According to a report by the National Taxpayer Advocate, over 10 million Americans are currently in debt to the IRS. If you're one of them, you're not alone. Fortunately, there are a few options available to you for getting out of debt and back on track.
If you have the money available, paying your debt in full is always the best option. This will save you money in the long run by avoiding interest and penalties. It will also help improve your credit score. To pay your debt in full, you can either write a check or set up an electronic funds transfer from your bank account.
If you can't pay your debt in full, you can set up an installment agreement with the IRS. This means that you will make monthly payments until your debt is paid off. To set up an installment agreement, you will need to fill out Form 9465 and submit it to the IRS. There is a $120 fee for setting up an installment agreement, but this can be waived if you meet certain criteria.
An offer in compromise is an agreement between you and the IRS that allows you to settle your debt for less than what you owe. This option is only available if you can't pay your debt in full and don't qualify for an installment agreement. To qualify for an offer in compromise, you must prove that paying your debt would create financial hardship for you or your family.
If you're currently in debt to the IRS, don't panic—help is available. There are a few different options that you can choose from based on your individual situation. These options include paying your debt in full, setting up an installment agreement, or applying for an offer in compromise. No matter which option you choose, getting out of IRS debt is possible—and it's worth it!
If you owe the IRS money, you may be able to settle your debt for less than the full amount you owe by making an Offer in Compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liabilities.
-There is doubt as to the taxpayer's liability for the taxes owing; or
-Collecting the full amount of taxes owed would create a financial hardship for the taxpayer.
If you are unable to pay your taxes in full or if paying your taxes in full would create a financial hardship, you may want to consider submitting an OIC.
Individual taxpayers, including sole proprietors, and businesses (C-Corporations, S-Corporations, LLCs, and Partnerships) that owe federal income tax, self-employment tax, or trust fund recovery penalties can apply for an Offer in Compromise.
You must submit Form 656, Offer in Compromise, along with a $186 non-refundable application fee and initial payment (referred to as a "Deposit") with your offer. The initial payment is generally 20% of the total offer amount.
For example, if your total offer is $5,000.00, your initial payment would be $1,000.00 (20% of $5,000.00). You must also agree to pay the balance of your offer within five or fewer payments after we approve your offer and send you a notice of acceptance. These payments are called periodic payments. You must make all periodic payments on time; otherwise they will reject your offer.
If you're struggling to pay what you owe the IRS, you may be able to submit an Offer in Compromise (OIC) and settle your debt for less than the full amount owed. To qualify for an OIC, there must be doubt as to your liability for the taxes owed or collecting the full amount would create a financial hardship.
Submitting an OIC requires completing Form 656 and submitting a non-refundable application fee along with an initial payment which is typically 20% of the total offer amount. Once approved, you'll have five or fewer payments to make which are called periodic payments.
All periodic payments must be made on time; otherwise, your offer will be rejected and you'll still be liable for the full amount of taxes owed plus interest and penalties accruing until the balance is paid in full. Companies like Ideal Tax help individuals and businesses relieve their IRS debt which may be an excellent option for most.