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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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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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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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Cost of an IRS Installment Agreement

October 4, 2010 By

What affects the cost of my IRS Installment Agreement?

The IRS factors in specific allowances on various expenses and decides what your cash flow is to determine how much you will pay per installment. Generally speaking, the higher the IRS values the cash flow to be, the more you have to pay for every installment. The problem, however, is that the IRS only looks at certain expenses, meaning if you spend a lot on something outside of what they view as ‘essential’, you could find yourself in trouble. For example, credit card payments are often not allowed.

Depending on the situation, the IRS will give you one year to get rid of any un-allowed expenses (i.e. credit card payments) before installment agreements start should the expense make it impossible for you to pay them.

So what expenses are allowed? Food, clothing and products you need to meet a basic standard of living (hygiene products, household cleaning products etc) are allowed and no matter what your circumstances, you get a minimum allowance (if you feel you need more, you have to prove why).

The allowance you get for bills such as rent, mortgages, insurance, electricity etc depends on where you live and how many people live in your house. Very often, this allowance is not enough, however you need special circumstances in order to increase it.

Medical insurance payments are allowed, regardless of the cost. Prescriptions and other medical payments are $60 per month for individuals under the age of 65 and $144 for people younger than 65. Again, if you need more, you have to prove it.

Unfortunately, paying an IRS installment agreement can mean having to go through a Chapter 7 or 13 bankruptcy. The most important thing to do with these expense limitations is to ensure you get all the extra expenses you can in order to avoid serious financial problems.

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Easiest Ways To Get A Tax Levy Release

September 29, 2010 By

What Are The Easiest Ways To Get A Tax Levy Release?

If you have already received a notice that says “Intent to Levy” from the IRS, you only have 30 days before the IRS will send collections to seize your assets. This could be anything from property to vehicles and more. During these 30 days, it’s imperative that you work fast and get everything in order. The easiest ways to get a tax levy release are:

Payment Agreement

The IRS wants their money and they’d rather cooperate with you to make payments over a longer period of time than try to auction off your assets. A payment agreement is similar to an installment agreement except you will normally pay less than the total amount you owe the IRS and you will also make smaller payments. For this to be an option, you have to prove you don’t have the ability to follow the standard installment agreement.

Pay It Off

If you pay what you owe immediately, the tax levy release will happen right away. This usually isn’t an option for many people by the time they reach this point but if you can do it, all your problems pretty much go away overnight.

Offer in Compromise

This is very similar to what a credit card company offers if you’ve owed them money for a long time. You can make an offer that is less than the total amount that you owe and you can go from there. If accepted, your tax levy release will happen right away. If not, you will have to try some other type of payment options.

These 3 options are the fastest and easiest methods to get a tax levy release. Since you don’t have a lot of time, ensure that you handle it immediately.

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Offer in Compromise: The Pros and Cons

July 19, 2010 By

Pros and Cons: Offer in Compromise

Pros:

  • If an OIC is granted, it saves money if your offer has interest continues to accrue and deferred payments according to the OIC and not the initial sum owed.
  • If your offer is turned down there is less stress during the procedure because usually property and salaries aren’t seized during that time.
  • Tax liens must be relinquished by the IRS within thirty days of receiving the agreed amount for an OIC from you. When a Certificate of Release of Federal Tax Lien becomes public your credit rating recovers.

Cons:

  • Once an OIC is agreed to you are obligated to file upcoming tax returns and make tax payments on time for five years. This applies to payroll tax and estimated business tax, if self-employed.
  • If accepted or rejected, the IRS has more time to collect tax owed when you file an offer. They add the time the offer is under deliberation and thirty days to the usual limitation of ten years to collect.
  • All tax refunds before your offer and during the year of acceptance by the IRS must be forfeited. You may have to forfeit refunds for three to five years.
  • Subsequent to submitting an offer you may not appeal to the IRS or court for years stated in the offer. This applies if offer is accepted or rejected.
  • The IRS will revoke an offer after acceptance if you were untruthful.
  • It’s not usual but the IRS can audit you during the OIC process depending on what you reveal or withhold.
  • The OIC can be revoked if you don’t make a payment. You will be liable for the initial amount, penalties and interest. The same pertains if you don’t file and pay all taxes for five years prior to an OIC acceptance.

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Tax Relief: You Need To Know This About Installment Agreements

July 16, 2010 By

Installment Payment Plan

Debt under $25,000 easily qualifies for a payment plan, but debt over $25,000 must be negotiated. A payment plan has the downfall of penalties and interest accumulation during payment which could take years to pay off.

IR Code 6502 allows ten years for the IRS to collect tax money. To get an IA, the IRS will grant you the extension if you sign Form 900. Delay the process by first speaking to a tax advisor. The IRS may not remember to give you the form; in those cases, make sure you request a Form 900. If you don’t sign the form, you don’t get an installment agreement.

Negotiating Monthly Payments

If you can’t pay your tax in a maximum of three years or you owe in excess of $25,000 ask for a monthly payment plan and complete Form 433-A or –B. Each revenue officer will come to a different conclusion on how much you should pay.

