Tax resolution can be a complex process. Taxpayers facing unmanageable tax debt have two primary options: bankruptcy or Offer-in-Compromise. Each option has its own set of pros and cons that must be considered carefully when making a decision.
Bankruptcy is a legal process that helps taxpayers get rid of their debt including tax debt in under certain conditions. Taxpayers who file for bankruptcy receive an automatic stay and can discharge their tax debt quickly. However, filing for bankruptcy will remain on a person’s credit report for several years and may affect their ability to get future loans or lines of credit.
An Offer-in-Compromise (OIC) is an agreement between the taxpayer and the IRS to settle a tax debt for less than the full amount owed. Taxpayers can submit an OIC if they can prove that they cannot pay the full amount of tax due. An OIC allows taxpayers to reduce their tax liability without filing for bankruptcy, however it is often more time consuming as it requires more paperwork and negotiations with the IRS.
When facing tax debt, it is important to understand the pros and cons of bankruptcy and an Offer-in-Compromise before deciding which route to take. Taxpayers should consider consulting a Tax Resolution Specialist to evaluate their financial situation and determine which option works best for them. A Tax Resolution Specialist can provide guidance and advice to make sure taxpayers understand the process and make an informed decision.
Taxpayers should keep in mind that filing for bankruptcy does not necessarily mean their debt is gone forever, as certain forms of tax debt cannot be discharged through bankruptcy. Taxpayers with more complex situations may find that an Offer-in-Compromise is the better option. Taxpayers should take the time to understand their situation and explore all available options before making a decision.
By weighing the pros and cons of both bankruptcy and an Offer-in-Compromise, taxpayers can make an informed decision that best suits their financial circumstances. Understanding tax resolution options is key to successfully resolving tax debt and moving towards a brighter financial future.
If you or anyone you know has a tax issue with the Internal Revenue Service or the Indiana Department of Revenue, please schedule a phone or in-person consultation today. Your tax issues won’t go away on their own, but with the help of an experienced Tax Resolution Specialist, you can put your tax problems behind you once and for all.
Patrick H. Wanzer, CPA, CTRS
317.218.4689
www.edgewatercpa.com