Can You Settle Your Old IRS Debts?
Tax time is never a fun time. It requires a lot of organization and numbers, and if the numbers don't jive you could find yourself owing a nice chunk of change to the state, local, and federal governments. In some cases, people fall behind in filing their annual returns. If you owe back taxes for previous years because you didn’t file an income tax return, it can feel like a huge burden on top of existing debts. But it can also be a scarier situation because owing money to the federal government is a debt that will only continue to grow in penalties and potential legal action.
Many people do not properly file taxes likely because they can not afford to satisfy the debt in full. They fear there are no alternatives and simply choose to try and ignore the situation. Debts with the IRS will only get worse if ignored, but there are options to help get you out of this financial situation. One method involves settling the debt with the IRS.
What Is an IRS Settlement?
In many cases where a debt is outstanding for previous tax years, the IRS will allow a taxpayer to negotiate a settlement agreement where the taxpayer can settle the total debt for less than the amount owed. There are also other processes the IRS will allow where back tax debts in full can be collected over a period of time.
Each program, including the settlement of the debt, includes criteria which the taxpayer must meet in order to qualify for the program. The IRS and the taxpayer will work to find which settlement program is necessary. Documents will need to be completed and submitted by the taxpayer for IRS approval before a final decision is reached. Once the agreement is reached, the taxpayer will no longer be considered in bad standing with the government for the tax years involved in the negotiation or settlement.
Who Can Settle?
Depending on the type of settlement program you qualify for through the IRS, anyone with a past due tax debt can apply. Eligibility will be dependent up individual taxpayer’s financial situation and the size of the outstanding debt.
Individuals can work with the IRS to settle balances owed or they can contact a tax professional who will handle the negotiation process in the best interest of the client. The IRS is generally willing to work with those who have outstanding tax debts provided the taxpayer cooperate and make payments as agreed. There will be penalties assessed for the late filings and payment which will add to the debt. Those fees can also be negotiated throughout the process as well.
If you owe back taxes or find you have not filed income tax returns during a particular year, you do need to act soon. Contact a tax professional or the IRS directly to discuss what can be done to satisfy the debt before the government has to take action, in which case they will be less flexible in their options to eliminate the tax debt burden.