A tax settlement is an agreement
where a taxpayer and the IRS come into agreement to settle the tax liability
through one of the IRS or state programs. Each state varies on what type of tax
settlement program they offer and the guidelines in submitting them. Most
states' guidelines for tax settlements are very strict.
Basically this fall into 2 general categories:
1.The first is when the taxpayer may qualify to pay back less than the full amount owed and is unable to pay the full debt back immediately. This includes abatement of penalties, an offer in compromise or a partial payment plan.
2. There are two additional options if the individual doesn't qualify for a settlement. One is a monthly payment plan, known as an installment agreement, is set up to pay back the tax debt over time. The other is usually due to an extenuating circumstance where the taxpayer cannot pay anything. This is called uncollectible status. It could be family, a medical condition or unemployment. Until the individual's financial situation changes, the IRS or state will hold off collections temporarily. This does not stop the interest from accruing or eliminate the debt.
Generally the state tax debt is less when an individual owes both the state and IRS. An installment agreement will need to be set up with the state majority of the time.
However, there are taxpayers who cannot pay the state back in an installment and are looking for tax relief, typically in a tax settlement where less than the full amount of the tax liability is paid back. An Offer in Compromise is the typical way this is done.
An Offer in Compromise is an agreement between the IRS or state agency where the taxpayer pays less than the full amount of the tax liability.
The Offer in Compromise/tax settlement program is available in most states. When submitting an Offer in Compromise, most state agencies will require full financial disclosure and documentation.
There are many variables that a state agency will consider when deciding on accepting a settlement. The individual's income, expenses, and assets are typically included in these. Other factors include, age, medical condition and circumstances that created the tax debt.
State tax departments will exam what could be collected in the future given the taxpayers age, employment status, medical condition and any other extenuating circumstances as well as looking at the taxpayer's current financial state.
A tax settlement with state agencies can usually take anywhere from a few months to over a year. It is important that the correct forms are filed and that the right substantiating information is submitted to avoid have the Offer returned.
An experienced tax representative should be able to help with evaluating whether a taxpayer would actually qualify for an IRS tax settlement or state tax settlement. They will make sure that the lowest possible amount is offered and that correct forms and documentation are submitted.
Basically this fall into 2 general categories:
1.The first is when the taxpayer may qualify to pay back less than the full amount owed and is unable to pay the full debt back immediately. This includes abatement of penalties, an offer in compromise or a partial payment plan.
2. There are two additional options if the individual doesn't qualify for a settlement. One is a monthly payment plan, known as an installment agreement, is set up to pay back the tax debt over time. The other is usually due to an extenuating circumstance where the taxpayer cannot pay anything. This is called uncollectible status. It could be family, a medical condition or unemployment. Until the individual's financial situation changes, the IRS or state will hold off collections temporarily. This does not stop the interest from accruing or eliminate the debt.
Generally the state tax debt is less when an individual owes both the state and IRS. An installment agreement will need to be set up with the state majority of the time.
However, there are taxpayers who cannot pay the state back in an installment and are looking for tax relief, typically in a tax settlement where less than the full amount of the tax liability is paid back. An Offer in Compromise is the typical way this is done.
An Offer in Compromise is an agreement between the IRS or state agency where the taxpayer pays less than the full amount of the tax liability.
The Offer in Compromise/tax settlement program is available in most states. When submitting an Offer in Compromise, most state agencies will require full financial disclosure and documentation.
There are many variables that a state agency will consider when deciding on accepting a settlement. The individual's income, expenses, and assets are typically included in these. Other factors include, age, medical condition and circumstances that created the tax debt.
State tax departments will exam what could be collected in the future given the taxpayers age, employment status, medical condition and any other extenuating circumstances as well as looking at the taxpayer's current financial state.
A tax settlement with state agencies can usually take anywhere from a few months to over a year. It is important that the correct forms are filed and that the right substantiating information is submitted to avoid have the Offer returned.
An experienced tax representative should be able to help with evaluating whether a taxpayer would actually qualify for an IRS tax settlement or state tax settlement. They will make sure that the lowest possible amount is offered and that correct forms and documentation are submitted.
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