Tax resolutions are designed to suit specific needs of taxpayers. The financial condition of the applicants is a significant concern for the IRS. It heavily impacts whether a request for a payment plan is accepted or not. Tax Defense Network takes a look at the three most used IRS tax resolutions.
The reason for the popularity of Installment Agreement is that most taxpayers qualify its eligibility criteria. This payment plan allows tax debt to be paid in monthly installments. There are many kinds of Installment Agreements, including the Partial Payment Installment Agreement, through which taxpayers can achieve a reduction in tax debt. For most, paying tax debt in installments is easier than paying it in a lump sum. However, penalties and interest continue to be added to the tax debt amount that remains to be paid.
Offer in Compromise
Offer in Compromise is a tax debt reduction plan that allows taxpayers to pay less in tax debt owing to financial hardship. This plan allows taxpayers to settle their IRS debt for less than what they owe. Offer in Compromise is an opportunity for taxpayers to pay a reduced amount of tax debt. The benefit of Offer in Compromise is that it helps avoid collection actions by the IRS, and accumulation of penalties and interest on the tax debt amount.
Currently Not Collectible
Taxpayers who cannot pay any amount in tax debt may qualify for Currently Not Collectible (CNC). There can be various reasons for the IRS to grant Currently Not Collectible status, including inability to find the taxpayer and financial hardship. This plan benefits those who are unable to pay any amount of tax debt due to extreme economic hardship.
After granting a CNC status, the IRS reviews the financial condition of the taxpayer periodically to find any improvements. Having a CNC status protects taxpayers from IRS collection actions. Penalties and interest, however, continue to be charged on the tax debt amount.