Many people are not aware that there are options for paying off back tax debt and these options are offered by the IRS to help those that may not be able to pay off their tax debt in one payment. These programs help consumers to pay off taxes, penalties and interest. The programs are geared for different people (one of the programs requires a qualification by the IRS) but both have the same goal: to help consumers settle their tax debt and move forward with a clean slate. Â
IRS Offer in Compromise (OIC) Program
The Offer in Compromise is a very enticing program as it can save the taxpayer from paying thousands of dollars in back tax debt. I must stress that this program is a privilege, offered by the IRS, and is not a right, therefore someone who is seeking the Offer in Compromise settlement must understand that the IRS chooses whether or not they qualify for it. This program was designed to give those who have experienced significant financial problems a fresh start. The IRS is very strict about whom they qualify, for instance, in 2007, they received 46,000 Offers and only 12,000 (or roughly 24%) were accepted. Before embarking on the long process of applying for this program, I recommend hiring expert tax representation to see if you would qualify for an Offer in Compromise, and if they think that you do, have them help you through the process.  Finally, why would the government endorse this type of program when they could be collecting much more money? Simply put, the government is actually saving money by settling with consumers who have outstanding tax debt. Many of the people that owe large amounts of money to the IRS may not be able to pay it back ever and so the IRS would rather settle for a smaller amount than incur the internal administrative costs that accrue while trying to collect taxes over many years before the statute of limitations expires (usually about 10 years). Â
IRS Installment Agreement (IRS Payment Plan)
For those who do not qualify for the Offer in Compromise plan, the IRS will accept a payment plan, known as an Installment Agreement. If you plan to go this route, I recommend hiring expert tax representation otherwise you may end up with a payment that is too much for you to handle. A Certified Tax Resolution Specialist will help you negotiate an affordable payment plan and will save you money by negotiating the lowest possible monthly installments with various options for making those payments (such as through direct debt, payroll deduction, credit card, by check or money order). The bottom line is that if you owe back tax debt, it is not going to disappear on its own. In fact, the longer you avoid paying it, the more you will owe with penalties and interest accruing all the time. Take responsibility for your back tax debt. If you need the advice of a tax professional, contact my office for a free tax relief consultation.
IRS Offer in Compromise (OIC) Program
The Offer in Compromise is a very enticing program as it can save the taxpayer from paying thousands of dollars in back tax debt. I must stress that this program is a privilege, offered by the IRS, and is not a right, therefore someone who is seeking the Offer in Compromise settlement must understand that the IRS chooses whether or not they qualify for it. This program was designed to give those who have experienced significant financial problems a fresh start. The IRS is very strict about whom they qualify, for instance, in 2007, they received 46,000 Offers and only 12,000 (or roughly 24%) were accepted. Before embarking on the long process of applying for this program, I recommend hiring expert tax representation to see if you would qualify for an Offer in Compromise, and if they think that you do, have them help you through the process.  Finally, why would the government endorse this type of program when they could be collecting much more money? Simply put, the government is actually saving money by settling with consumers who have outstanding tax debt. Many of the people that owe large amounts of money to the IRS may not be able to pay it back ever and so the IRS would rather settle for a smaller amount than incur the internal administrative costs that accrue while trying to collect taxes over many years before the statute of limitations expires (usually about 10 years). Â
IRS Installment Agreement (IRS Payment Plan)
For those who do not qualify for the Offer in Compromise plan, the IRS will accept a payment plan, known as an Installment Agreement. If you plan to go this route, I recommend hiring expert tax representation otherwise you may end up with a payment that is too much for you to handle. A Certified Tax Resolution Specialist will help you negotiate an affordable payment plan and will save you money by negotiating the lowest possible monthly installments with various options for making those payments (such as through direct debt, payroll deduction, credit card, by check or money order). The bottom line is that if you owe back tax debt, it is not going to disappear on its own. In fact, the longer you avoid paying it, the more you will owe with penalties and interest accruing all the time. Take responsibility for your back tax debt. If you need the advice of a tax professional, contact my office for a free tax relief consultation.