What are the Common Types of Tax Resolution?

Getting a letter or notice from the tax authorities is a big headache for taxpayers as it means there is a tax problem. It could be a matter of tax evasion, misreported income, inaccurate financial statements, etc. There are many different types of tax problems that you may have to deal with.

Dealing with an IRS notice on your own is just too much to handle. In fact, you might end up paying heavy penalties and putting yourself under massive financial burden. That is why you should always turn to an experienced professional or a tax resolution agency for a solution that serves your interests. Tax professionals have specialization in handling a wide range of tax problems and offer their clients the much-needed help at the state, local and federal level. Based in the Bronx, NY, The SCL Tax Services is one such tax resolution agency, which provides fast and effective solutions to a wide range of IRS-related tax issues.

Here is a quick look at the most common types of tax resolution types that tax resolution companies use to help clients.

Installment Agreement

This is one of the most common types of tax resolution methods to resolve a tax issue with the IRS or other tax authorities.

Pay installments

If this method is chosen to help a taxpayer, this means that the taxpayer has consented to pay the heavy sum of their tax debt through small, monthly installments. The purpose is to ease the financial burden on the taxpayer, as paying the entire amount at once will be extremely difficult. What is important to note here is that taxing authorities will most likely ask you to pay a large installment amount every month. That is exactly why you should seek the help of a tax resolution expert or agency, which will deal with the IRS authorities to reduce the monthly installment amount so that the payment becomes easy for the taxpayer to manage.

Once the entire debt has been paid through monthly installments, the IRS will then free the taxpayer of federal tax lien.

Partial Pay Installment Agreement

This method of tax resolution works in the same way as the installment agreement method. The taxpayer still clears their tax debt by paying monthly installments, but the installment amount is much lower.

There is a statute of limitations associated with this type of installment agreement. As per the statutory terms, the taxpayer will be fully exempted from paying their monthly tax payments, if he or she is unable to clear the entire debt amount within 10 years. But, this will happen only after the IRS has conducted a review of your financial situation and found that your financial situation has remained unchanged. In case, the IRS finds something (such as increased income) that you have tried to withhold, the authority can decide to increase the installation amount.

Offer in Compromise

Abbreviated as OIC, Offer in Compromise is a commonly used method to resolve the tax problem of a taxpayer.

Before you are taken into this program, the IRS will carry out a detailed investigation of your present financial situation. The review will be done to compare your tax debt with your present financial status. Once you have qualified for this settlement program, the IRS will allow you to pay a lesser amount to clear the entire debt at once. The IRS may also decide to conduct multiple reviews of your financial status over a course of time, after taking you in.

The IRS determines the amount of OIC payment by using financial tools such as 433-A and 433-B for individuals and businesses, respectively. If you plan to settle your entire debt through this type of tax resolution, feel free to have a consultation with one of our tax professionals at SCL Tax Services.

Currently Not Collectible

This is actually a status, which means the delinquent taxpayer lacks the financial ability to pay their tax debt.

If you fall under the “currently not collectible” status, this simply means that you earn much less than what your expenses are. As a result of your economic hardships, the payment collection activity will be pulled up. The IRS will investigate whether or not you can bear the basic living expenses.

File Returns

 

File past due returns

The IRS deals with missing tax returns by levying penalties on the taxpayer. If you have missed returns, you will receive a tax bill from the IRS. Filing past due returns is a common way to resolve this problem.

A tax professional will go through all your financial documents to find out where exactly you stand in this regard. While you will be required to pay the IRS-imposed penalties, you can get a refund that you did not receive as a result of missing your tax returns. After the issues have been resolved, you will need to sincerely abide by all the tax laws in an appropriate manner going forward.

Penalty Abatement

In many cases, the amount of tax debt is so huge that it puts the taxpayer under a heavy financial burden. If you find it impossible to pay the penalties and interests, you can submit a penalty abatement request.

After you have submitted a request for penalty abatement, the IRS will examine your specific case. If you qualify for the abatement, the IRS will almost immediately remove the penalties imposed on you. In other cases, the IRS may direct you to first pay all the tax that you owe them. Once you have cleared the taxes owed, the IRS will then release you from the penalties and interests on your due taxes. Based on your specific situation, you can submit a request with the IRS for abatement of partial or the full penalty amount.

A tax resolution service or tax professional will first evaluate your tax situation and then apply the most ideal method to resolve your problem. Once your problems have been solved in a proper manner, you will need to file your tax returns in a timely manner to avoid any further discrepancies.

Talk to a Tax Resolution Specialist

If you have been sent a notice or a heavy tax bill by the IRS, the State or any other taxing authority, the best idea is to reach out to an experienced tax professional or a tax resolution service. If you are located in the Bronx, NY, you should head straight to the SCL Tax Services for the timely addressal of your tax problems. Our tax resolution specialists have extensive experience in effectively dealing with a range of tax problems for individuals as well as businesses.

Give our office a phone call or write us an email to schedule your consultation with one of our highly experienced tax pros.

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