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IRS Payment Options if you are Unable to Pay Taxes Due

September 2, 2011 By

If you find yourself in a situation where you are unable to meet your due taxes before the tax deadline, do not despair. There are available options that you can take advantage of to ensure that you do not agitate Uncle Sam. Here is what to do if you find yourself in such a situation:

File a Tax Return

Ensure that you file a tax return, even if you are unable to pay off the due taxes immediately. There are worse consequences if you do not file the return. Not filing amounts to more tax troubles and may even surmount to criminal implications.

Consider Various Options for Paying your Due Taxes

Once you have filed your tax returns, you need to plan on how you will pay the taxes due. Depending on the amount of taxes that are owed, you may consider the following options for delayed payments:

  • Request for Short Delay – If you will have the funds to pay the taxes within 120 days, then you may call the toll-free IRS number and request for a short delay. The IRS customer service representatives handling such issues are permitted to make an interest and penalty free extension of up to 120 days if you provide a good reason for the delay.
  • Installment Agreement – If the amount you owe is below $25,000.00 and you are not able to pay it all in one lump-sum, you can apply for an installment agreement under the Online Payment Agreement service available on the IRS website. You can also call the toll-free IRS number to set up this installment agreement. The installment agreement is automatic for any taxpayer who owes below $25,000.00 and you can determine the installments to pay as long as you will repay within the required period. This installment agreement also has an extra advantage – you will not be requested to provide financial statements or any further paperwork. However, you will need to pay interest on the taxes due and late payment penalties. The interest rate for tax debt to the IRS is currently at 4% and is subject to change every three months. The late fee is currently 0.25% for Installment Agreements and 0.5% for tax debts outside IRS payment agreements.
  • Consider Borrowing – You can also consider taking a loan to clear your due taxes. However, you will need to compare the amount to pay if you took up a loan against making late payments through installments. Depending on your loan terms, you can check if the loan interest will amount to more than what the IRS will charge in interest and lateness fees. If the loan interest rate is less than that of the IRS’s deal, then it would be advisable to take the loan and pay off your taxes. However, if it is cheaper to take the IRS Installment Agreement, you should not be hesitant as there is no recourse to taking the agreement.
  • Prioritize Between State and Federal Taxes – If you owe both Federal taxes and State taxes, you should also do a comparison of the charges to be levied if you are late on either of the taxes. You can then pay off the taxes that bear more charges in interest and late fees and place an installment agreement with the tax authority with lower charges.
  • Seek Professional Help – If you owe over $25,000.00 or are still unsure about how to handle your tax dilemma, you may consider seeking help from a tax professional on what to do regarding which option to select.

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IRS Payment Options for Those Who Cannot Meet the Deadline

July 18, 2011 By

Taxes due in a given tax year are to be paid on or before April 15th of the following year. However, if you ever find that you cannot pay your due taxes before this deadline, you can still apply for other options of tax payments. You should also ensure that you file your tax returns by the due date. There are 4 options that the IRS provides to individuals who are unable to pay their due taxes by the 15th of April:

1. Extension of the Payment Period

Depending on your financial circumstances, the IRS can extend the tax payment period by 60 to 120 days. To get such an extension, you can apply online via the Online Payment Agreement application section of the IRS website. You can also call the IRS telephone number and request for such an extension. Interests are charged on the tax liability for the period of the extension. However, such interests are very low, especially when compared to other options for extended payments.

2. Installment Payment for Taxes below $25,000.00

The IRS also provides another option for payment specifically for those whose tax debt is significantly large and cannot manage to pay off the tax liability in a lump-sum payment. If the taxes owed are less than $25,000.00, including penalties and interest, then one can apply for an Online Payment Agreement to have the tax liability paid over a period of 5 years. For this type of installment agreement, the approval is almost immediate and one can designate the amount of installments to pay as long as the installments will allow the debt to be paid off within 5 years. The agreement does not require any paperwork, such as remittance of financial information, to the IRS. Apart from applying online, you can also apply for this type of installment agreement by calling the IRS telephone number, by making a written request to the IRS, or by filing Form 9465, “Installment Agreement Request Form”.

3. Installment Payment for Taxes above $25,000.00

If you owe more than $25,000.00 in taxes, you will need to contact the IRS and provide all your financial details in a financial statement. These details include your paystubs, bank statements, list of assets and debts, and other financial documentation. The IRS then reviews your financial portfolio and determines the amount of tax payments that you will pay per installment.

