Taxes on Lawsuit and Legal Settlement | Tax and Debt Settlement Services
A tax settlement refers to the arrangement approved by the IRS or state tax authorities, which allows taxpayers to retire a pending tax debt for an amount less than the original one owed. Occasionally, tax authorities may allow such an arrangement when circumstances arise that might bar the taxpayer from paying the debt in full. While not all situations warrant a tax settlement, persons who owe taxes usually realize that the taxation bodies are willing to look into the individual’s situation and explore the possibility of a tax settlement. This is usually based on the taxpayer’s circumstances and the current tax regulations.
Benefits of income tax settlement
Several benefits are associated with negotiating an income tax settlement with the IRS:
Pay a lower amount
An obvious benefit is that you’ll ultimately pay a significantly less amount to the IRS or state tax authorities. Assuming your situation meets certain criteria, a tax settlement amount may be computed and presented in a short time. After paying the amount based on a common agreement, the account is said to be fully settled. This means as the tax payer, you’ll no longer be charged late fees and other related penalties.
Avoid liens or garnishments
The other benefit of using tax settlement services is that you avoid a situation where tax liens could be placed on your business or home, a bank levy on one or several accounts, or the addition of a wage garnishment on your paycheck.
Many taxpayers at the thought of negotiating with the IRS, but with the right tax settlement companies on your side, this doesn’t have to worry you. In certain cases, your tax obligation can be pushed off or forgiven altogether.
Options to consider during tax settlement
Based on your financial situation and the amount owed, you may consider a couple of options:
Partial payment settlement
Through guidance from tax settlement companies, you may negotiate a partial payment. This allows you to pay a lower amount over a short period. In this case, you’ll be required to provide financial proof alongside an explanation, and your debt will be lowered on approval.
Offer In Compromise
At times, it may be almost impossible for you to clear your tax debt, even when following an instalment plan. In that case, the IRS may want to lower your debt considerably based on your financial standing. It’s however important to note that these requests are not always approved. Talk to an expert from reliable tax settlement companies who can help you in case this applies to you. The professional will also file all the required paperwork accurately for the best possible outcome.
The reasons for a tax debt to be compromised are three-fold:
1. Doubt as to liability – This is when there’s doubt as to whether there was correct assessment of tax.
2. Doubt as to collectability – This refers to doubt as to whether the taxpayer can ever pay the amount owed to IRS. This is the most used section, and you’d need to show proof of your financial hardship.
3. Effective tax administration – This is where there’s a correct tax amount due but with an exceptional circumstance. It mostly applies to the elderly or disabled tax payers.
Tax penalty abatement
Typically, the interests and penalties can grow big. With our tax settlement services at Tax Relief R us, we can help get those huge penalties removed. We could even get past interests and penalties refunded. Remember you have to show reasonable cause for penalty abatement or adjustment, and only the best tax settlement companies can help you determine if this option can suit you.
Currently not collectable
If you are completely incapable of paying your IRS debt, you may file for the ‘currently not collectable’ status. If the IRS proves your case to be true, they may hold off the collection process. This happens if you don’t have assets that are worth levying and your wages can only cover living expenses. You should be able to avail financial statements annually to ascertain that you are still not able to pay. Otherwise, the collection may go on.
Wait for the statue of limitation
Depending on your situation, you may have to wait for your tax obligations to be wiped out of the record. The federal income taxes have a statue limitation of 10 years, preventing any act of fraud. If you think this strategy might work for you, you should check with local CPA firms that provide reliable tax settlement services.
If you have accumulated a tax debt and would like it to be reduced or struck out altogether, contact us today for professional tax settlement services.