Tax Debt Settlement Law

Tax Debt Settlement

What is Tax Debt Settlement?

Occasionally, a taxpayer might owe outstanding back taxes and may be in more debt to the IRS or state tax authorities than he or she can afford. For those experiencing financial difficulties or economic hardships, they may be able to lessen their debt through a tax debt settlement. A tax debt settlement is an agreement with the IRS that would lessen the burden on a taxpayer in serious debt. Depending on the taxpayer's financial situation, the IRS could agree to either accept a reduced amount from the taxpayer than his or her original tax bill, or they might agree to set up a payment plan so the taxpayer can pay the full amount over time. Below are some of the most common tax debt settlement programs.

  • Offer in Compromise: An Offer in Compromise is when the IRS agrees to accept an amount less than the full amount owed. If there is the no way the taxpayer can pay the full amount of their debt, even over time, then the IRS may reduce the person's debt and consider them in good standing when the settlement is paid off.
  • Tax Penalty Abatement: A penalty abatement means that the IRS will agree to reduce or eliminate any late fees, interest or penalties your debt may have accrued.
  • Partial Payment Installments: An agreement for partial payment installments means that the taxpayer can make low monthly payments that they can afford. Once the statute of limitations on tax collections comes into effect (generally 10 years) the balance of the debt is erased and the IRS will not seize your assets or garnish your wages or take other means of collection. Your debt will be considered settled and you will be in good standing at that point.
  • Innocent Spouse Relief: Though married taxpayers file taxes jointly, in some situations, the IRS may agree to hold only one partner liable for the debt they owe, so that it does not affect the "innocent" spouse.
  • Bankruptcy: Through Chapter 7 bankruptcy, it may be possible to eliminate tax debt. However, there are several factors that this depends on and it may not be the best option for most people.

Tax Debt Settlement Legal Issues:

Tax debt settlements are not for everyone and they are very difficult to attain. Only a small amount of people will qualify. To apply for an Offer in Compromise, there are strict requirements to meet, and many forms and evidence of financial hardship to submit. If a settlement is agreed upon, the reduced debt will still need to be paid within a certain amount of time, whether in a lump sum or installments. All methods of tax debt settlements have their drawbacks and consequences. However, there are also benefits if you do qualify for a tax debt settlement, such as significantly reducing your debt, preventing added fees and interest, and avoiding liens and garnishes. In very rare circumstances, you may even qualify for a deferral of your taxes, in which the IRS determines your debt is "Currently Not Collectible." This would stop the IRS from their collection efforts, at least for a certain period of time.

What a Lawyer Can Do For You:

The IRS is generally adamant about collecting debt that is owed to them. They have the ability to add interest and late fees to one's debt, seize assets, garnish wages, place liens, and even punish a delinquent taxpayer with jail time. Since there are so many negative consequences to not paying your tax debt, it is extremely beneficial to hire a tax debt settlement attorney to help you negotiate a tax debt settlement. An experienced tax attorney will assess your financial situation to best determine which method of tax debt settlement is right for you. They will help you gather all of the necessary documentation you will need to apply for a settlement program and negotiate on your behalf if required. If you feel you need a tax debt settlement, seek the assistance of a qualified tax attorney now.

Lawyer Referral Service:

If you are struggling with a tax debt that you cannot afford, we can help you find a tax lawyer that can help you with tax debt settlements. Contact Attorney Search Network for a tax lawyer referral today.

If you have any questions about the information provided above, contact Attorney Search Network for a free Lawyer Referral to a Tax Lawyer with experience in Tax Debt Settlements. Call us toll free at (800) 215-1190 or fill out our online form for your Tax lawyer referral.

If you have any questions about the information provided above, please contact Attorney Search Network.