Settle Your IRS Tax Debt
Offer in Compromise Deals

You can settle your IRS tax debt, that is a fact. The IRS is often seen as a staunch and unforgiving institution, but they do have procedures in place to make life a little easier when you are stuck in a position where you can pay your tax debt in a timely fashion.

One of a number of tax debt solutions, a debt settlement of a tax obligation is known as making an Offer in Compromise. The process is fairly similar to debt settlement with a private credit lender. You are settling the debt for less than the total amount owed and as a result your credit score will suffer.

The IRS Offer in Compromise Program

The process of filing an Offer in Compromise is fairly simple. You make an offer to settle a tax liability for less than the full amount the IRS is seeking. The IRS will then make a decision to approve or reject that your offer.

There are two major factors that may lead to the IRS accepting the offer. One is if they can’t see any realistic possibility of collecting the full sum owed from you or the tax debt itself is questionable. Basically it is unclear whether or not you should be liable for the debt.

There are several negative effects that come from an Offer in Compromise that you should note before considering the option.

• Not only do you have to pay the offer amount, but the IRS assumes certain privileges to seize refunds and tax credits owed by you.
• You must keep a squeaky clean tax record for the following five years.
• Any failure on your part to stick to the terms of the agreement will set you back to owing the full amount of your tax debt.

Other Payment Options

If you want to avoid the negative effects that come from a Offer in Compromise, there are other ways to pay off tax debt, but they all involve paying the full amount. Filing an Offer in Compromise is the only way real way to settle a tax debt for less than the amount owed.

One option to pay back tax debt without using an Offer in Compromise is to get the IRS to agree to an installment plan and pay the tax debt off over a period of time. You may also combine the installment plan with an upfront partial payment to speed up the pay back process.

Tax Debt and Bankruptcy

Of course, declaring bankruptcy is not a form of debt settlement, but it can be a last-resort method of clearing a tax debt. Debt from income tax can generally be discharged when you file for bankruptcy.

Again, this should be a last resort. You are generally much better off pursuing an installment payment plan or making an Offer in Compromise and sticking to the rules the IRS lays down if your offer is accepted. There are a number of downsides to declaring bankruptcy.