Millions of Americans are currently struggling financially, and the reality is that anyone can fall behind on taxes. Facing tax debts can be overwhelming, which is why the IRS has a system known as “offer in compromise”.
This allows qualifying debtors to pay a reduced amount. Should a taxpayer qualify for an offer in compromise, there are generally two payment options. These are outlined below.
Settling the bill in one go
The first option is to pay a lump sum toward the tax debt. Part of the lump sum is made with the application for an offer in compromise. The payer must include at least 20% of the outstanding tax bill. The rest of the bill must be settled within five months of making the first payment.
It’s important to remember that an offer in compromise is not always accepted, and the payment made during the application is non-refundable. However, should the application be accepted, the payment is still put toward the tax bill.
Installments
The second option is to set up a payment plan. The balance must be fully settled within two years. The amount you pay each month will have to be negotiated with the IRS, and it will depend on the outstanding tax bill.
Again, the first payment must be made with the initial application for an offer in compromise and it is a non-refundable payment. However, should the application be rejected, the payment will be put toward the outstanding tax bill.
Tax matters can be nuanced, and it is essential not to navigate complex debts on your own. Having legal guidance behind you will help you to come up with a strategy to tackle the debts you are facing.