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Tax Settlement

Owe the IRS? A tax settlement may help you significantly lower your tax debt and restore your peace of mind.

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Tax Settlement Benefits

First of all, you may be wondering, “What is a tax settlement?” A tax settlement is an agreement with the Internal Revenue Service (IRS) or state tax authority that allows you to pay less than you currently owe. In general, the IRS and/or state will consider a settlement if there are extenuating circumstances that prevent you from paying your tax balance in full.

There are two main benefits to negotiating a tax settlement:

Pay Less Than You Owe

If you owe federal or state taxes, you may be able to settle your tax debt for pennies on the dollar. You will, of course, need to meet certain criteria. Once the settlement amount is approved and paid, your account will be considered paid in full and no longer subject to any penalties that would otherwise be incurred.

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Protection from Liens, Levies & Wage Garnishment

When the IRS or state enters into a settlement agreement with you, you are protected from certain actions that are typically taken against those who owe tax debt. This includes, tax levies and liens, as well as wage garnishment.

Keep in mind that negotiating your tax debt is not an easy feat, and not every situation will warrant a tax settlement.


How to Negotiate an IRS Tax Settlement

Millions of taxpayers find themselves in debt with the IRS each year. It’s nothing to be ashamed of or embarrassed by, but your tax debt shouldn’t be ignored. Unpaid taxes can lead to additional problems, including mounting penalty fees, liens against your property, and loss of wages (wage garnishment). If you’re among those who owe taxes and can’t afford to pay, there is hope.

In certain instances, the IRS will allow you to negotiate a tax settlement for an amount less than you owe, or you may be able to pay the debt over an extended period of time. For example, if your tax debt is $30,000 and the IRS accepts a $10,000 settlement, you could potentially pay that in one lump sum or make $2,000 payments for five months. Before you can settle your tax debt, however, there are a few steps you must complete.

  1. Submit Unfiled Taxes

    Submit any unfiled taxes ASAP. The IRS won’t consider any settlement if you have outstanding returns. If the IRS created a substitute for return (SFR) for any unfiled returns, be sure to amend those, as well.

  2. Decide on the Type of Tax Settlement Desired

    There are several types of tax settlement options available to you, including:

    • Offer in Compromise (OIC)
      Although this is the most commonly requested settlement option, it is very difficult to get approval. If accepted, however, you can pay 20% of the settled amount upfront and the remainder, split into equal payments, over five months. This is known as a lump sum Offer in Compromise. Another option is OIC periodic payment, which can run between 6 and 24 months
    • Partial payment installment agreements
      Under a partial payment installment agreement, you will make monthly payments over several years. Due to the statute of limitations, however, some of your taxes will eventually expire. Technically, you haven’t negotiated a lower amount, but you’ll end up paying less due to the length of the agreement.
    • Penalty abatement
      This is one of the easier methods of reducing your tax debt, if penalties have caused it to balloon. You must provide legitimate reasons for not paying or filing on time. Once approved, however, the IRS will erase some or all of your tax penalties.

    If you don’t believe you are eligible for any of these options, you may also apply for a regular payment plan or see if you qualify for uncollectible status.

  3. Submit Your Application

    The application process itself can be intimidating. There are forms to complete, documentation to provide, and fees to be paid. You can apply on your own, but we strongly encourage working with an experienced tax professional who has a successful track record in this area. Tax Defense Network has saved its clients millions in tax relief. We are committed to securing the best possible settlement possible on your behalf.

Once you submit your application, the IRS will review it and make a decision. If approved, the IRS will consider you in good standing for the period of time that the settlement covers. Should you default or break the tax settlement agreement in any way, you would no longer be considered in good standing.

“My experience with [TDN’s] services centers around successfully developing a tax liability settlement agreement with the IRS…They were very good at anticipating needs, showed a complete understanding of the policies and procedures, and demonstrated a thorough knowledge of tax law and procedures. I could never thank them enough for the excellent job they did, and more importantly, the tremendous support they provided during this stressful time.”
— Robert C.

Common Questions About Tax Settlement

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