It is often easier to prevent an illness than to treat it. The same can be said about getting tax debt relief. However, it is not always possible to avoid falling behind on taxes. Sometimes, events occur that prevent people from making deposits on time, or from sending enough money to full pay tax due on returns. What can be done to resolve this type of situation?
The IRS has two requirements you have to meet before you can even start negotiations about any past due tax amounts. First of all, a taxpayer needs to stop accumulating new tax liability. This means that all tax payments from this point forward have to be made on time and in full. Second, all unfiled tax returns have to be prepared and sent to the IRS.
Sometimes the IRS may prepare a Substitute for the Return (SFR) for you, especially if you failed to respond to numerous requests to file your tax return. However, the SFR is usually not beneficial to the taxpayer, because this return will not include any deductions and/or credits. It is almost always a good idea to file your own return, unless your tax debt is so old that it may reach its Collection Statute Expiration Date very soon. In this case filing your original return to amend the SFR prepared by the IRS might extend your case for collections for another ten years. In all other cases it is usually better to file the original return.
After you have complied with both requirements, you are in a position to resolve your tax debt with the IRS. You can either do it by yourself, or hire a tax resolution specialist to help. If your tax debt, including penalties and interest, is less than $10,000, doing it by yourself will most likely save you some money. The IRS will accept a streamline payment plan agreement to resolve a debt like this. However, if your debt is more than $10,000, it is a good idea to get a professional to handle the negotiations for you.
There are a few options that are available to get tax debt relief. Choosing the option that is best for you depends on your financial situation. The IRS uses a financial statement, form 433-A for individuals, or 433-B for businesses, to determine which repayment option can be allowed in your case, which could be a Streamline Installment Agreement, Partial Payment Plan, Offer in Compromise, or even Currently Non Collectible Status (CNC).
However, the IRS is not going to provide you with advice about the best way to repay your tax debt. If you want to settle your tax liability with the IRS and be able to continue paying for your everyday expenses after that, you should probably consult a tax professional. You can also get advice of which payment option will save you most money in the long term, because penalties and interest will continue to accrue even after a payment plan is accepted by the IRS.
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