4. Credit Card and Debit Card Payments

The IRS has also provides a platform where any taxpayer can now pay their taxes by either debit card or credit card. Therefore, if you still owe taxes by the tax deadline, you can use your credit card to make the payments. The IRS has outsourced the facilitation of the credit and debit card payment to three private companies. These companies are Link2Gov Corporation, Official Payments Corporation, and RBS WorldPay, Inc. You can make your tax payments through the websites of these companies. The IRS does not charge any fee for credit card and debit card payments. However, each of these private companies charges a convenience or flat rate fee.

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Tax Relief Options: Offer in Compromise and Installment Agreements

June 21, 2011 By

An Offer in Compromise

An Offer in Compromise (OIC) is a negotiated deal that the IRS gives to a taxpayer who has an outstanding tax liability and is unable to pay it off for one reason or another. The Offer reduces the tax liability of the taxpayer depending on his or her ability to pay and reduces the tax debt to as little as 1% of the taxes owed. OIC is given at the discretion of the IRS and is not a right of any taxpayer. To qualify for an OIC, you need to have made full disclosure and correct submission of your tax returns. The chances of winning an OIC are low (below 50% of applications). According to the IRS, there are three reasons that can qualify a taxpayer for an Offer in Compromise.

  • Doubts on Tax Collectability – The first condition that can grant a taxpayer an OIC is if there are doubts as to whether the IRS can successfully collect the tax debt from the taxpayer within the time frame allowed by the law. To qualify, the taxpayer needs to have no assets that they can cash out and their monthly income too little to pay the tax debt while paying for their necessary minimum living expenses.
  • Doubt on Accuracy of Tax Liability – This is a rare qualification option for an OIC. To qualify, there must be significant doubts as to whether you really owe the tax liability that remains outstanding. This can happen if the taxpayer produces new evidence that casts doubt on the existence or legitimacy of the tax liability or if a tax law was misinterpreted when determining the tax liability.
  • Exceptional Circumstances – Even in situations where the tax liability in question is correct and the taxpayer can manage to make payments, the IRS can still consider an OIC if payment of the tax liability would have the taxpayer living in financial hardship or if paying the tax liability would be unfair in one way or another.

Installment Agreements

Installment Agreements are another product negotiated with the IRS. The IRS provides various installment payment plans for taxpayers who have a tax liability that they cannot pay off in a single lump-sum (without having the taxpayer suffering below the necessary living standards). People who owe the IRS below $25,000.00 can go for a Streamlined Installment Agreement that does not require forwarding financial documentation to the IRS. On the other hand, if a taxpayer owes over $25,000.00, they will need to call the IRS and negotiate for an Installment Agreement.

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Marlee Matlin Seeks IRS Installment Plan to Pay Tax Liability

June 6, 2011 By

Tax scandals are a norm in the lives of many celebrities. When a tax scandal erupts, it especially comes with a reputation risk and huge embarrassment to such celebrities. One of the latest celebrity “victims” of scandal is an Academy Award winning actress who got herself in a $50,000.00 tax liability for her 2009 returns. The famous deaf actress, who recently appeared on a famous reality show where she wanted to become an “apprentice” for a certain famous mogul, downplayed the tax debt as a common thing in the U.S. and stated that she was already paying off the liability. According to sources, the actress is paying off the tax liability through an IRS installment payment plan. She hopes to use the funds that she is set to earn through various TV shows that she is currently involved in to pay her debts to Uncle Sam.

Besides the funds that she is currently seeking to earn, the actress is also aiming to sell off her house and also transfer her kids from private school to public school in order to raise more money to settle her tax liability. The actress, who filed taxes jointly with her police-officer husband, says that her tax liability did not arise from living a flamboyant Hollywood life but rather, it was her poor budgeting that let her finances get way out of hand. She lamented that being an actress and earning income in a haphazard way made financial and tax planning much more complicated as compared to people who earn a consistent and steady paycheck.

The IRS installment payment plan will enable the couple to pay off their tax liability in installments that are more affordable over span of a couple of years. The installment payment plan is available to all taxpayers who cannot afford to pay off their tax liabilities in a lump-sum. However, interests and penalties will continue to accrue, even within the repayment period. To qualify for an installment plan, you will need to call the IRS and request to be placed on an Installation Agreement. There are different options of installment plans that are available from the IRS.

If you owe over $25,000.00, you will need to negotiate with the IRS for a repayment plan. The IRS will require you to fill out Form 433F, “Collection Information Statement Form” detailing all your assets, pay stubs, bank records, and a myriad of other information. In case you do not manage to keep to the installment plan and pay on time and accordingly, the IRS can easily pursue your assets and place liens as they have all your financial information.

