A Guide to Tax Settlement: Benefits and Eligibility Criteria

 

A tax settlement is a discounted arrangement regarding taxes owed that is acknowledged by the IRS or the state taxing authority. It is also known as an offer in compromise. Under this settlement, a taxpayer is allowed to extinguish an outstanding tax debt for less than the actual amount owed. Some extenuating circumstances that have prevented taxpayers from paying their taxes owed are accepted by the IRS. Taxsettlement services can be best carried out through proper guidance.

 

Not every kind of situation is considered for tax settlement. Tax settlement may be based on the current circumstances of the taxpayer and applicable tax regulations. Let’s discuss tax settlement in this blog.

 

How can an IRS settlement benefit you?

 

Negotiating a tax settlement can benefit you in these ways:

 

●     Pay less: The first obvious benefit is that you will be able to pay less to the tax authority than you actually owe. Given the situation of the taxpayer, a tax settlement can be determined and presented in a short time span. Once you pay the balance on the mutual agreement, the tax account is taken to be settled in full, leaving you with no late fees and other penalties.

 

●     No need for Liens and Garnishments: The other benefit offered by a tax settlement is that the taxpayer does not need to suffer from a tax lien on his/ her home or business.

Who is eligible for a tax settlement?

 

The IRS offers the settlement option to taxpayers who have a difficult time paying off their tax debts or have a valid reason for their penalties to be abated. Not everyone is eligible for such tax settlement.

 

The main factor considered is the financial hardship of the taxpayer. Their financial situation is analyzed, and if the tax authority comes to the conclusion that the financial situation is not favorable, then the taxpayer is taken to be eligible for tax settlement. Financial hardship is a good indicator of tax settlement.

 

For more clarity, you can take the help of Tax Services for Freelance Workers to check if you are eligible and how a tax settlement could benefit you.