If you have a lot of tax liability, you may be afraid to lose your property to the Internal Revenue Service (IRS). However, you can stop the IRS’s collection efforts if you promise to pay what you owe, or at least a significant percentage of that amount. To repay the IRS, you may negotiate installment payments or propose an Offer in Compromise. These agreements are different, but both will allow you to settle your debts with the IRS without having to pay what you owe in full.
Installment payment
If you cannot pay in a lump sum what you owe, you may be eligible to apply for a long-term payment plan with the IRS. This plan is known as an installment payment, and it allows taxpayers to repay what they owe to the IRS over the course of years in monthly payments.
You must consider that this plan does not stop the accruement of penalties and interest, so the amount you owe may increase over time. Also, not everyone is eligible to get this payment plan. You may qualify to apply for a long-term plan if you owe $50,000 or less in tax, penalties and interest, and filed all required tax returns
Offer in Compromise
An Offer in Compromise is different than a payment plan. In an Offer in Compromise, the taxpayer promises to pay the IRS a smaller amount in exchange for their larger debt. If the IRS offers you to compromise, you will have to pay less than what you owe, and the remaining debt will be forgotten.
An Offer in Compromise is an appealing solution. However, the IRS does not accept all of the requests they get. Usually, they accept them when they have proof that the taxpayer cannot pay what they owe, or that doing so would cause them extreme difficulties. Also, not everyone is eligible for this relief. You could negotiate an offer in compromise if:
- You have filed all tax returns
- You are not in a bankruptcy proceeding
- You have made all the required payments for the current year
If the IRS believes you qualify for the offer, you could pay back the amount negotiated in a lump sum or a periodic payment.
The relief you need
Paying your debts in full may not be something you can afford. Still, you could pay back what you owe without having financial struggles by applying for an installment payment or an Offer in Compromise. You do not have to live under financial pressure, and it is your right as a debtor to apply for either of these reliefs if you qualify.