A tax settlement is when a taxpayer settles their tax liabilities through one of the IRS programs/filings. The IRS offers settlements to taxpayers that are struggling with their tax debts or have valid reasons to abate their penalties. The IRS offers several different options for taxpayers to settle their taxes owed. The main factor the IRS takes into consideration when determining if the taxpayer will qualify for a tax settlement is their financial situation. The tax settlement that a taxpayer qualifies for is dependent upon their unique financial situation. The IRS prefers individuals to pay their taxes owed in full, but they will make exceptions for certain circumstances.
The IRS will allow a taxpayer to either negotiate a tax settlement for less than the total amount owed or come to an agreement on another method for the IRS to collect taxes owed over time. For either of these situations the taxpayer must meet the qualifications of one of the tax settlement programs set forth by the IRS. The taxpayer will first have to determine which type of tax settlement they would like to apply for and then submit the appropriate forms to the IRS for review before making a decision
WHAT THE GUIDE covers
There are different types of Installment Agreements, which allow you to pay IRS taxes over a series of monthly payments if you cannot pay in full. Below you find the most common types of IAs, and a link to each which will provide you the details as to how to file, their specific requirements, and their details.
Guaranteed Installment Agreement - This is the simplest type of Installment Agreement and is for taxpayers who owe $10k or less in taxes.
Streamlined Installment Agreement is intended for taxpayers that have tax debt of $25k or less. It is deemed “Streamlined” because it will not require full financial disclosure.
Financially Verified Installment Agreement -If you owe over $25k or you can’t make the minimum monthly payment on a Streamlined Installment Agreement you want to look at getting this type of installment agreement. It has many names, but basically will require you to fill out Form 433 to fully verify your financial situation. A tax professional is best to work with here.
Installment Agreement Over 100k - If you owe over 100k, then you need a longer term installment agreement. Sometimes in this case, the IRS will require you to sell off assets to satisfy some of your debt before offering you this type of IA. It is recommended to use a professional here. Partial Payment Installment Agreement – If you are truly unable to pay off your taxes, you can look to apply for a Part-Pay IA which will require you to pay less than you owe in full over time (as part of your debt falls of each period due to the Statue of Limitations.