Settle Tax Debts

Almost every taxpayer faces, at one time or another, a tax bill he cannot pay. The bill may come in response to a return he has filed, after an audit. At any given time, 15% of all taxpayers owe back taxes. In 2005 the IRS issued over 29 billion dollars in penalty assessments.
Here is a guide to guide you through your tax debt woes, the little known IRS program that let you settle tax debts for a small fraction of what you owe.
The amount of incorrect information circulating in our society involving tax debt is quite shocking. If you cannot afford to settle tax debts there are many options that you can take right now that may solve your tax problems.
I am listing five possible solutions for you those wishing to settle their tax debts:

• Installment agreement: a monthly payment plan for paying off the IRS.
• Partial payment installment agreement: a fairly new debt management program where you have a long term payment plan to pay off the IRS
• Offer in Compromise: a program where you can settle your tax debts for less than what you owe. Requires making a lump sum or short term payment plan to pay off the IRS at a reduced dollar amount.
• Not currently collectible: a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.
• Filing bankruptcy: discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition.

In this article we would be discussing Offer in Compromise in detail as an option.
You can see the following link for the official IRS page about the scheme.
Tens of thousands of Americans have already settled their tax debt for a small fraction of what they originally owed through the IRS's newly expanded Offer in Compromise program….and if you owe a lot more than you can afford to pay you will likely qualify for this program as well. This means you can end your tax debt nightmare and get on with your life.
By learning this inside information and secrets for resolving your tax problems you will be better prepared to assess your options and take the most advantageous route. Having this information at your disposable will prompt you to take the action that may save you thousands of dollars and put an end to your tax debts nightmare
An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

• Doubt as to Liability - Doubt exists that the assessed tax is correct.
• Doubt as to pay-ability - Doubt exists that you could ever pay the full amount of tax owed.
• Effective Tax Administration - There is no doubt the tax is correct, and no doubt that the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

To make you eligible to this scheme you have to fulfill the following requirements

• You are not a debtor in a bankruptcy case.
• You have submitted the $150 application fee, or Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment.
• You have submitted 20 percent payment with the lump-sum offer, or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment.
• You have submitted the first installment payment on a periodic-payment offer, or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment.

An Offer in Compromise is a lengthy and time-consuming process. It takes most people anywhere from 12 months to 24 months to achieve a successful resolution on your offer application. But the odds of succeeding are slim. Only about 16% of applicants succeed in reducing their debts through the Offer in Compromise program.
If your Offer in Compromise has been approved, to make sure the IRS does not revoke your Offer. You should

• File your taxes on-time for the next five years.
• If you cannot file by April 15th, request an automatic extension
• Pay your taxes on-time. If you owe, your taxes must be paid in full by April 15th. Make estimated payments or extension payments to make sure you don't have a balance due.

If the IRS revokes your Offer in Compromise, they will reinstate the full amount of your tax liability, add on penalties and interest, and begin aggressive collection efforts.