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Jun 16, 2015 5 min read

Tax Resolution Basics

We're sharing a few key terms to help you get started on your journey to adding tax resolution services. Learn more here!

Tax Resolution Basics

Tax resolution is an essential service in the tax industry. CPA practices can expand their service offerings and build new business by taking on tax resolution clients. If you are looking to expand your services as a CPA or if you are interested in tax resolution, here are key terms to help you get started:

Offer in Compromise

This enables an individual to settle tax debt for less than the full amount owed. The IRS may consider these types of options if an individual cannot pay the full tax amount or if doing so creates a financial hardship. The IRS considers - the ability to pay, income, expenses, and asset equity. If an individual is considering an offer in compromise, it is essential that individual follows all the steps laid out by the IRS and understands the process. A tax resolution specialist can determine if a taxpayer qualifies for an Offer in Compromise.

Installment Agreement

If an individual is unable to pay off tax debt immediately as they face a personal tax resolution issue, that individual may make monthly payments through an installment agreement. All tax returns must be filled out in order to apply for this option. The IRS offers online payment agreements if the individual is eligible. If an individual is set up for an installment agreement, it is essential to pay the minimum monthly payment when it is due and file all tax forms and returns on time going forward. Taxpayers can make installment payments via payroll deduction, direct debit, check, credit card, or online payment agreement (OPA). The IRS may revoke an Installment Agreement if a taxpayer misses a payment or fails to file their tax returns or pay taxes after the agreement is entered into.

Penalty Abatement

The IRS may remove the tax resolution penalties if there is a legitimate reason for not paying the taxes on time. Penalties and interest can sometimes make up a large portion of the overall tax debt. Tax resolution specialists will be able to advise if an individual qualifies for a penalty abatement.

For taxpayers that may be subject to an IRA penalty, the IRS asserts a standard of "Reasonable Cause" in determining qualification for a reduction of that penalty.

A few of the reasons the IRS may reduce a penalty are:

  • Death, Serious Illness
  • Fire, Natural Disaster
  • Unable to Obtain Records
  • Ignorance of the Law
  • Mistake was made
  • Undue Hardship
  • Written Advice from IRS
  • IRS Error

All tax resolution cases are analyzed by specialists on a case-by-case basis. In any case, taxpayers should file their tax returns as soon as possible. Delinquent tax returns should be dealt with immediately.

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