What is the process for filing a tax settlement?

The tax settlement process usually starts with a free consultation. A case manager will review your current tax debt and other financial details and provide you with a quote for your services. If it continues, the case manager will conduct a thorough investigation of your taxes, develop an action plan, and negotiate with the IRS. The tax settlement process with states is similar to the process with the IRS, but it varies from state to state.

In some states, for example, you can exempt yourself from fines, but not interest. In other states, they may be exempt from interest, but not from penalties. And in some states, legitimate tax debt can't be reduced at all. For more information, contact your state comptroller.

Visit the National Association of State Auditors, Comptrollers, and Treasurers (NASACT) site to view its member directory, or see the list of NASACT states by state. There are several red flags that should warn potential customers who are considering hiring a tax settlement firm. 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. Even if the IRS attempts to collect a tax debt, the taxpayer can file collection resources to try to stop a tax lien, lien, or seizure before the statute of limitations expires.

The number of customers who get satisfaction from tax settlement companies is negligible, and most are practically in financial destitution. Known as tax settlement firms, these entities claim that they can dramatically reduce or eliminate what the customer owes 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. You should consult a certified tax resolution specialist or a lawyer who specializes in tax debt relief to discuss your options and negotiate a payment plan with the IRS.

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.