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Tax Resolution: Minimize Large Tax Debt

Tax Resolution: Minimize Large Tax Debt

Tax resolution maximizes your chances of settling your tax debt and trying as much as possible to avoid the IRS. Unfortunately, there are only a few reasons that will warrant a contact from Uncle Sam, and most times, it's not good news. 

The reason you may hear from the IRS includes incorrect tax filing on your tax return, i.e., filing wrong income and deductions. The office takes this seriously and considers it to be underreporting of income, and they may send an auditor to scrutinize your tax situation.


Signs that I'm about to get a visit from an auditor.

Uncle Sam won't burst down your door without a warrant or notice. The administrator first sends a hard copy notice letter to your home. However, you can write back to question their decision or appeal for mercy to deactivate the call. Alternatively, suppose the deduction does occur, and you agree to start an installment payment plan, but there is economic hardship. In that case, you can have the agreement canceled before the money is deducted from your account. 

If you refuse to answer their notice, you will get phone calls, after which an agent will burst into your home. To be on the err side, always reply to their messages and answer their calls to resolve any tax issue. It is never nice to get a visit from an IRS agent; because their sanction is strict.


Common Types of Tax Resolution

There are not many tax resolutions available out there. But there are ones used mainly by many taxpayers to minimize their huge debt to the IRS. This article will list and explain them with advice on how to go about each. 

Installment Agreement

An installment agreement is paying their debt as conveniently as possible. The amount you owe will be divided into payable segments to reduce the burden of paying. You pay your tax debt in installment for 6 years. The IRS sends you Form 9465 if you agree to pay in installments. This system of payment allows the debtor to relent during hard times.


Partial Payment Installment Agreement

A partial payment installment agreement, or PPIA, is no different from an installment agreement. The gray area is that the latter calculates the owed amount according to the taxpayer's statute of limitation and ability to pay. As a result, a taxpayer may not pay all the outstanding debt.

The statute of limitation gives the IRS a limited window to collect their debt from a taxpayer. After that period, it becomes illegal to pay unsettled taxes. The statute of limitation (CSED) states that the IRS is allowed to pursue tax debt for a maximum of 10 years from the assessed date. However, some circumstances allow them to extend the expiry date. After this period, the IRS cannot burst you for their taxes, meaning you're free and forgiven. 

Some taxpayers have made use of this opportunity. However, the IRS knows how difficult it may be and how partial payment is more manageable and advises taxpayers to use the opportunity and pay as much tax before the expiring date. That is the result of a PPIA.


Another opportunity is an offer of compromise (OIC). The option allows tax debtors to settle less than their debt. The method offers tax debtors a new start so that the taxpayer and the IRS get an equal share of their interest. The debtor and the IRS will come to a legal agreement on steps to be taken for better payment and convenience. However, only three reasons permit a taxpayer to take this option.

  • Doubt of collectability

  • Doubt of liability

  • A flawless tax system

The method is convincing, but the procedure is complicated and compiled into a guide you must read to determine what is accepted and unaccepted in this offer.



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