Frugalnomics

If you want a method for tax debt settlement that allows you to pay the debt without paying the full amount you should seriously consider an offer in compromise with the IRS. An offer in compromise is honored by the IRS if there is a doubt that an individual will not be able to pay the tax debt in full payment. Instead of forcing the individual to pay the full amount the IRS can settle for a lesser payment instead of chasing on that tax payer and imposing more penalties and interests. This is employed so that the IRS could get something than get nothing at all from the tax payer.

However not all tax payers can qualify for an offer in compromise. You should only be considered for an offer in compromise on three grounds. First of all, as mentioned earlier, if there is a doubt that the tax payer cannot pay the remaining amount before the statutory period expires. The second reason for an offer in compromise is that there is an existing doubt in liability where the examiner fails to charge the right tax. Lastly, if the person is basically cannot pay the tax due to special situations. Or instance, a parent of a sickly child that needs high maintenance and long-term treatment may be granted an offer in compromise even if he or she earns enough money for the tax payment but not enough to support his or her sick child.

There are different payment schemes for an offer in compromise. There are lump sum payments, structured short term period payment and deferred periodic payment. In choosing the payment scheme, you should first consider your financial capabilities. Are you capable of paying in lump sums or would you rather choose a periodic payment.

To prevent more tax debts in the future, you need to have accounting packages. Accounting packages is an essential to carefully account your expenses and relevant figures in your business. Although it does not insure a tax payer from tax debts in the future, it keeps track with the tax expenses. If the tax payer knows his tax expenses he will always find ways to have the cash for the tax debt settlement.