Either way, IRS payment plans give a chance for an individual with a huge tax liability to pay it off in manageable installments and avoid having liens placed on their assets and having other financial battles with the IRS.

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Is It Time to Hire a Tax Lawyer?

April 19, 2011 By

If you are in trouble with the IRS, there are several important factors to consider before choosing representation. Consider the level of involvement of the IRS in your issue thus far.

If the IRS is going to audit you because they believe your taxes were fraudulently filed, a tax lawyer will be able to advise you on what to do to avoid severe penalties of up to 75% of taxes you owe. If you owe taxes and paying them will create severe hardship for you, you may be able to enter into an Offer in Compromise agreement with the IRS which will allow you to pay less than your full debt. Although you can get an Offer in Compromise without representation, a tax attorney will be able to increase your offer’s chance for acceptance. In the event that your offer is not accepted, your attorney can advise you on your other options.

You may have a lien placed on your assets or your wages may be garnished because of failure to pay your taxes. With a lien or wage garnishment, the IRS attempts to gain back the value of the taxes you have yet to pay. A tax attorney can help you by getting the lien or wage garnishment removed. If the IRS has already audited your tax returns and determined they were fraudulently filed, a tax attorney can help you get the resulting penalties removed.

To find the best tax lawyer for your needs, do your research. Many attorneys offer free consultations, which is a great opportunity to assess whether you are compatible with that tax lawyer. It may also help to ask others who have had tax problems, and it is essential to make sure they have experience, the proper education, and are a member of the state bar.

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No Questions Asked – Streamlined IRS Installment Agreement

January 17, 2011 By

If your income tax liability to the IRS is under $25,000, you should consider an installment agreement. These streamlined agreements are available to anyone whose income tax debt is lower than $25,000 and can pay their balance in five years. The installment agreements are streamlined because if you meet the qualifications, you will enter into that repayment plan with no questions asked.

There are several advantages to an installment agreement of this type. First, it really is a streamlined process. A streamlined installment agreement with the IRS means simplicity. You just have to call, tell them you owe under $25,000, and want to pay it under five years using a streamlined process.

Second, there really are no questions asked. You do not have to fill out a financial statement, which means you do not have to provide any documentation of your finances. You do not have to disclose where you work, where you bank, or your assets. Normally when you enter into an installment agreement, you have to provide personal documents like bank statements, recent paystubs, and verification of your living expenses.

Third, since the process is streamlined and since there is no documentation required – meaning easier for you and easier for the IRS – the IRS will not apply financial standards to your living expenses. Typically, financial standards apply, which means they are likely to ask you to pay an amount which is higher than what you can realistically afford. Since you do not have to give the IRS documentation of everything, and since the process is streamlined, you will save time and money. Your payments will be less, and the hassle will be less. This is a great way to negotiate with the IRS to make the process easier on both of you and to make the IRS happy by entering into a set payment plan.

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IRS Installment Plan: Short of Perfect

November 9, 2010 By

Installment Payment Plans by IRS Are Not Perfect

It is a known fact there are procedural difficulties in IRS collection cases. Tax professionals are fully aware these difficulties result in delays. Delays cost the taxpayer time and money because, typically, the taxpayer and the IRS come to an agreement that doesn’t suit the unique circumstance of the taxpayer.

Tax professionals have noticed it is common for the IRS to agree to an IRS installment plan with a taxpayer who can pay their bill in full or the IRS expects a taxpayer with no earnings to enter into a payment plan. This mismatch arises because there are IRS officials who are not sufficiently trained and knowledgeable. The IRS is a massive bureaucracy that often results in errors and poor judgment; it is impossible to get one-on-one personal service from the IRS.

A qualified tax professional will have the expertise to assess whether or not a specific IRS official has the training and knowledge to deal with a taxpayer’s situation. A tax professional will be able to make a distinction between an IRS official who is incompetent and one who is efficient and knowledgeable.

Due to the size and imperfections of the IRS, its officials cannot provide a service to the public that is of a consistently high standard. It is becoming even more difficult for the IRS to improve due to its determination to shut the tax gap. This decision was made in order to assist in the payment for the federal shortfall quadrupling.

A TIGTA study found seventeen of fifty seven installment cases were recognized so that taxpayers with financial means could settle their tax bill in full. By doing this, they could steer clear of the charge for an installment contract, penalties and interest.

A tax payer has a much higher chance of saving both time and money if a tax professional negotiates with the IRS on his or her behalf.

