If you owe taxes to the IRS for 2023 and you are struggling to pay them, you may be wondering if there is a way to settle your debt for less than the full amount. The good news is that the IRS offers several options to help taxpayers who are facing financial hardship due to COVID-19 or other reasons. Here are some of the most common ways to settle your tax debt with the IRS for 2023:
Offer in Compromise
This is an agreement between you and the IRS that allows you to pay a reduced amount of your tax debt. The IRS will consider your income, expenses, assets, and ability to pay when evaluating your offer. You must meet certain eligibility criteria and submit a detailed application with supporting documents. You also need to pay an application fee (about $205) and an initial payment or make monthly installments while the IRS reviews your offer. If your offer is accepted, you must comply with all tax laws and pay any future tax liabilities on time. You can use the Offer in Compromise Pre-Qualifier Tool to check if you qualify and estimate an acceptable offer amount.
Installment Agreement
This is a payment plan that allows you to pay your tax debt in monthly installments over some time. The IRS offers different types of installment agreements depending on your situation and the amount you owe. You can apply online, by phone, or by mail. You may have to pay a setup fee and interest and penalties will continue to accrue until you pay off your balance. If you owe less than $250,000 and can pay off your debt within 180 days, you may qualify for a short-term payment plan with no setup fee. If you owe less than $250,000 and can pay off your debt within 72 months, you may qualify for a streamlined installment agreement without providing a financial statement or a notice of federal tax lien. If you have an existing installment agreement and you incur new tax debts, the IRS may automatically add them to your plan instead of defaulting it.
Currently Not Collectible
This is a temporary status that suspends collection actions against you if you cannot pay your tax debt. The IRS will review your financial situation and may ask you to provide proof of your income, expenses, and assets. You must file all required tax returns and update the IRS if your financial situation changes. Interest and penalties will continue to accrue on your tax debt and the IRS may file a notice of federal tax lien to protect its interest. The IRS may resume collection activities if your income increases or after 10 years, which is the statute of limitations for collecting tax debts.
Consult your Tax Professional
These are some of the options available to settle your tax debt with the IRS for 2023, but they are not for everyone. You should explore all other payment options before you apply for any of these programs. You should also consult a tax professional or a reputable tax relief company to help you with the process and negotiate with the IRS on your behalf. If you are pressed for a small business tax debt. Allow us to help you crawl out of the hole. Don’t panic. Call Franek!
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