Most people are familiar with IRS payment plans, which are extended payment periods available for those who are unable to pay their balances in full. However, in rare cases, the IRS also offers tax settlements - payment options that allow taxpayers to settle their accounts for less than owe. Qualifying for these IRS tax settlements is rather difficult, though, since the agency has very strict standards for granting these types of requests. Learning about IRS tax settlements and how they work can help you decide if you may qualify for these options.

Understanding an IRS Tax Settlement

Basically, an IRS tax settlement is available for individuals who can prove that they are completely unable to repay their tax balance in full and that they will be unable to do so for the foreseeable future. These settlement options include an offer in compromise, a partial payment installment plan and a penalty abatement.

Requesting a Tax Settlement

To request a settlement from the IRS, you'll need to learn the basics of each program and then apply for the one that you think you qualify to receive. While you can submit the request on your own, you may find it best to ask a qualified tax professional for help. In addition to meeting the economic requirements you'll also have to meet certain tax compliance guidelines including filing all of your tax returns for the last few years. You'll also need to submit details about your current economic situation, including your current income, assets and your necessary living expenses. If the IRS looks at your finances and determines that it is reasonably possible that it can collect most of the outstanding balance from you the agency will probably refuse to grant your request.

IRS Tax Settlement Options

An offer in compromise is the most commonly requested tax settlement option. Those who receive this settlement are able to offer a small percentage of their total tax balance as a lump sum and have the remainder of their debt forgiven. Another settlement program is the partial payment installment plan which allows taxpayers to pay back a percentage of their total debt over time and have the remainder forgiven. A final option is the penalty abatement - a forgiveness of the total penalties that have accrued on the account over time. Those who receive a penalty abatement will still owe the total balance but are able to avoid paying the additional penalties.

IRS tax settlements are an important repayment option for taxpayers who are having trouble meeting their tax obligations on their own. By learning about various IRS tax settlement options you can decide which program you'd like to request from the agency.