Battling insomnia last week I found myself flipping channels around midnight. I have found that this is the time of night you can usually catch commercials from a tax debt settlement company. Of course, this makes sense since we are a in the final stretch of the annual tax filing deadline. People facing potentially huge tax bills may be seeking the assistance of a professional for tax liabilities. It seems like such an easy fix. Especially when you have a cute little vampire on your television talking about how debt sucks. But consumers should beware that for every legitimate tax debt settlement company out there, there are a number of other less than credible companies.
It is common to hear stories of consumers that relied on a commercial about a former IRS agent with insider information on how to negotiate a tax debt settlement for pennies on the dollar. They make guarantees on the results that seem too good to be true. Most people recognize this, but others in a desperate moment may be more inclined to believe these quick fix schemes. And yes, some of these are actually schemes requiring you to pay thousands of dollars in up-front fees while providing little or no tax debt relief. You should be suspicious of any tax debt settlement company that requires you to pay fees up front without providing an explanation of what they intend to do. A good one will go over a plan with you and tell you exactly what to expect during the process negotiating your tax debts.
Self-help is available to all taxpayers if you have the patience and understanding of the options available to you. Many people do not realize that you can use the IRS website to apply for a repayment agreement online. This is true if your tax liabilities (including taxes, penalties and interest) do not exceed $50,000. The IRS acknowledges that they do want to work with taxpayers to get them in some sort of repayment status, even if it’s only $25-$50 per month. They would rather have some sort of payment plan in progress, even up to 6 years, than the alternative of no plan to pay back the debt.
Another way to reduce your tax liability is to make on offer in compromise to the IRS. This requires you to provide detailed financial statements to the IRS to prove that you lack the ability to ever pay back your tax liability due to an extreme economic hardship. But only one in every three offers is approved by the IRS each year. The IRS provides an online questionnaire to help consumers determine whether they are eligible for an offer in compromise. If you are eligible, be prepared to provide the IRS with the lump sum payment with your submitted offer in compromise. However, if your offer in compromise is not accepted, the IRS still keeps your money and applies it towards your tax liability.
To many people, handling this type of negotiation on their own is intimidating an overwhelming. If you find that you simply cannot do this on your own, by all means, seek the assistance of a reputable tax debt settlement company. And please don’t rely on the cute commercials you see late at night. Ask around. See if any of your friends have dealt with a tax debt settlement company in the past that they can recommend. Educate yourself on your options before you meet with them. Having a good working knowledge and understanding of how the system works will allow you to focus on interviewing the company more and not just being overwhelmed with all of the information they are throwing at you.
This author meets with a number of consumers in his debt settlement practice. He uses this opportunity to discuss how a tax debt settlement company will work and what the client can expect when dealing with one. He is qualified to provide quality content on this subject.
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