If you qualify, the amount you pay will be equal to your asset value, plus one or two years of future income, depending on the type of offering selected. The question of liability arises when there is a genuine dispute over the existence or amount of the correct tax debt under the law. If you have legitimate doubts about whether you owe part or all of the tax debt, you will need to fill out Form 656-L, entitled Transaction Offer (Concern Regarding Liability), in PDF format. A Low-Income Taxpayer Clinic (LITC) may be able to help.
LITCs help low-income people who have a tax dispute with the IRS. Find out if you qualify for their services and where you can find a LITC. If you agree with the rejection, you can send the full payment of your tax debt to avoid additional interest and penalties, or request an installment agreement to pay your tax debt. Most tax settlement firms promise to send their experts to the IRS to negotiate on behalf of the client, where they will presumably be able to persuade the agency to accept a much smaller amount, often a penny on the dollar.
These entities, known as tax settlement firms, claim that they can dramatically reduce or eliminate what the customer owes to the IRS. Compare that information with everything a tax settlement company tells you to make sure you've received the correct information before deciding whether or not to hire the company. The tax settlement process with states is similar to the process with the IRS, but it varies from state to state. The number of customers who get satisfaction from tax settlement companies is negligible and most are practically in financial distress.
The vast majority of potential clients of settlement agreements need to develop payment plans with the IRS that allow them to settle their tax balances over time and, at the same time, preserve their assets and their dignity. There are several red flags that should warn potential customers who are considering hiring a tax settlement firm.