Strategies to get a payment plan:

  • Tell them what payments you can afford when handing in Form 433- A or -B.
  • Commit to paying less for income essential living costs only, i.e. amount IRS states you can afford after essentials. You offer to pay lowest amount as it’s hard to revise once you sign installment plan.
  • If you have $0 or a minus amount contemplate an Offer in Compromise, collection suspension, or bankruptcy.
  • Make an initial payment when you suggest an agreement. Continue the payments regardless if the IRS permitted your IA. Paying a set amount, in a timely matter, for three months may convince the officer that the payment plan and amount is right for you. If you don’t have the means to start immediate payments, a check that is postdated may be accepted.

Tax bills higher than $25,000 must be approved by a manager, not a tax officer. If an IA is approved it could take months to get it in writing.

If You Can’t Fulfill your Installment Payment

Being unable to fulfill a monthly payment requires an exceptional reason such as disability or loss of employment. Call 800-829-1040 for help and also contact the relevant tax officer. If the IRS doesn’t agree, they can start procedures to seize your property; contact the Taxpayer Advocate Service.

An appeal against a revocation can be restarted but the IRS is usually not compliant if the amount is more than $10,000. You must supply new documentation showing your changed circumstances, affecting income and living costs. During the new process for an IA, the IRS may take wages and accounts.

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Tax Relief: Your Offer In Compromise Questions Answered

July 9, 2010 By

Ways to Avoid Mistakes with IRS OIC Forms:

  • Use most current forms to fill in marital status, spouse tax liability, social security number and employer ID.
  • Fill in two individual forms if you owe business and personal tax; divide tax type and periods.
  • Forms with deletions of preprinted items or alterations will not be processed.
  • If both spouses submit an offer, both must sign.

If you made mistakes on your forms, you may resubmit; but it will delay the process by weeks or months.

How Much You Must Pay?

Lump sum offers are made up of five payments or less. A twenty percent deposit is necessary with your first offer forms.

Installment payment offers are in excess of five payments. Your first forms must be submitted with one full monthly payment and then every month until your tax bill is settled.

A $150 application fee is required if there is no incomplete payment accompanying your offer beneath the lump sum or installment rules. It can be put aside if you can’t afford the fee. Submit an Application Fee Worksheet in Form 656 booklet. Make check or money order payments to ‘United States Treasury’.

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Tax Debt Relief Help: Protecting You and Your Assets

July 3, 2010 By

 

Safeguarding Yourself after Disclosing Finances to the IRS

After your interview, the IRS will know where you live, work, bank etc. They can easily confiscate assets and wages so be sure to safeguard yourself. You don’t have to let them know if you change employers, banks or sell assets the day after verbal or oral disclosure but, you must give information that is presently accurate. Switching banks is a lawful short term option. Leave a small amount in an account and move the surplus to a different bank.

Only interest bearing accounts are conveyed to the IRS at the end of the year. Open an account in a different location or state from where you reside. Only pay the IRS with money orders or through your old account. Each payment’s account is recorded by the IRS so don’t supply you new account number(s). However, if you are asked to complete Forms 433-A or –B, you must disclose new accounts.

Collector’s Next Move

After assessing forms 433-A and –B the IRS could:

  • Demand payment immediately if there is proof that you can pay
  • Request that you get a loan from a bank, finance company, or relative company or relative
  • Request you sell assets in order to pay the IRS
  • Recommend an Offer in Compromise
  • Suggest a payment plan
  • Advise you of bankruptcy alternatives
  • Start imposed collection i.e. levy accounts, other assets and wages
  • Describe your case as presently uncollectible

Revenue Officers check information supplied by you. If you transfer your assets or ask family members to hold your assets they will act severely. Fake transfers are unlawful and the IRS can seize them.

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Tax Relief: Installment Agreement- Getting Declined

June 29, 2010 By

When the IRS Declines an Installment Agreement

There are three reasons for the IRS to turn down an Installment Agreement (IA):

  • Not all living costs are deemed essential i.e., private schooling fees, high credit card purchases, charitable donations.
  • Information on Forms 433-A and -B are inaccurate or deceptive e.g., public records prove you own assets that you didn’t reveal or your income is higher than disclosed.
  • You failed to complete a previous Installment Agreement causing the IRS to regard you as unreliable.

If an IA is turned down, continue your request with the tax officer/manager, RS Appeals Office, and tax advocate.

Revoking an Installment Agreement

Once an IA is approved, you and the IRS are bound to it. However, there are exceptions to revoking your payment plan:

  • You don’t file tax returns or settle taxes subsequent to the IA; the IRS monitors your returns and payments.
  • Revocation is caused by non-payment or late payment; the IRS gives thirty to sixty days before sending a warning regarding revocation.
  • There’s a noticeable (positive or negative) change in your finances. If you keep silent they may not see it but, if the IRS notices, you must complete a new Form 433-A or -B.
  • If the IRS learns you didn’t fully disclose all assets and/or additional income(s) during your IA negotiations.

A Form 523 notifies you of the IRS’ intention to revoke your IA. You can appeal it by using Form 9423.

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