When Looking for Relief This Tax Season, Consider Your Options for Tax Settlement

Overdue tax liabilities can cause unwanted stress and anxiety during tax season. Pursuing tax settlement options can bring you relief and solve your financial problems.

Outstanding tax debt is not something that will go away on its own. Although it may be tempting for you to ignore your debts and hope for the best, an owed tax liability is something that you can’t avoid. If you want to make this tax season as painless as possible, then you need to deal with any taxes you might owe from the past. One of the best ways to get the relief that you need is to pursue options for settling back taxes.

Installment Agreements

When dealing with IRS tax debt, one of your options may be to set up an IRS installment agreement. This agreement is a payment plan in which you make a promise to the IRS to pay your tax debts off in equal sums over an extended period of time. For the IRS to agree to an installment payment plan, you need to make an offer that is reasonable. If you ask for a payment plan that does not offer a fair sum every month, then you may be denied an IRS installment agreement. As such, you need to consider this settlement option very carefully before you attempt to set up a payment plan.

Offers in Compromise

Another option that you have for dealing with owed back taxes is making an offer in compromise. This compromise will allow you to pay off your tax debts for a sum less than what you owe. If you want your offer in compromise to be accepted by the IRS, then you’ll need to make sure that it is reasonable and fair. It’s sometimes difficult to secure offers in compromise, due to the strict rules that apply to this type of tax settlement agreement, so you may need professional guidance when preparing an offer in compromise to present to the IRS.

Seeking Professional Advice

Getting tax relief can sometimes be tricky, so you may wish to consider hiring a professional to help you with your needs. If you consult a qualified tax consultant and get tax help, you could find yourself in a much better position at the end of tax season. A tax professional can help you to deal with any back taxes that you might owe as well as help you find the best options for settlement. In addition, you may be able to get advice that will help you avoid any tax issues in the future. With tax help from a qualified tax advocate, you’ll have a much better chance of qualifying for settlement options that are normally more difficult to acquire.

Tax Defaulters In California Cornered

Do you reside in California but still owe State tax money? Presumably by now, many are getting used to alternative means of transport. On October 4, 2011, California Governor Jerry Brown signed into law, a bill that authorized the revocation of the driver’s licenses of the State’s 1,000 most egregious tax debtors, unless they clearly come up with tax repayment plans with the Franchise Tax Board or State Board of Equalization. This latest move is aimed at ensuring that the estimated $6.5 billion unpaid state income and business taxes is paid up.

The California Department of Motor Vehicles can now access information on the tax defaulters list from state tax officials to facilitate the revocation of such licenses. Shockingly, roughly $155 million is owed by the top 250 people and businesses on the state’s delinquency list. More to that, a Los Angeles couple has accumulated the largest outstanding bill in personal income taxes, amounting to a staggering $14.2 million!

It was only this summer that a similar auto/tax bill program was put into effect on the East Coast, and the drivers there are still getting used to it! Elsewhere, to close an approximately $1.3 billion budget gap in Maryland, the lawmakers agreed on June 1, 2011 to make driver’s licenses and vehicle registrations contingent on motorists’ tax compliance.

Taxes related to vehicles are increasingly becoming common in America. This is not by accident, but a deliberate move to leverage Americans’ passion for cars. Other taxes, like the fuel taxes, are usually collected at both the Federal and State levels. At this rate, we should be prepared for more vehicular taxes; it all depends on the fuel pump prices and the political landscape. Don’t be surprised if gas taxes are raised or gas tax holidays introduced for drivers; it is all a matter of time.

If you drive a hybrid car, you can still enjoy some individual income tax credits, though not for long. However, there are still more tax breaks available for other alternative fuel vehicles. To date, the urban and sub-urban dwellers are still fighting because of commuter taxes.

Some tax advocates are happy with the by-the-mile tax proposals. Although official talks about a possible per-mile tax appear to have been suspended, it is only a matter of time before it re-emerges.

One would wonder why there is so much fuss about vehicle-related taxes. It is simple; America has over 200 million licensed drivers whom are all eligible tax payers. The logic is, the more taxes the government squeezes out of tax defaulters, the more money for its treasury! And with the biting recession, nothing is more important to the government than a steady flow of revenue!

What Is an Offer in Compromise and How Can I Secure This Tax Settlement?

Are you struggling with a large back tax burden? Whether you failed to pay your taxes on time and in full because of a calculation error, a paperwork problem, or because you just couldn’t afford what the IRS asked for, back taxes can snowball fast. The IRS imposes steep fees and interest charges on unpaid back taxes that can take your debt from manageable to overwhelming in a matter of months. Soon, you might worry that you’ll never be able to break free.

Luckily, the IRS will occasionally grant tax settlements to make it easier for you to repay all or part of your debt. One of the most popular tax settlements is the offer in compromise, and securing one can mean the difference between a bleak outcome and a bright financial future. However, you’ll want to hire a tax resolution expert such as a tax attorney or CPA to help you determine whether you’re eligible and to negotiate with the IRS on your behalf. Without professional help, it’s extremely difficult to successfully petition for a tax settlement.

What exactly is an offer in compromise? In short, it’s an agreement with the IRS to settle your tax debt for less than you actually owe. You or your representative must offer an alternative repayment amount. If the IRS accepts that amount, you guarantee repayment within a certain time frame, either as a lump sum in five or fewer payments or spread out into monthly installments.

You may be eligible for an offer in compromise if you meet the following criteria:

  • Your current income, assets, and expenses make it unlikely you’ll be able to repay the owed amount.
  • Repayment of the full amount would constitute a financial hardship.
  • You have filed all of your tax returns and back tax returns.
  • You are not currently in an open bankruptcy proceeding.
  • You are up to date on any estimated tax payments and/or income tax withholdings.

Because offers in compromise significantly reduce the amount you owe, and thus the amount the IRS will collect, they aren’t given away easily. You’ll need a tax attorney, CPA, or enrolled agent to help you gather all of the necessary documentation to back up your claims, and to act as your advocate in all dealings with the IRS. Tax professionals are fully versed in federal, state, and local tax laws, and know the best ways to present and argue tax settlement cases, including petitions for an offer in compromise. They can also advise you if your situation better lends itself to a different route for tax settlement, such as an installment payment plan or penalty abatement.

If you’re buried in back taxes and you’re worried that the IRS’s tax penalties will soon make the debt burden unbearable, know that it’s never too late to bring in a tax resolution professional. After securing your offer in compromise or other tax settlement, your tax advocate can help you assess your financial situation and create a budget and payment plan that you can stick to. Then, once your existing IRS woes are a thing of the past, you can take steps to ensure you never have tax problems again.