October 12, 2022

Are Tax Relief Programs Worth It?

The Truth About IRS Tax Settlement Firms

Individuals and corporations who owe the Internal Revenue Service (IRS) money may suffer harsh penalties, including confiscating personal or company assets in some situations. To address this dilemma, which has the potential to cause a severe financial disaster, a new type of business has emerged to assist delinquent taxpayers in dealing with their tax bills.

Tax settlement businesses claim to be able to dramatically decrease or remove whatever the customer owes the IRS. But, can these companies deliver on their promises, or is it a scam?

Sure it does take a certain amount of time out of your hands to outsource, yet for most people, the numbers don’t justify getting the help of a tax settlement firm. However, if you have significant tax debt and you are unable to pay your debt, it might pay off to consult with a tax professional. They are very experienced with the processes at the IRS and can help you reach the best possible outcome for your debt burdens.

IRS Help for Taxpayers

If you owe taxes but cannot pay the IRS in full, consider filing an Installment Agreement Request (Form 9465) along with your return. If you owe less than $10,000, the IRS cannot decline your request for an installment arrangement under certain circumstances. However, you still should pay the maximum amount you can with the repayment. Even if your request for an installment arrangement is accepted, you may be charged interest and perhaps a late payment penalty on any tax not paid by the due date.

People who cannot pay their tax bill in full at once may be eligible for an Installment Agreement. People can use the program to make lower monthly payments until the total loan is paid off. The IRS increased the threshold for simplified installment agreements from $25,000 to $50,000 in tax debt under its Fresh Start initiative and the maximum payback period from anywhere to six years. Taxpayers who owe less than a certain amount may apply online with the IRS and do not need to file an IRS Collection Information Statement.

The IRS may even reduce the amount of your debt. An Offer in Compromise (OIC) allows taxpayers to permanently settle their tax liability for a lower amount than they owe. The OIC is an essential tool for persons in difficult situations; taxpayers are qualified only when all other payment alternatives have been explored. The IRS expanded the OIC program to a bigger group of struggling taxpayers as part of its Fresh Start initiative. However, the IRS will not take an offer if they believe the debt can be paid in full as a single payment or through an installment plan. The IRS website provides guidelines on selecting a tax expert for an OIC.

In extreme cases, the IRS may waive penalties for persons who haven’t paid their taxes due to significant hardship. The IRS may waive the liability if the taxpayer satisfies precise requirements. Interest reduction is considerably more restricted and rarely available. While these programs may avoid fines or interest, you still owe taxes. If a tax relief firm claims to erase your interest and penalties, be wary: minimal relief is available, regardless of who represents you against IRS Collections. Their services should involve a face-to-face discussion with you to clarify your alternatives and cost structure.

You can file for a repayment plan, OIC, or penalty or interest reduction without the assistance of a third party, according to the IRS. Only select tax specialists can provide third-party help in dealing with the IRS. Enrolled Agents (federally-authorized tax professionals who can represent clients at all administrative levels of the IRS), such as the tax experts at Idealtax.com. These tax professionals have the power to represent you and help you reach the best possible outcome for your tax burdens.

Signs to be wary of when picking a debt relief company

Scammers know that being in debt to the IRS may make individuals desperate, and they can take advantage of your anxiety. According to the Federal Trade Commission, a firm requiring cash before doing anything for you is a fraud symptom. While there are respectable tax debt relief firms, there are also many fraudsters. We’ve listed some red flags you should be wary of when looking for a third-party tax relief firm to represent you.

  • Debt relief is guaranteed.
  • Promising to reduce or perhaps erase your tax debt significantly
  • Promising to have penalties and interest waived
  • Directly soliciting your firm via letters or emails
  • Using tactics that will cause your case to be delayed, such as repeatedly seeking the same documents

Offer in compromise

As previously stated, if your tax burden is so enormous that you cannot pay it or that doing so would cause you financial hardship, the IRS may enable you to settle for less than what you owe. You can sometimes use the offer in the compromise pre-qualifier to check if you are eligible to participate in an OIC. The IRS evaluates your eligibility by looking at the following factors:

  • Income 
  • Assets
  • Liabilities
  • Expenses

However, the IRS recommends you exhaust all other payment choices before submitting an offer in compromise.

The Value of Being Proactive

Remember that trying to avoid your tax obligation will not benefit you. Ignoring your tax situation can simply exacerbate it as interest and fines accumulate in the form of interest charges and additional penalties. Keep in mind that the IRS can be pretty forgiving to first-time tax offenders, and it’s in the IRS’ best interest to find a suitable solution for both parties.

Be proactive by filing your taxes and contacting the IRS to learn about your alternatives. If you are feeling overwhelmed, you may speak with a qualified tax professional, but you also have the right to contact the IRS on your own. Contact one of the certified tax professionals at Idealtax.com today to get a consultation!

About the author 

Kyrie Mattos

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