How much will the IRS usually settle for?

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asked Apr 18, 2023 in Law & Legal by Glueonhands (4,510 points)
How much will the IRS usually settle for?

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answered Apr 18, 2023 by RCallahan (13,590 points)
The amount the IRS will usually settle for is what they determine and deem you can feasibly pay.

There's no set percentage amount that the IRS will settle for as it depends on your IRS debt and how much you can pay.

The IRS will determine what you can pay them for an IRS settlement by taking into account your assets, home, car, etc and your income, your monthly expenses such as child care, rent, mortgage, utilities, and your savings and more.

If the IRS accepts an offer in compromise, settling a tax debt takes 6 to 8 months.

If the agency rejects the offer, then accepts it on appeal, the process takes 8 to 12 months.

The people who qualify for the IRS fresh start program are people having an IRS debt of $50,000.00 or less and or the ability to repay most of the amount.

Being able to repay the IRS tax debt over a span of 5 years or less and not having fallen behind on IRS tax payments before and being ready to pay as per the direct payment structure qualifies you for the IRS fresh start program.

The IRS does really have a fresh start program which was started in 2011 by the United States Federal Government.

The fresh start program provides tax relief to certain select taxpayers who owe money to the IRS.

If you owe the IRS but can't pay, then you can contact the IRS to set up payment plans.

If you cannot pay the IRS in full then you should file your tax return as normal and pay as much as you can by the due date.

Then see if you qualify for an installment payment plan and attach a Form 9465 Installment Agreement Request to the front of your tax return.

Also you might also qualify for the IRS tax debt forgiveness if you are in a hard enough financial hardship.

The IRS 6 year rule is a rule that allows for payment of living expenses that exceed the CFS, and allows for other expenses, such as minimum payments on student loans or credit cards, as long as the tax liability, including penalty and interest, can be full paid in six years.

Taxpayers must complete and submit an IRS Collection Information Statement (IRS Form 433-F), but do not have to provide substantiation of reasonable expenses.

If you think you are going to need more than six-years to repay the IRS, prepare for a hard time.

The CFS will be applied and the IRS will review your financials with a fine tooth comb. What you think may be reasonable is unlikely to meet the IRS standards.

While their are exceptions that allow the IRS to deviate from those standards, they will be slow to agree to do so.

While acceptance isn't guaranteed, the IRS doesn't usually require additional financial information to approve these plans. With a streamlined plan, you have 72 months to pay.

The minimum payment is equal to your balance due divided by the 72-month maximum period.

An IRS payment plan works best for people who are only behind on the current year's taxes and who have no other way to pay within a month of the tax deadline.

It's important to keep in mind that payment plans aren't something you should rely on.

IRS payment plans and agreements are not reported to the credit agencies so by setting up an IRS payment plan will not affect your credit or credit score.

The IRS does not report any of your payments or delinquent IRS taxes to the credit agencies as it's not credit that you are owing to them.

Both owing the IRS or making payments to the IRS on your income taxes will not affect your credit score.

So if you need to setup a payment plan with the IRS to pay your back taxes you owe then there's no need to worry about your credit score being affected.

Just continue to make the IRS income tax payments as you agreed to on and they cannot take anything you own or seize your bank accounts etc.

But if you default on the payments the IRS could seize your property, bank accounts, garnish wages etc.

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