Dealing with tax debt can be a daunting and stressful experience. Whether you’re an individual or a business owner, the complexities of tax laws and regulations can make finding a solution feel like an uphill battle. However, tax resolution, also known as tax relief, offers a way to address these issues and regain financial stability. In this comprehensive beginner’s guide to tax resolution, we’ll explore the process, various strategies, and resources available to help you resolve your tax debts and disputes.
Tax resolution refers to the process of resolving tax debts or disputes with the Internal Revenue Service (IRS) or state tax agencies. This can involve reducing the total amount owed, negotiating a compromise, or establishing a payment plan. Tax resolution can also address tax liens, levies, or wage garnishments, which may have been imposed due to unpaid taxes. The primary goal of tax resolution is to provide relief and peace of mind to taxpayers by addressing their tax issues and allowing them to regain financial stability.
The tax resolution process typically begins with a thorough assessment of your tax situation. A tax professional or tax resolution company will review your financial records, tax returns, and correspondence with the IRS or state tax agency to determine the best course of action for your case.
The tax resolution process can involve several different strategies, including:
Installment Agreement: An installment agreement is a payment plan that allows you to pay off your tax debt in monthly installments over a specified period. The IRS or state tax agency may agree to an installment agreement if they believe you cannot pay your tax debt in full immediately.
Offer in Compromise (OIC): An OIC is a settlement agreement between you and the IRS or state tax agency, allowing you to pay a reduced amount to settle your tax debt. To qualify for an OIC, you must demonstrate that you are unable to pay the full amount due to financial hardship, or that the tax liability is incorrect.
Penalty Abatement: If you have a reasonable cause for not paying your taxes on time or failing to file your tax return, you may qualify for penalty abatement. This can significantly reduce or eliminate the penalties associated with your tax debt.
Currently Not Collectible (CNC) status: If the IRS or state tax agency determines that collecting your tax debt would cause undue hardship, they may place your account in CNC status. This means they will temporarily halt collection efforts while you work to improve your financial situation.
Innocent Spouse Relief: If you find yourself saddled with tax debt due to your spouse’s or former spouse’s actions, you may be eligible for innocent spouse relief. This can relieve you of the responsibility for paying the tax debt, penalties, and interest associated with your spouse’s or former spouse’s actions.
Navigating the intricacies of tax resolution can be challenging, especially when you’re already burdened with tax debt. Tax professionals, such as enrolled agents, certified public accountants (CPAs), and tax attorneys, have extensive knowledge of tax laws and regulations and can guide you through the resolution process.
Enrolled agents are federally licensed tax practitioners authorized to represent taxpayers before the IRS. They can assist with tax resolution by negotiating with the IRS, preparing and filing necessary forms, and providing advice on tax-related matters.
CPAs are accounting professionals who have passed the Uniform CPA Examination and met specific state licensing requirements. They can provide tax resolution services, including preparing and filing tax returns, analyzing financial records, and offering tax planning advice.
Tax attorneys are legal professionals who specialize in tax law. They can represent taxpayers in court and provide legal advice on tax matters. Tax attorneys can help with tax resolution by negotiating with the IRS or state tax agencies, addressing complex tax issues, and handling appeals or litigation.
Several tax resolution companies can help you navigate the complex world of tax relief. These companies employ tax professionals, such as enrolled agents, CPAs, and tax attorneys, with extensive knowledge of tax laws and regulations.
Some of the leading tax resolution companies include:
Optima Tax Relief
Tax Defense Network
Anthem Tax Services
Larson Tax Relief
When selecting a tax resolution company, it is crucial to research its reputation, experience, and success rate in resolving tax issues. You should also consider their fees and the types of services they offer. Be cautious of companies that make unrealistic promises or guarantee specific results.
If you need financial assistance to resolve your tax debt, several loan options are available. Some common loan options for tax relief include:
Personal Loans: Personal loans are unsecured loans that can be used for various purposes, including tax resolution. Borrowers can obtain personal loans from banks, credit unions, or online lenders. Interest rates and repayment terms vary based on your credit score, income, and other factors.
Home Equity Loans: Home equity loans are secured loans that use your home as collateral. These loans can be used to pay off tax debt, and they typically have lower interest rates than personal loans. However, you must have sufficient equity in your home to qualify for a home equity loan, and there’s a risk of losing your home if you fail to repay the loan.
401(k) Loans: Some employer-sponsored retirement plans, such as 401(k)s, allow participants to borrow money from their accounts. 401(k) loans can be used for tax resolution, but there are limitations on the amount you can borrow, and the loan must be repaid within a specified period, usually five years. Failing to repay a 401(k) loan on time can result in taxes and penalties.
Credit Card Cash Advances: Some credit cards offer cash advances, which may be used to pay off tax debt. However, credit card cash advances typically come with high-interest rates and fees, making them a less desirable option for tax relief.
Tax resolution can be a lifeline for taxpayers facing financial difficulties due to unpaid taxes. Understanding the basics of tax resolution, the strategies available, and the resources at your disposal can help you take the first steps toward resolving your tax issues and regaining financial stability. Whether you choose to work with a tax professional, or a tax resolution company, or explore loan options for tax relief, taking a proactive approach to address your tax debt can alleviate stress and help you avoid further legal complications.
United Credit strives to keep the content shared on this blog accurate and up to date. You are urged to consult with business, financial, legal, tax and/or other advisors and/or medical providers with respect to any information presented. Opinions expressed here are the author’s alone and have not been approved or otherwise endorsed by any financial or medical institution. This content is intended for informational purposes only.
As Chief Sales and Marketing Officer, Nate expertly drives revenue growth for United Credit by leading sales and marketing strategies across all channels. With over 20 years of experience working with global brands in various industries, Nate has a proven track record of boosting sales, expanding market share, and building strong relationships. His unique ‘right-brain + left-brain’ approach combines business acumen and strategic thinking with striking creative execution, ensuring United Credit’s sales and marketing efforts consistently deliver results for continued success.
Matthew is the President and Founder of United Credit. Matt founded fintech company United Medical Credit in 2011 to connect consumers and businesses with an array of experienced, innovative financing solutions. In 2022, the company grew and became United Credit, fueling an expansion into retail markets while retaining its expertise in specialty healthcare.
Since its founding, Matt has provided leadership for all aspects of the Company, emphasizing long-term growth while ensuring United Credit delivers value to its consumers, merchants, and business partners. The Company has risen in the fintech space as a preferred consumer financing partner under his tenure.
Matt is also an active member of YPO (Young Presidents’ Organization), the world’s largest leadership community of company chief executives.