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Tax Relief Options

September 23, 2010 By

Careful Consideration of IRS Problems Will Save You Time

It’s natural to want to resolve problems with the IRS as soon as possible. This is why many taxpayers don’t spend sufficient time thinking through their tax problems. If you have such problems with the IRS, there important considerations:

Is the way you want to solve your IRS problems possible? One of the better means of solving a tax problem is to opt for an Offer in Compromise. Prior to making this decision you must decide if you are a suitable applicant. There are specific blueprints used by the IRS to work out the amount for settlement. More often than not, their blueprint is not the same as your reality. The most common disagreement is the dissimilarity between the amount the IRS expects and your living costs. If the IRS blueprint is rigid and your living costs can’t cope with their expectation then consider bankruptcy or an installment plan.

Can the IRS seize your property? Due to the gravity, you must ascertain risk of levy and seizure. Even though it’s not common, you must negotiate with that risk possibility in mind.

The IRS has a preference for liquid assets like salaries and cash in the bank above assets without equity like bank loans, houses and cars. They must warn you prior to levying or seizing any assets. They must allow you to settle or appeal before they act. You must know if the IRS has the right to take this action prior to making a choice.

What time limit is provided by the Statute of Limitations on Collection? According to the statute the IRS is allowed a collection period of ten years beginning from the time your liability is recorded by the IRS. Careful consideration is a must as your actions during that time affects the date of conclusion. E.g. if an Offer in Compromise (or OIC) is refused the IRS gets further collection time because it takes up to one year.

If there’s only a short time before the ten years ends avoid an OIC. It is better to opt for an installment plan. A Hardship or Currently Not Collectible declaration is also preferable.

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Two Important Words: Tax Relief

September 22, 2010 By

Educator Excitement

Tax relief– two words that go great together and for good reason. People pay a lot of money each year in taxes and in today’s economy, any savings are good savings. Federal and state governments offer a lot of help that people simply don’t realize is available. This is great news if you owe the IRS some money or are looking to save during the filing of next years taxes. Most tax preparers will offer you tax relief help but it’s a good idea to ask them if you qualify because they may not know your circumstances. Here are a few common types of tax relief:

Penalty Abatement

A lot of people owe the IRS money; penalties and interest will accumulate as long as you don’t comply with them. You can get penalty abatement tax relief which will reduce the penalties or even eliminate them completely for past taxes owed.

Installment Agreements

This is exactly what it sounds like. You can work with the IRS to pay them back slowly over a period of months or years instead of paying them a large lump sum.

Disaster Tax Relief

Were you in a recent disaster like Hurricane Katrina? If so, the government will offer you complete tax relief. This means you don’t have to pay taxes for that particular year or the IRS will offer you an extension on your back taxes. Tax relief help of this kind doesn’t occur very often however; you should inquire about this form of relief if you feel you qualify.

Offer in Compromise

Like many credit card companies, the IRS may offer you a compromise. This could be the best route if you owe a lot of money. You could pay well under 40% of what you actually owe because the IRS doesn’t like to waste time and resources by taking you to court.

Tax relief help is very important. An experienced tax professional can find more areas that you may qualify for than you can on your own. Even if they charge a fee for their service, odds are you will get back much more than you pay.

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IRS Penalties: Defaulting on your Installment Agreement

September 3, 2010 By

Don’t break your deal with the IRS!

When you set up an installment agreement, you are making a deal with the IRS by which you are telling them you will be making monthly payments towards paying off your tax debt within a certain time period. However, if you do not fulfill your agreement, you will end up with an IA (Installment Agreement) default.

When the IA default occurs, you will receive a notice of default from the IRS (entitled as a ‘Notice of Levy’). Once you have received this, you are given exactly 30 days to make an appeal against it so you can negotiate with the IRS about an installment agreement. Otherwise, the IA default will be enforced and your installment agreement with the IRS will end after the 30-day period and they will try to collect what you owe!

So long as you file the appeal within the 30-day period, your installment agreement will be valid until your case has been heard and a decision has been made, in accordance with the law.

If you win your case, your negotiations with the IRS will protect your assets, your income, and your bank account from being levied while they are taking place. During this time, you should ensure you give the IRS up-to-date information about your financial situation, which hopefully will stop the IA default from being enforced.

If you have no ability to pay the IRS back and your appeal is rejected, you should consider other options, such as an offer in compromise, filing for uncollectible status or declaring yourself bankrupt. These can be effective alternatives however; the best option depends entirely on your personal situation.

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