coffee mug near open folder with tax withholding paper

What is Tax-Debt Relief?

Tax debt relief is a broad term that encompasses various choices, each intended to create an optimal settlement between delinquent taxpayers and the IRS. A payment plan or debt settlement, sometimes an offer-in-compromise, is typically used to provide relief. An offer in compromise is considered best for the tax debtor and is determined by their total financial situation. In addition, there are options for debtors, like extended payment plans.

The Truth About IRS Tax Settlement Firms

Individuals and corporations who owe the Internal Revenue Service (IRS) money may suffer harsh penalties, including confiscating personal or company assets in some situations. To address this dilemma, which has the potential to cause a severe financial disaster, a new type of business has emerged to assist delinquent taxpayers in dealing with their tax bills.

Tax settlement businesses claim to be able to dramatically decrease or remove whatever the customer owes the IRS. But, can these companies deliver on their promises, or is it just a scam you should always avoid?

IRS Help for Taxpayers

If you owe taxes but cannot pay the IRS in full, consider including an Installment Agreement Request with your return. If you owe less than $10,000, the IRS cannot decline your request for an installment arrangement under certain circumstances. Their inability to decline your request is due to unique laws, and for sums greater than $10,000, there is still a chance you can acquire an installment arrangement because the IRS cannot impose any financial hardship.

With the refund, you should still pay as much as feasible. Even if your request for an installment arrangement is accepted, you may be charged interest and perhaps a late payment penalty on any tax that is not paid by the due date. You can prevent IRS collection letters and proceedings, such as a Notice of Federal Tax Lien or an IRS levy, by creating an installment arrangement and completing your monthly payments in advance.

IRS Forgiveness Program

With installment arrangements and offers in compromise, the IRS’s ‘Fresh Start Initiative’ was already enticing problematic taxpayers into compliance. Still, the enlarged program is friendlier, making it simpler to qualify for installment plans or offer-in-compromise settlements. Learn more about the fresh start program from Ideal Tax.

Installment agreements with the IRS

Installment agreements are often accessible to persons who are unable to pay their tax burden in full at one time. People can use the program to make lower monthly payments until the total loan is paid off. The IRS increased the threshold for simplified installment agreements from $25,000 to $50,000 in tax debt under its Fresh Start initiative, as well as the maximum payback period from five to six years.

Offer in compromise

OIC allows taxpayers to settle their tax burden for a lesser amount owed effectively. The OIC is a critical tool for persons in difficult situations; taxpayers are qualified only when all other payment alternatives have been explored. The IRS expanded the OIC program to a bigger group of struggling taxpayers as part of its Fresh Start initiative. However, the IRS will not take an offer if it judges the debt can be paid in full as a single payment or through an installment plan. On its website, the IRS provides guidelines on selecting a tax expert for an OIC.

Penalty Abatement

In extraordinary cases, the IRS may give penalty abatement to persons who haven’t yet paid their taxes because of extraordinary hardship. If the individual satisfies particular requirements, the IRS may agree to waive the fines. Interest reduction is considerably more restricted and rarely available. While these programs may avoid fines or interest, you still owe taxes. If a tax relief organization claims to erase interest and/or penalties for you. Remember, little relief is available, regardless of who represents you before IRS Collections.

Should I get legal help for a solution?

According to the IRS, you can apply to an Installment Agreement, OIC, or a penalty or interest abatement without a third party’s assistance, according to the IRS. Only certain tax professionals, including Enrolled Agents, Certified Public Accountants, and attorneys, have the authority to represent you if you prefer 3rd party assistance in negotiating with the IRS. They should meet with you in person to discuss your alternatives and their pricing before providing their services.

The IRS has also highlighted some things to consider when considering a qualified tax professional or attorney. Before signing any agreement, carefully study the return policy if you are requested to make an advance payment for counsel in a tax collection action. Check to determine if a default billing rate, a fixed cost paid to all employees at a firm, would be imposed if you discontinue the company’s services. Even early in the representation, a high default billing rate might swiftly deplete a considerable chunk of your initial money.

If you wish to have a consultation, we recommend contacting the tax professionals at They are very familiar with IRS processes and understand precisely what needs to be done to secure an optimal settlement for your tax debt. Moreover, they’ll be able to negotiate more effectively and have you qualify for programs that were otherwise out of reach. However, tax professionals are not magicians, and they can never guarantee you’ll get a part of your debt lifted.

The Bottom Line

The tax settlement industry is riddled with danger at every turn. Those seeking assistance with outstanding tax bills should generally have their tax or financial advisor refer them to an experienced tax attorney with years of expertise dealing with this situation. They should also be prepared to go through substantial economic research and a regulatory procedure that might take months. Above all, they should be ready to hear the phrase “no” from the IRS in the end.

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