When Bankruptcy Is a Better Option than Settling with the IRS
Tax season can be daunting, and filing taxes can feel like an overwhelming responsibility, especially if you have overdue taxes. While it’s crucial to stay up to date with tax payments, sometimes life gets in the way. If you find yourself in a situation where you owe the IRS, there may be a chance to get a tax settlement. In this post, we explore how to determine your eligibility for an irs tax settlementand provide some helpful tips to get started!
1. Understand the Types of Tax Settlements: Before calculating your eligibility for a tax settlement, it’s essential to comprehend the different types available. The two most common types are the Offer in Compromise (OIC) and the Installment Agreement. An OIC is a deal that allows taxpayers to settle their tax debt for less than the full amount. On the other hand, an Installment Agreement allows taxpayers to pay off their tax debt over time with monthly payments, depending on their income level.
2. Check Your Eligibility for an OIC: The eligibility criteria for OIC generally depend on three factors: income, expenses, and assets. The IRS considers these factors to determine a taxpayer’s ability to pay. If you have substantial monthly income, the IRS may not accept your request for an OIC because they believe you have the means to repay your debt. Additionally, if you have significant assets, the IRS may not accept your request for an OIC because they believe you can cover your tax debt with the sale of your assets. In contrast, if you have limited income, high expenses, and minimal assets, you may be eligible for an OIC.
3. Check Your Eligibility for an Installment Agreement: The eligibility criteria for an Installment Agreement typically depend on your ability to pay your tax debt in full within a certain period. The IRS may require financial documentation to determine your eligibility, such as pay stubs, bank statements, and your monthly budget. If you can’t afford to pay the full amount at once and can prove you’re making every effort to pay your taxes, the IRS may consider an Installment Agreement.
4. Determine Which Option Works For You: After reviewing your eligibility for both types of tax settlements, you must determine which option works best for you. If you can pay your tax debt within a year to a few years, an Installment Agreement is likely your best bet. However, if you can’t pay the full amount, an OIC would be an excellent option to get your tax debt settled.
5. Seek Professional Advice: Determining your eligibility for a tax settlement can be complicated, and navigating the IRS’s rules and regulations can be overwhelming. Seeking professional advice from a licensed tax professional or attorney can help you understand your options and provide you with valuable guidance throughout the process. Calculating your eligibility for an IRS tax settlement is essential if you’re feeling the burden of overdue taxes. Understanding the types of tax settlements and eligibility criteria can help you determine your best course of action. Remember, always seek professional advice and guidance to help you navigate the complex taxation system. Don’t let overdue taxes ruin your financial stability and peace of mind, take the initiative, and explore your tax settlement options today!