Have you have run into tax troubles and owe the IRS big money? The reasons so many taxpayers incur a big tax bill vary from simply avoiding filing tax returns, to being self-employed and underestimating the amount of income and self-employment tax you will owe at year end. It can start one year and then just keep piling up to the point where you have trouble catching up.
There are commercials out there that hawk “Settle your IRS debt for pennies on the dollar!” This sounds great – but it is not as attainable as it sounds. These ads are referring to Offers in Compromise, agreements with the IRS for taxpayers that have a large balance due and cannot afford to pay it back in full.
The IRS does not write off debts unless they are pretty certain they will not be able to collect the full debt within a given time period, or if to do so would cause an undue hardship on the taxpayer. It is an option for people who truly cannot and will not be able to pay off their debt in the near future. If the IRS accepts you into this program, you will agree to pay a smaller amount of tax to settle the debt. This sum is usually paid in one lump sum, but may also be spread over a few payments. The process from application to end can take several months and sometimes up to a year.
More commonly used is an agreement to pay your tax debt over time. The IRS offers installment payment plans depending on the amount you owe. This option allows you to pay your overdue tax bill monthly until it is paid off.
Both of these options require that you stay compliant, meaning that all tax filings are filed and paid on time in the future.