4 Tax Relief Methods to Potentially Reduce Your IRS Tax Liabilities Submitted by:
(OPENPRESS) November 19, 2010 -- There are ways to pay the IRS less than what you owe. While this is something that all Americans would like to do, the methods below are rarely approved because certain conditions and requirements need to be met. You have to know which options can work for you. Some of them are based mainly on your financial situation.
Here are four ways to settle taxes owed for less:
1. Offer In Compromise - This is the most common way of settling your debt for less than the total amount. This allows you to make an offer to the IRS to pay a particular amount. Does this mean they have to accept the offer? Of course not. In fact, the IRS only accepts between 10-15 percent of the offers they receive. It is important that your offer is equal to or greater than the amount they would be able to collect through enforced collection mechanisms.
2. Partial Payment Installment Agreement (PPIA) - This method allows you to pay back taxes over a period of time, as opposed to sending one check to the IRS. If you don't have a lump sum of cash available for spending this may be the best option – especially if you are in a less than ideal financial situation. In the end, the total amount that you pay can be less than you owe as time expires part of your debt due to the statute of limitations. To qualify for this you must be able to prove that you cannot make the normal payment associated with an installment agreement and the IRS must review a Colleciton Information Statement.
3. Penalty Abatement - Those who are facing a financial hardship can request penalty abatement from the IRS. While this does not do anything to the balance owed, it can help to rid of some or all of the penalties you have accumulated. You will not qualify for penalty abatement unless you can show the IRS that you previously or are currently dealing with a financial hardship.
4. Statute of Limitations - The IRS only has so long to collect back taxes from you. If the statute of limitations runs out without them getting their money, you are off the hook. If you can declare hardship and stay in this status until the statute expires, you may be able to escape your tax debt for less than what you owe. Do you owe money to the IRS? Are you facing a financial situation that could be considered a hardship? If so, you may have the ability to settle your back taxes for less than what you owe. This is not something you should rely on, but if the situation presents itself it should be considered. Again, your options include: offer in compromise, partial payment installment agreement, penalty abatement, and statute of limitations. Consider the pros and cons of all four, and then decide which one gives you the best chance of settling your debt for less than what you owe.