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How to Apply for a Tax Settlement

23rd September 2011
By Sally Pratt in Taxes
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Applying for a tax settlement is not something that many people are familiar with. In fact, you may be downright confused on how you can settle your debt. Although there are many ways to apply for tax settlement, some just donít know where to get started. It may sound confusing on the surface, but applying for a tax settlement is not as bad as it sounds.

Before you get too far ahead of yourself, you need to consider your situation. Do you owe unpaid taxes? Do you owe interest and penalties? These are the types of questions that you need to ask yourself. The reason for this is simple: the type of debt that you have will determine which tax settlement is best for you.

For instance, if you owe penalties you can opt for abatement. Generally speaking, this means that you are asking the IRS to wipe out any penalties and interest that has accumulated on your account. This does not affect how much unpaid tax you owe, though. Penalty abatement is one of the best ways for you to lessen your tax liability.

If you owe unpaid taxes you may want to think about an offer in compromise. This allows you to settle your tax debt for pennies on the dollar. In other words, the IRS will agree to let you pay less than what you owe. In the end, as long as you follow through you will be back in full compliance. Although applying for an offer in compromise may be straight forward, keep this in mind: the IRS only accepts 10 to 15 percent of these. There is a very good chance that you do not qualify for an offer in compromise, and instead will have to search for another tax settlement option.

No matter what type of tax settlement you are interested in, at some point you will have to go through an application process. For instance, you must fill out Form 843 for penalty abatement. Those who are interested in an offer in compromise should turn to Form 656. These forms are not as complicated as they appear at first glance.

Are you having trouble getting started? If you donít know the first thing about applying for tax settlement and are having a difficult time moving forward, you may want to hire a professional. A tax professional can help you choose the right settlement option. From there, they can walk you through the entire process. In fact, you can give them power of attorney so that they have the ability to communicate on your behalf with the IRS.

All of this information should give you a better idea of what it takes to apply for a tax settlement. Donít look past this option because you think it is too confusing. If you do, you may end up paying the IRS more than you have to. The process of applying for tax settlement can be a simple one if you know what you are doing, and are willing to get help when it is needed.

If you need help with a tax settlement, request a free consultation from the tax professionals at today.

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