Tax Settlement Help
In certain circumstances, the Internal Revenue Service (IRS) will settle a tax debt with taxpayers for less than what is actually owed. Those seeking a settlement with the IRS must meet strict guidelines in order to qualify for settlement help.
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Significance
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An Offer In Compromise (OIC) allows taxpayers to settle the tax liability for less than is owed if an OIC is in the best interest of both the taxpayer and the IRS. If the tax liability can be paid in full or with installment agreements, then the IRS will generally not approve the OIC.
Types
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Generally, the IRS uses three criteria to determine whether you'll be considered for an OIC: Doubt of Collectibility--which assumes you'll never be financially able to pay your tax debt in full; Doubt of Liability--which assumes legitimate doubt as to whether the tax assessment is correct and Effective Tax Administration--in which the IRS and the taxpayer agree to the amount and accuracy of the tax liability but find that paying the tax in the full amount would prove to be an economic hardship for the taxpayer.
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Requirements
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Individuals seeking a settlement will file IRS Form 656 along with a $150 nonrefundable fee. On Form 656, you will indicate whether you are want to make a one-time lump sum payment to cover the tax debt, a short term periodic payment offer or a deferred period payment offer.
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References
- Photo Credit tax forms image by Chad McDermott from Fotolia.com
