Residents of Texas understand the importance of resolving tax debt, but things sometimes become challenging, and tax debt unintentionally builds. The burden of repayment can be scary, but the IRS wants taxpayers to know that the organization is open to compromise and willing to enter into negotiations to settle tax debt.
Who qualifies to negotiate for a compromise with the IRS?
To qualify for a tax debt repayment plan with the IRS, the taxpayer must demonstrate financial hardship or state that full repayment would create such hardship. You cannot be in active bankruptcy. The IRS will consider your finances, debts, assets and ability to pay to determine your eligibility for repaying your tax debt.
There is an application fee for the Offer of Compromise, so using the IRS prequalification tool is wise before applying. You should know if you qualify before you pay the fee. Approximately one-third of applicants are approved for this repayment plan.
How does the application process work?
After using the prequalification tool, you can take steps toward the Offer of Compromise. You will need to do the following to begin:
- File forms IRS Form 656 and IRS Form 433-A (individual) or Form 433-B (business).
- Pay the filing fee; a low-income waiver is available if you qualify.
- Include your initial offer of at least 20% of the amount owed.
The IRS has a complete instruction booklet with information on how much your initial offer should include. You want to pay the minimum, but also note that this could affect the payment amounts on the remaining balance. Careful preparation and successful execution can make paying tax debt less worrisome.