Tax debt resolution does not involve the full payment of the tax debt amount in cases where taxpayers cannot afford to pay their entire back taxes. Those who do not have the financial means to pay their entire tax debt should consider applying for an Offer in Compromise for tax debt reduction. Under this debt payment plan, taxpayers pay a reduced amount to resolve their tax liability.
An Offer in Compromise, popularly known as the ‘pennies on the dollar ‘option, is a much abused IRS debt payment plan. Many fraudulent tax resolution companies have twisted the facts of this plan to attract taxpayers to buy their services. It is important for taxpayers to know that Offer in Compromise has strict qualifying restrictions. Only taxpayers that do not have the income and assets, or the ability to take a loan to fulfil their tax debt, must consider applying for an Offer in Compromise.
The reduction in tax debt depends on the financial condition of a taxpayer. The IRS requests complete financial details to authenticate the claims of taxpayers applying for an Offer in Compromise. To decide the amount of tax debt to be reduced, a taxpayer’s financial strength is considered.
Taxpayers should seek professional tax help in cases where the back taxes resolution involves a tax debt reduction. This will help in successfully negotiating a case with the IRS.