Dealing with the IRS can be a daunting task and settling your tax debt can seem like an intimidating process. However, by understanding the rules and regulations of the IRS, you can make it easier to settle your tax debt. Here’s a step-by-step guide on how to settle your taxes to avoid further penalties or interest.

1. Understand Your Tax Situation

Before attempting to settle your tax debt, it is important to first understand exactly what you owe and why. Contact the IRS and ask for a statement showing all taxes owed and any interest or penalties that may have been added on. Once you know exactly how much you owe, you will be better equipped to negotiate with the IRS about settling your debt.

2. Consider All Options

It is important to explore all available options before settling your tax debt. For example, if you do not qualify for an installment agreement, then look into other options such as currently not collectible status or an offer in compromise (OIC). Knowing all of your options will help make sure that you are getting the best deal possible when settling your taxes with the IRS.

3. Negotiate With The IRS

Once you have determined which option is right for you, it is time to negotiate with the IRS about settling your tax debt. Be prepared with evidence that shows why this option would be beneficial for both parties and make sure that they understand that this agreement is mutually beneficial and financially sound for everyone involved.

The IRS Fresh Start Program

The IRS provides several solutions--collectively called the Fresh Start program--for resolving tax debt for taxpayers or businesses that can't pay in full but want to avoid liens. These options include installment payment plans or an amount paid that is less than what was originally owed.

The Fresh Start program provides a way for taxpayers to settle their IRS debt and also allows the IRS to recoup some of the money it's owed.

Fresh Start Program: What Are Your Payment Options?

The program provides taxpayers with three options to repay their tax debts. This helps them avoid future penalties and interest that can cause financial problems.

Installment Agreement

If you owe the IRS fifty thousand dollars or less, this is the first option available to you. Without any additional penalties or interest, they have up to six years to repay their debt. Penalty and interest-free, this repayment plan also eliminates additional fees from the IRS including tax liens, wage garnishments, or asset seizure.

The majority of taxpayers choose this option, where the monthly installment is determined by their current income and how much money they have left after bills are paid (disposable assets).

The IRS strategizes affordable payment amounts to guarantee that scheduled payments are made without any money-related issues.

Offer In Compromise

This is the second, less often used option for taxpayers to pay their IRS tax debt. In this case, the taxpayer offers to pay less than what they owe, which can be a significantly lower amount. The Pros: ・The taxpayer can negotiate a reduced payoff with the IRS that will save them money. Cons: ・IRS may not accept offers in compromise and could come after full balance plus interest and penalties.

An OIC, or offer in compromise, is an uncommon method to clear the debt that reflects your current financial situation. You must make a reasonable offer so it's safer to hire a tax professional who will help prepare and submit your offer on your behalf. professionals are also well-versed in filing the necessary IRS forms and providing accurate reports of finances which increases the likelihood of having an accepted OIC application.

Tax Lien Withdrawal

If you want to pay your entire debt through direct debit repayments, choose this option. You'll need to write some instructions for the amount to be withdrawn from your account, but don't worry- we won't report it to the credit bureaus.

Conclusion:

By understanding your situation and exploring all available options, negotiating with the IRS can be made easier when attempting to settle your tax debt. While this process may seem intimidating at first glance, having a clear plan of action will ensure that everything goes smoothly when dealing with the IRS. Hopefully, this step-by-step guide has helped provide insight into how to properly settle your taxes so that you can avoid further penalties or interest from accumulating on top of what is already owed.