IRS tax settlement can be a challenging process to understand. Getting relief from tax debt can make a considerable difference in your financial situation and can help you get back on track. However, the IRS has strict parameters that determine if you qualify for a tax settlement. So, the million-dollar question is how to calculate your eligibility for an IRS tax settlement? In this blog post, we’ll discuss what an irs debt settlement is, what you need to do to qualify for it, and how to calculate it.
1. Understand how the IRS tax settlement works
Before calculating eligibility, you must understand what an IRS tax settlement is. The IRS offers various payment options to individuals who are unable to pay off their tax debt entirely. These payment options include an offer in compromise, installment agreement, and currently non-collectible status.
2. Know your eligibility criteria
The IRS has certain eligibility criteria that taxpayers must meet to qualify for a tax settlement. You need to determine if you fall into any of these categories. If you have a history of filing your tax returns, are not hiding any assets, and have explored other payment options, you might qualify for an IRS tax settlement.
3. Calculate your disposable income
To calculate your eligibility for an IRS tax settlement, you need to determine your disposable income. Your disposable income is what you have left over after your necessary expenses have been paid. Necessary expenses include rent/mortgage, utilities, food, clothing, transportation, and health care costs. The IRS considers your necessary monthly expenses along with your average monthly gross income to calculate your disposable income.
4. Determine the value of your assets
The IRS will also consider the value of your assets when deciding your eligibility for a tax settlement. Assets can include property, vehicles, investments, and other valuables. The value of your assets is assessed based on their fair market value. Your assets are then subjected to a standard allowance based on your family size and how many dependents you have.
5. Submit your documentation
The final step in calculating your eligibility for an IRS tax settlement is submitting your documentation. You will need to document your monthly income, monthly expenses, and the value of your assets. Any missing documentation can delay the IRS’s decision or result in denial of your request.
Calculating your eligibility for an IRS tax settlement isn’t as daunting as it may seem. Understanding the process and knowing the eligibility criteria is half the battle. By having accurate documentation of your financial situation, you’ll have a better idea of where you stand and what your options are. Remember, the IRS is always willing to work with individuals who want to settle their tax debt but have genuine financial difficulties. Eligibility for a tax settlement is determined by several factors, with your disposable income and the value of your assets playing a vital role. By following the steps outlined in this blog post, you’ll be able to calculate your eligibility for an IRS tax settlement successfully.