How Difficult Is It to Receive an IRS Tax Settlement or Repayment Plan?

How Difficult Is It to Receive an IRS Tax Settlement or Repayment Plan?

• Jul 15, 2023

Dealing with tax issues can be stressful, especially when you find yourself unable to pay your taxes in full. The good news is that the Internal Revenue Service (IRS) offers various options for taxpayers who are struggling to settle their tax debts. In this blog post, we will explore the process of obtaining an IRS tax settlement or repayment plan and discuss the level of difficulty involved.

Understanding IRS Tax Settlements

When you owe the IRS money, a tax settlement allows you to negotiate a reduced amount to pay, often referred to as an "offer in compromise." This option is available when you can demonstrate that paying the full amount would cause significant financial hardship or is not possible. However, receiving an IRS tax settlement is not a guaranteed outcome, and the process can be challenging.

An offer in compromise is usually paid in a single lump sum, rather than spreading the payments out over time. However, it’s the only IRS tax debt relief option that allows taxpayers to settle their tax debt for less than they actually owe.

Eligibility Criteria

The IRS carefully evaluates each case to determine if an individual qualifies for a tax settlement. They consider factors such as your income, assets, expenses, and future earning potential. It's essential to provide accurate and detailed financial information to demonstrate your eligibility. While the eligibility criteria can be strict, consulting with a tax professional or IRS advocate can help you navigate the process more effectively.

Complicated Application Process

The application process for an IRS tax settlement can be complex and time-consuming. It involves filling out detailed forms, providing supporting documentation, and presenting a compelling case. You must ensure that your application is complete and accurate to improve your chances of success. Any errors or omissions could lead to delays or rejection of your request. Seeking professional assistance can simplify the process and increase your likelihood of a favorable outcome.

Review and Negotiation

Once your application is submitted, the IRS reviews it thoroughly. This review process can take several months, and the IRS may request additional information or clarification during this time. The IRS has the authority to accept, reject, or counteroffer your settlement request. Negotiating with the IRS can be challenging, as they have stringent guidelines and high standards for accepting a tax settlement. It's crucial to be patient and prepared for the negotiation process.

Repayment Plans

If you are ineligible for a tax settlement or offer in compromise, the IRS offers repayment plans as an alternative. These plans allow you to pay off your tax debt over time through monthly installments. The difficulty level of obtaining a repayment plan can vary depending on your financial situation; however, they are generally much more easily acquired than offers in compromise. Unlike an offer in compromise, this option won’t usually allow you to settle your debt for less than you owe. However, if it is your first time falling behind on taxes, you may be eligible to have the added fees and penalties for late payment waived, which can offer significant financial relief. This waiver is usually provided at the end of your repayment plan, provided that you make each payment on time throughout your plan, so it’s important to make every effort to stick to your payment schedule.

While the IRS always encourages taxpayers to pay their debts in full, they understand that financial hardships can make it challenging. Communicating with the IRS and providing honest and accurate information is key to establishing a reasonable repayment plan. It’s essential that you not try to avoid the situation by failing to file your taxes, or otherwise ignoring your tax liability.

Get the Help You need with Tax Debt Settlement

Resolving tax debt with the IRS can be a complex and challenging process. Whether you're seeking a tax settlement or a repayment plan, it's important to approach the situation with careful consideration and professional guidance. The expertise of tax professionals here at the IRS Advocates can significantly increase your chances of success and help you navigate the intricacies of the process.

If you're struggling with tax debt and are unsure how to proceed, we encourage you to contact the IRS Advocates. We are experienced professionals who specialize in assisting taxpayers with tax settlement and repayment plan applications. By scheduling a consultation with one of our experts, you can get the necessary guidance and support to help you through this challenging process.

Remember, you don't have to face the IRS alone. Reach out to the IRS Advocates today and take the first step towards resolving your tax debt.