Understanding How Tax Resolution Works

Although taxes are considered a staple for Americans, millions continue to fall behind in their filings. You can easily forget about them, especially if you have a lot on your plate. 

However, there are grave consequences to falling behind your taxes. If you don’t file your taxes on time, you could face heavy penalties, liens, or worse, get sentenced to jail. Fortunately, you can work with the IRS to solve these issues through tax resolution. 

Tax resolution is a service offered to taxpayers facing issues like back taxes that haven’t been paid for months. If you want to learn more about this service, we’re here to help. 

In this blog, we’ll explore how tax resolution works, its different methods, and the benefits it offers. Read on to learn why getting tax resolution services is better than facing the IRS alone.

What is Tax Resolution & How Does It Work?

Tax resolution is the process of working with the IRS to solve issues like unpaid taxes, tax return errors, underreported or unreported income taxes, and other similar problems. 

A tax resolution expert will assess your situation, review your tax documents, and develop a strategy to address your issues. Once they find a suitable method for your circumstance, they’ll contact the IRS and help you communicate with them.  

Since these issues come in different forms, there are several methods that you can use to work them out:

Audit Representation

Whenever the IRS sees something suspicious in a person’s tax return, they will conduct an audit to check if you’re reporting the right amount of income and claiming legitimate deductions in your filings.

Tax audits scare most people, but the great news is that you don’t have to go through it alone. You can get a tax professional to help you create an audit defense. 

Installment Agreement 

An installment agreement is a tax resolution method where you agree to pay back your tax debt through monthly installments for six years. It’s a great answer to unpaid taxes that allows you to split your debt into smaller amounts. 

Moreover, installment agreements allow you to avoid late payment penalties and fees that could accumulate over time. 

Once you pay back your tax debt in full, any tax liens that the IRS imposed on you will be released, and you’ll get a current and compliant status. 

Partial Payment Agreement

A partial pay agreement is similar to a regular installment agreement, except it accepts even smaller payments for your tax debts. 

However, this tax resolution method only applies to taxpayers who owe the IRS at least $10,000. They must also be current with your tax withholding or estimated tax payments.

It’s also worth noting that your installment payments could increase as the years go by. The IRS will review your financial situation every two years to see if it improves, and if it does, your installment will increase. 

Currently Not Collectible Status

If you don’t have the financial capacity to pay back what you owe to the IRS, you can change your status to “Currently Not Collectible.”

You must prove to the IRS that you’re experiencing financial hardships to claim this status. This means providing them with documentation of your monthly income, assets, and living expenses. 

This status prevents the IRS from collecting your debt but doesn’t stop them from charging you additional penalties and interest. Moreover, they will still be entitled to collect your future returns to fulfill your bill. 

Penalty Abatement

The IRS charges penalties if you fail to follow tax laws and regulations. So, if you already have existing tax debt, these fees will go on top of them. 

Fortunately, you can reduce or waive your penalties by requesting penalty abatement. This tax resolution method is typically granted under two special circumstances. 

One is if you’ve had no previous penalties for the past three tax years. The First Time Penalty Abatement policy is granted to taxpayers with a history of good tax compliance. 

The second is when you have reasonable cause for your inability to pay on time, like lack of funds, death, or serious illnesses. The IRS will consider your situation and may grant penalty relief if you provide adequate documentation supporting your claim.

Benefits of Hiring A Tax Resolution Expert

While it’s true that you can solve your tax issues alone, there are plenty of benefits to hiring a tax resolution expert, such as:

Expertise

A tax resolution expert will use their in-depth knowledge of the ever-changing tax laws to assess your situation and determine which tax resolution method is best for your needs. 

Peace of Mind

It’s hard to relax after receiving a letter from the IRS. But when you have an expert by your side, you can rest easy knowing that you have a professional guiding you through the experience. 

They will assist you in communicating with the IRS, teaching you how to answer any correspondences you may receive. Sometimes, they’ll even take the lead of meeting with the IRS on your behalf.

Saves Money

The goal of a tax resolution expert is to reduce your liabilities as much as possible. If you have unpaid taxes, they’ll work hard to get you an installment agreement from the IRS. 

The same idea applies when you have penalties. They’ll assess your situation and determine whether you can qualify for the First Time Penalty Abatement policy. 

Furthermore, with their expertise, you can avoid making more costly mistakes when dealing with the IRS. 

Get Tax Relief Today

In today’s economy, tax issues may seem impossible to solve. But with the right tax resolution method and the guidance of a tax expert, you’ll be able to overcome these challenges in no time. 

If you need tax relief, look no further than NCH’s business tax resolution services. 

Our team of tax resolution experts is here to support you during this difficult time. We’ll carefully assess your problems and help you understand what options are available to you. 

Don’t let your fear of taxes and the IRS stop you from fulfilling your obligations. Contact NCH now and let us help you find the best tax resolution method for your needs. 

To learn more about our business tax resolution services, visit our website here or call us at 1-800-508-1729.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.