Regardless of whether you are a business or an individual, facing tax debt is never a walk in the park. Whether an unfortunate event happened suddenly, or you are going through a rough patch financially, taking the necessary steps for tax debt resolution is vital. Luckily, the IRS offers several tax debt resolution options that you can consider. In this blog post, we will discuss the different tax debt resolution options available and how you can determine which plan is the right one for you.
Similar to the installment agreement, the Partial Payment Installment Agreement (PPIA) involves lower monthly payments as you pay less than the total owed. The IRS calculates the payment amount based on your income, expenses, and assets. However, interest and penalties will still accumulate on the remaining debt.
Offer In Compromise
An offer in compromise is a tax debt resolution option that allows taxpayers to settle their tax debt for less than what they owe. This is an option only for those taxpayers who find it impossible to pay their tax debt in full or in installments. Before taxpayers can qualify for an offer in compromise, they must provide the IRS with detailed information regarding their income, expenses, assets, and liabilities. The IRS will review the information and determine whether taxpayers can negotiate a settlement of their tax debt.
Currently Not Collectible
If the IRS determines that the taxpayer is unable to pay their tax debt, they may grant Currently Not Collectible status, which suspends collection activities. This means that the IRS won’t attempt to collect the tax debt for a period of time while the taxpayer’s financial situation is evaluated regularly. The downside to this option is that interest and penalties will still accrue on the unpaid debt, and the IRS can still file a tax lien to ensure they collect the tax debt if the taxpayer’s financial situation improves.
Dealing with tax debt is never easy. However, there are different tax debt resolution options available with the IRS that you can consider. Whether installment agreements, offer in compromise, or currently not collectible, it is essential to take a good look at your financial situation and determine which plan is the most suitable for you. When in doubt, it is always best to consult with a tax professional to help you navigate your options. Remember that tax debt resolution can take time, but with effort, patience, and perseverance, you can overcome your tax debt.