You may have heard the familiar ad, “settle your tax debt for pennies on the dollar!” Well, though possible, there are stringent requirements to qualify. The good thing, however, is that there are several possible outcomes to resolving or suspending harsh IRS collection actions.
Payment In Full
You can notify the IRS that you will pay your full tax due within 180 days if they will hold any ‘enforced’ collection activities, such as liens or levies. The IRS may still send notices, but no harsh actions are taken. Interest and penalties continue to accrue.
Under the IRS ‘Fresh Start’ program, taxpayers are eligible to pay tax over a period as long as 72 months. A user fee applies, and you cannot owe taxes in the future without having to reinstate the plan. An installment agreement is the most likely solution for paying your balance due. Interest and penalties continue to accrue. Taxpayers requesting a ‘direct debit’ installment agreement are able to take advantage of a decreased penalty rate.
“Currently Not Collectable” Status
Taxpayers under financial hardships (loss of job, decrease in pay, foreclosure threat, etc.) may be eligible to request to be placed in a special ‘Not Collectable’ status. Interest and penalties continue to accrue, but no ‘enforced’ collection activities like levies and liens take place. Taxpayers often have to prove the financial hardship by providing documentation such as bank statements, pay stubs, utility bills, and other receipts.
Taxpayers in limited circumstances may be eligible for an Offer-In-Compromise. Taxpayers may be able to settle their debt for substantially less for the following reasons: Doubt-as-to-Liability, Doubt-as-to-Collectability, and effective tax administration. Financial data is used in a special formula to calculate a minimum offer amount.
Please be aware that national firms that purport to ‘settle your debt for pennies on the dollar’ are mostly referral services to firms just like ours. These national ads are expensive and you can be sure that a high percentage of your overstated fee is going to pay for the advertisement. We charge a fair, uninflated fee, and we will not submit an offer that we do not think will be accepted.