Income tax debts can accumulate rapidly. People have to pay not just the amount due but also interest that compounds daily and fees assessed by the Internal Revenue Service (IRS).
Tax debt can quickly snowball out of control, leaving taxpayers frantic because they cannot reasonably pay what they owe. The IRS is well-known for aggressive collection efforts, including wage garnishments and levies.
What options do taxpayers have if they cannot pay the full amount of income taxes that they owe?
The IRS may agree to settle
Despite its reputation for aggressive collections, the IRS can be flexible. Individuals with limited income or personal property may be able to make an offer in compromise.
An offer in compromise is essentially a settlement offer. The IRS may accept a lump-sum settlement from people who have financial resources or the ability to liquidate assets to pay what they owe. Other times, an offer in compromise might include a series of structured payments intended to slowly reduce the total tax debt.
Provided that the offer is reasonable given the taxpayer’s financial circumstances and overall debt, the IRS may agree to accept less than the full amount due. Taxpayers may need help as they begin developing an offer in compromise. Support is also usually necessary if they must negotiate or revise the offer due to an initial rejection.
Reviewing an IRS income tax controversy with an attorney can help people evaluate all of the options available to them. An offer in compromise can be an effective solution for some taxpayers with large income tax debts.
