How do I settle IRS tax debt?

February 05, 2020 by Karen Thomas-Brandt, EA
Man with tax burden

Having a tax bill looming over your head is not a situation anyone ever wants to be in. However, sometimes stuff happens, and we can find ourselves in just that position. Fortunately, there are ways to deal with tax debt owed to the IRS. Here are a few solutions:

Pay it off: This may seem obvious and not the answer you are looking for, but consider how much you spend every month in “extras” such as coffee, eating out, manicures, pedicures, etc. Maybe pull back on these expenditures and pay your tax bill, which will otherwise accrue interest at the federal short-term rate plus 3 percent.

Installment Agreement: One of the most common solutions to settling IRS tax debt is an Installment Agreement. Setting up an Installment Agreement with the IRS allows a taxpayer to establish a monthly payment plan and will give you up to 72 months to pay off your IRS debt. An Installment Agreement is a great option for taxpayers who need a little extra time to pay off their debt; keep in mind, however, that interest will continue to accrue until the debt owed is paid in full. Note: If you can pay your full amount owed to the IRS (tax, interest, and penalties) within 120 days, you can save the cost of the set-up fee for the installment agreement.

Offer in Compromise: This option, while appealing, is often misunderstood. An Offer in Compromise will allow a taxpayer to settle their debt for less than the full amount owed; however, only about 40% of Offers in Compromise submitted are accepted by the IRS. Generally, an Offer in Compromise will be accepted by the IRS when the amount offered is reasonable and represents the most they can expect to receive within the statute of limitations.

These are just a few of the options available to taxpayers who have IRS tax debt. To review all tax debt relief solutions, please click here for more information. Our experienced tax professionals will help you figure out the best IRS tax debt settlement option for you.

Do you owe money to the IRS or State?

Get Professional Help Now!

SEARCH

 

Karen Thomas-Brandt, EA
Resource Manager

 

Karen Thomas-Brandt, EA, is a Resource Manager at TaxAudit, the largest and fastest-growing audit defense service in the country and the exclusive provider of TurboTax® Audit Defense. With more than 17 years in the tax field, Karen has prepared thousands of tax returns and defended hundreds of taxpayers in audits. In her current role, Karen specializes in coaching and mentoring tax professionals so that they have the skills to best represent our members and love where they work!


 

Recent Articles

Cash, IRS check, and Social Security Card
Taxpayers who are behind on their federal taxes may be surprised to know that their Social Security benefits are ripe for the picking by the IRS.
Definitely Worth It
Yes, TurboTax Audit Defense It is absolutely worth it. Those who have audit defense do not have to panic or make frantic calls upon receipt of IRS tax notices.
Doing Taxes
The most important thing about having audit defense, in my opinion, is peace of mind. Your tax professional will help you navigate the waters of a tax audit.
Net Operating Loss
If you are a small business owner, you may have heard about net operating losses. If you have one, it may create a reduction in your taxes in other years.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.