| When it comes to settling tax debts there are 5 | | | | begins collections. Typically the IRS sends an original |
| common solutions. It is best that you learn all available | | | | assessment letter stating the amount of tax owed |
| options and see what fits your particular situation the | | | | plus any interest and penalties then it will send a series |
| best before taking action. Some important things to | | | | of four CP Letters (Computer notice noted by number |
| consider prior to making your decision of what tax | | | | on top of letter). Know that you have about 3-6 |
| debt settlement method to use are your back tax | | | | months before IRS takes action if nothing is done, but |
| amount owed, tax debt amount, the maximum amount | | | | you will receive interest and penalties on outstanding |
| you can afford to pay, the amount of assets you | | | | amounts. To get more time all you have to do is |
| have, and if you would be able to pay amount in full if | | | | compose a letter back to the IRS in response to the |
| you just had more time. Below are the 5 most | | | | assessment notice or CP notices and mention that |
| common ways to settling back taxes. | | | | you cannot pay at the current time and say you would |
| Offer in Compromise | | | | like a 45 day extension. When 45 days is up and you |
| An offer in compromise is the method that allows | | | | can't pay, just do it again. Just know that once you |
| individuals to settle IRS back taxes for less than the | | | | receive IRS notice CP-504, you will not have much |
| total amount originally owed. If you have ever heard | | | | more time until they take collection actions against you. |
| the saying, "Settle for Pennies on the Dollar", this is the | | | | Currently Not Collectible |
| way that is used. It shouldn't come to a surprise that | | | | This method doesn't really resolve your taxes owed, |
| this is the hardest settlement method for IRS back | | | | but it put off collections. When you receive this status, |
| taxes. The IRS has strict requirements to qualify for an | | | | the IRS will pause collections until you can pay. One |
| offer in compromise. The offer in compromise tries to | | | | thing to keep in mind here is that the statute of |
| find what amount would work best for both the IRS | | | | limitations is still running and the IRS has 10 years to |
| and for the individual. This means the IRS will only settle | | | | collect back taxes from the year they were filed. If 10 |
| for less if you can prove it will cost them more to try | | | | years passes and they have not collected, you no |
| to get the money from you. This is a good choice if | | | | longer owe that amount. |
| your total assets is less than the amount of tax debt | | | | Tax Professional (Tax Attorney or CPA |
| you owe. | | | | Tax specialists are many times the the most efficient |
| Installment Agreement | | | | way to settle tax debts. Tax experts have the highest |
| An installment agreement is the most common method | | | | success rate for getting offer in compromises |
| for individuals to settle their back taxes. You will be | | | | accepted and for the least amount of money. Tax |
| required to make monthly installment payments of a | | | | experts are great at setting up the most affordable |
| minimum amount. With an installment agreement you | | | | payment plans with the IRS. Most tax professionals will |
| will end up paying more than the original amount owed | | | | offer a free consultation to give you your options, likely |
| because you will still have to make interest payments. | | | | outcomes, and cost. It is best to talk to multiple tax |
| An installment agreement should be used if you cannot | | | | professionals to find the one that you feel gives the |
| pay of entire amount owed in full but have the means | | | | best suggestions, you get along with best, and gives |
| to pay off over time. | | | | you a reasonable price. |
| Delay the IRS | | | | Every year thousands of people settle their unpaid |
| If you simply need more time to pay the total amount | | | | back taxes with the IRS. Tax code continues to get |
| due it can easily by done by using your understanding | | | | more and more complex that even the highest ranking |
| of the IRS system to your advantage. When taxes | | | | IRS individuals don't even understand it. Knowing your |
| are unpaid it begins the IRS automated notice system. | | | | options and taking action early is the best thing to do |
| The IRS send a series of automated letters before it | | | | when dealing with a tax situation. |