There are many roads to Rome, which means there are multiple ways for taxpayers to resolve a tax debt. While installment plans and Offers in Compromise (OIC) are the better-known options for resolving tax debt, there are other options to consider.
Taxpayers tend to view tax debt resolution as an all-or-nothing proposition. Either they get a huge break by paying only a fraction of what they owe, or they must pay the total amount plus interest and penalties.
Multiple Paths
When discussing debt resolution options, one thing to keep in mind is that the best resolution option can be different for each taxpayer. This is why taxpayers who have outstanding tax debt should hire a tax professional. Someone well-versed in the IRS and its rules and regulations can help taxpayers select the best option for them and their situation.
While an Offer in Compromise (OIC) is one of the best-known options for resolving a tax debt for less than the total amount owed, it’s not the best option for everyone. The IRS may reject an OIC. It may take the IRS over a year to decide whether to accept a taxpayer’s OIC, and some taxpayers may prefer a faster solution.
Currently Not Collectible
When paying a tax debt would create a financial burden for a taxpayer, the IRS may change a taxpayer’s status to currently not collectible. This means the IRS won’t collect taxes during the delay.
The downside of this option is penalties and fees do continue to accrue. In addition, if the IRS decides a taxpayer’s financial situation changed, they may end the delay in collecting the tax.
Partial Payment Installment Agreements
When a taxpayer cannot pay the full amount of their tax debt, the IRS may agree to a partial payment installment agreement (PPIA). This is an option when a taxpayer cannot pay the full amount during the tax period.
One downside to this option is that the IRS may investigate taxpayers’ assets. In some situations, the IRS may require that some assets be used to make payments before the IRS will agree to a PPIA.
These are just two options for resolving a tax debt. When taxpayers have unpaid taxes with the IRS, one of the challenges can be determining the best resolution for their situation. If you have a tax debt with the IRS, contact the experts at Highland Tax Resolution. We have years of experience helping people chart the right course of action for their situation in a professional and empathetic manner.