Can You Settle Tax Debt on Your Own Or Do You Need to Hire a Tax Professional?
Millions of people, burdened with delinquent state and/or federal tax debt, struggle each year to find a way to get out from under their debt load incurred from taxes. Filling a growing need in a difficult economy, tax debt settlement – which refers to the activity of resolving a person’s tax debt by reducing the debt and/or formulating a repayment Best tax agent plan – has emerged to be a significant financial resource for those with tax problems. Tax debt settlement is possible since the IRS, as with many state tax agencies, has processes to address delinquent taxes and help settle tax obligations. A difficult dilemma facing many people is in deciding whether it’s feasible to settle tax debt on their own – or is hiring a tax professional, and paying a fee, the right choice? There are certainly situations where an individual can tackle tax debt settlement effectively on their own, but as we’ll see, more often it proves wise to seek the advice and experience of a professional.
The subject of tax debt relief, understandably, is an intimidating one for most people. Tax laws are complex, and the prevailing perception is that the IRS can basically do anything they want. Most people don’t realize that tax settlement programs even exist, and that options are available to help pay delinquent taxes. We all know, however, that the IRS has several weapons in their debt collection arsenal, among which are: assessing penalties and thereby increasing the amount owed, issuing tax levies, or attaching a lien to your property. The need to take action when facing tax problems is critical, as failing to act increases the likelihood that a tax agency will levy a penalty or pursue legal avenues.
Tax Debt Settlement Options
Understanding the available tax debt settlement options is a key requirement in determining whether it’s feasible to settle tax obligations and debt on your own – or if hiring a professional makes more sense.
The “Offer in Compromise”, or OIC, is a fairly complex legal agreement between an individual and the IRS. In this arrangement, you essentially make an offer to the IRS for an amount that is less than the total due. The burden of proof, however, is on you to show that you are not able to pay any more. The IRS has to be convinced that you are not able to pay more than you are offering. While the OIC can drastically reduce a person’s tax obligations, the IRS denies roughly half of the OIC’s they receive. The OIC process can take several months to complete, the forms are complex, and the success rate is low, hence most experts agree that a tax professional should be employed to help you navigate through this process.
The second option is an installment agreement, which is a long term payment plan that is agreed upon by the taxpayer and the IRS. Several different types of plans exist, including a partial payment plan option. People whose tax debt is less than $25,000 may qualify for an online payment agreement (OPA). An individual should be able to manage setting up an OPA on their own. However, even with an OPA, its still a good idea to consult a tax pro in order to protect your interests. When using installment plans other than the OPA, given the complexity, individual should seek the guidance of a tax pro.
The third option is to request a payment extension. The IRS may agree to extend the time period in which a person must pay their tax obligations. 45 days is the maximum extension period, however it is possible to receive multiple extensions. This option works best for people who have manageable past due amounts owed – and can be a “do-it-yourself” request.
The Bottom Line