payment
There are times when your financial condition doesn’t allow you to pay those back taxes. If you lack the necessary resources to do so, you can’t do anything about it, even if you want to make monthly installments or pay back a percentage in an offer in compromise. In this situation, you can ask the IRS to give you currently not collectible status which prevents the tax collector from coming after you through liens for an indefinite period of time. CNC status lasts for as long as your financial condition improves. Any existing penalties or fees however that have already accrued against you will continue while you put yourself back together.
Or Don’t Pay At All
Yes, it’s true! You can actually get away without paying a cent. It’s possible but you need to wait out the statute of limitations on tax debt collecting, which typically runs for 10 years. You can consider this as an option, but it’s not really recommended.