What Is An IRS Settlement agreement?
An IRS settlement agreement is when a taxpayer settles their tax liabilities through one of the IRS programs/filings. The IRS settlement agreement 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 the IRS settlement agreement 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.
How an IRS Settlement Works
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 IRS settlement agreement they would like to apply for and then submit the appropriate forms to the IRS for review before making a decision. A taxpayer can either fill out the information themselves or they can have a designated tax professional make the filing on their behalf.
Once a settlement has been reached by both parties, the taxpayer will be considered good standing with the IRS for the tax year/years that the settlement covered (unless the taxpayer defaults or doesn’t hold up to all the terms of the agreement).
How to Settle Taxes Owed
In order to make a settlement or agreement over your taxes, you first need to make sure you are in full compliance with your tax filings and be sure to file any unfiled tax returns.
If you did not file and the IRS has filed for you, it is highly suggested you use a tax professional to file an amended return to decrease the amount of taxes owed (this is because the IRS does not give the taxpayer the benefit of the doubt on anything when they file for an individual and it is highly likely that they owe far less). Once you have filed and know how much you owe, you can review the tax settlement options and see what settlement method would qualify for (if any at all).