Yes, if your circumstances are adjusted. The IRS has the authority to cancel all or part of your tax debt and settle with you less than you owe. This is called a compromise offer or ICO. Sometimes, the IRS will consider reaching an agreement that allows you to pay a small amount of what you owe in back taxes, called a compromise offer.
You must convince the IRS that you cannot pay what you owe and offer to pay the reduced amount in a lump sum or in short-term installments. You have two options for submitting an offer on terms of commitment. You can work with a tax debt resolution service, or you can try to file them on your own. If you want to settle your tax debt yourself, simply download the IRS Form 656 booklet.
It includes Form 656 and Form 433-A that you must complete for your financial statement. Complete the forms and submit them for archiving on your own. If you can explain the reasons why you simply can't pay your taxes now, the IRS can put your case on hold and label you as currently uncollectible. If the IRS accepts the taxpayer's offer, the taxpayer will have agreed to fully comply with tax laws.
An ICO, commonly referred to as a “tax settlement”, is an agreement between the IRS and a taxpayer that settles a tax debt of less than the amount due. Landmark Tax Group is a professional tax resolution firm that specializes exclusively in IRS and State back tax issues. An IRS Form 656 can be used if your business is owned by a single owner linked to your social security number. He owed taxes for 11 straight years and, to make matters worse, the IRS had already filed a tax lien and was collecting his salary and bank account.
The letter will explain why the IRS rejected the offer and will provide detailed instructions on how the taxpayer can appeal the decision to the IRS Independent Appeals Office. Basically, the IRS reduces the tax debt owed by a taxpayer in exchange for a one-time payment. Keep in mind that the IRS may require you to limit your living expenses to the degrees you deem “reasonable”. If you receive a refund for filing the application within that two-year period, the IRS will apply it to your agreement.
You should consult a certified tax resolution specialist or a lawyer specializing in tax debts to review your options and negotiate a payment plan with the IRS. In most cases, the IRS will not accept an ICO unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). Usually, you have two years from the time the IRS first tried to collect unpaid taxes to apply for relief. Even if the IRS tries to collect a tax debt, the taxpayer can file collection appeals to try to stop a tax lien, garnishment, or seizure before the statute of limitations.