Tax Settlement Options
If you do not pay your tax in full when you file your tax return, you will receive a bill for the amount you owe. This bill starts the collection process, which continues until your account is satisfied or until the IRS may no longer legally collect the tax; for example, when the time or period for collection expires.
The first notice you receive will be a letter that explains the balance due and demands payment in full. The unpaid balance is subject to interest that compounds daily and a monthly late payment penalty. It is in your best interest to pay your tax liability in full as soon as you can to minimize the penalty and interest charges. You may want to investigate and consider other methods of financing full payment of your taxes, such as obtaining a cash advance on your credit card or getting a bank loan. Often the rate and any applicable fees your credit card company or bank charges are lower than the combination of interest and penalties imposed by the Internal Revenue Code. But if you are unable to pay your balance in full immediately, the IRS may be able to offer you an alternative settlement option.
Negotiating with the IRS on the settlement of your tax debt can be a daunting proposition. The complexity of the Internal Revenue Code is nothing short of astonishing. If you need help resolving a serious tax problem, you can trust the professionals at Tax Muscle to work vigorously to ensure you a favorable outcome. Our experienced team of tax professionals will examine your tax problem, apprise you of your resolution options, and facilitate the resolution plan that offers you the greatest benefit.
Some of the most common tax settlement options include:
- Offer in Compromise (OIC) - An OIC allows you to settle your tax debt for less than the full amount that you owe.
- Installment Agreement - An installment agreement allows you to pay your tax balance over time by making monthly payments.
- Currently Not Collectible - If you are experiencing a financial hardship, the IRS may temporarily delay collection by reporting your account as currently not collectible until your financial condition improves.
- Penalty Abatement - The IRS can abate or refund any portion of a penalty or addition to tax if certain conditions apply.
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When you file a tax return, you usually have a choice to make - whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.