Tax debt reduction plans are heavily advertised because of their attractiveness to taxpayers deep in tax debt. Many fraudulent tax resolution companies have used tax reduction plans, specifically Offer in Compromise, to tempt taxpayers into contracting their services. In reality, tax reduction plans have strict qualifying factors that most taxpayers do not meet.
The most common qualifying criteria among the various tax debt reduction plans is the inability of a taxpayer to pay the full tax debt amount. To ensure that the applicant for a reduction plan is financially incapable of paying the full tax debt, the IRS asks for and reviews their complete financial situation, including income sources, expenses, assets and liabilities.
It is only if they find that the applicant taxpayer can only fulfill basic living needs such as housing, food, transport etc., and cannot pay the tax debt using another resource such as taking a loan, that IRS reduces payment of tax debt. The IRS may also suggest that a taxpayer explore postponement of payment under the payment plan known as Currently Not Collectible.
Before applying for a tax debt reduction plan, all other options must be considered because the IRS also looks for other options to resolve the debt and will only settle for tax debt reduction if no other favorable option is available. For the best resolution of tax debt, get to know the essential facts of IRS tax debt resolution plans or use assistance from a tax professional or a tax resolution company.