How to Reduce Tax Debt. Guide on Reducing IRS Taxes Owed

When you owe money to the IRS they are going to come after it soon enough. Instead of waiting for the collection process to start, you are much better off getting ahead of the game and straightening everything out on your own. Along with this, you want to think long and hard about how you can reduce the tax debt owed. The IRS offers a few ways to pay less than the actual amount owed. If you qualify for any of these methods and fill out the paper work properly, you can actually reduce the total amount of taxes owed.

To reduce tax debt owed you don't want to consider a traditional IRS Installment Agreement. In fact, this will do the opposite of what you are trying to accomplish. With this type of payment plan you will end up paying more in the long run thanks to penalties and interest.

One type of installment plan that is good for reducing tax debt is a partial payment installment agreement. To take advantage of this you need to owe the IRS more than 10k. How does this equate to reducing your tax debt? In short, the amount that you will pay each month will total less than the actual amount that is owed. Up front you may not realize that you are saving money, but over the long haul this is evident.

You can also try to reduce your tax debt through an offer in compromise. Generally speaking, this is when you make an offer to the IRS for what you want to pay. Make sure you throw out a good number or you are going to get turned down. Your offer should be equal to or more than what the IRS could obtain through forced collections. The problem with this is that an offer in compromise is only accepted by the IRS approximately 10 to 15 percent of the time.

Offer In Compromise Requirements

Effective tax administration

This is when you agree that the tax owed is correct, but can prove that paying it will put you in a bad financial position.

Doubt to Collecting Liability

You have to prove to the IRS that paying back the total debt is not probable due to your current financial situation.

Doubt of Liability

You must prove to the IRS that the amount owed may not be 100 percent accurate.

Is all of this too confusing for you? Hiring a tax firm is a good decision if you are lost about how to settle your tax debt. A tax professional can help you determine which option you qualify for, how much to offer the IRS, and much more.

You can reduce tax debt owed. But to do so you need to know the details of your situation as well as how the IRS works.

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IRS Tax Settlement
Information on the different ways available to taxpayers to settle their taxes owed with the IRS.

Payment Plans
Payment plans offered by the IRS which allow the taxpayer to pay off taxes owed in a given period of time.

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The various methods and approaches to paying past due taxes to the IRS and states that are owed.