Thursday, April 24, 2014

The IRS Provides Options for Taxpayers Who Owe Tax after April 15!

Here are some options to consider, even if you can’t pay the full amount right now:

  • Borrow the money.  If you don’t have the money to pay all your taxes now, then you may want to get a loan from a bank or other source. The interest rate may be lower than the interest and penalties the IRS charges on late taxes. You also may be able to borrow against your assets or sell them to raise cash.
  • Make an Online Payment Agreement.  If you are unable to pay in full, then consider paying over time.
    • If you owe $50,000 or less, you can apply for an installment agreement. You may choose to make convenient monthly direct debit payments for up to 72 months. With this option, there are no checks to write or send. And you won’t miss a payment or pay late.
    • The IRS can also help if your tax debt is more than $50,000 or you need more than six years to pay. In these cases, the IRS may ask for further financial information. See Form 433-A or Form 433-F, Collection Information Statement.

  • Use an Offer in Compromise.  An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable time. The IRS looks at several factors to make a decision on your offer.

Payment Plan

The majority of delinquent taxpayers cannot just write to the IRS and request that their tax bill go away. 

Since, some taxpayers might not qualify for an Offer or Tax Bankruptcy relief, we often negotiate a long term Payment Plan with the IRS.  

A Payment Plan (Installment Agreement) with the IRS allows taxpayers that cannot afford to full pay their back tax liability the option to pay their Back Taxes through monthly payments. There are guidelines regarding how the IRS determines the payment amount and time frame for the agreement. Additionally, a taxpayer must be compliant with all Past Tax Filings before establishing the agreement. Depending on the circumstances and the amount of time that the IRS has left to collect the tax debt, the Installment Agreement may pay All or Part of the back tax liability! 

Once an Installment Agreement has been established the IRS:
  • Suspends their collection efforts
  • Refrains from issuing wage garnishments,
  • Refrains from bank levies
  • Suspends the sending of notices and making harassing phone calls!
However, penalties and interest continue to accrue on the unpaid portion of back tax liability throughout the duration of an Installment Agreement. Additionally, depending on the circumstances, the IRS may file a Notice of Federal Tax Lien to protect their interest until the liability is paid in full. There are certain conditions that must be kept after the Installment Agreement is established such as being compliant with future tax filings and payments.

For those that cannot afford to full pay their back taxes immediately and do not qualify for an Offer, a Payment Plan may be the best alternative. 

In negotiating long-term installment agreements, our main objective is to insure that the tax agencies do not impose unreasonable repayment demands, thus leaving the taxpayer unable to meet their monthly obligations. 

Offers - Who is Eligible?

Internal Revenue Code authorizes the IRS, to accept less than full amount of tax liability owed in any civil or criminal case arising under the tax laws prior to the case's referral to the Department of Justice. For an Offer in Compromise to be accepted, the taxpayer must establish to the satisfaction of the IRS that the taxpayer either: has no means of paying the tax, or does not actually owe the tax.

Most individual and business taxpayers who owe income taxes, payroll taxes, penalties or interest may submit an Offer in Compromise to settle these liabilities. The IRS will not accept offers from every single taxpayer who submits an offer. One of the following factors must be established in order for the IRS to settle the liability:

  • The taxpayer cannot pay off the liability;
  • There is doubt that the taxpayer actually owes the liability;
  • The settlement would promote effective tax administration
    Prior to 1992 the IRS has been reluctant to settle tax liabilities. In February of 1992, the IRS announced new procedures for settling back taxes. The new procedures greatly liberalized the Offer in Compromise process and increased the likelihood that financially distressed taxpayers would be able to settle their liabilities for less than the full amount.
    The IRS will accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full and the amount of the Offer in Compromise reasonably reflects collection potential. An Offer in Compromise is a legitimate alternative to declaring a case as currently not collectible, or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government.
    If a taxpayer requests an Offer in Compromise based on effective tax administration, the IRS will first be required to establish that there is no doubt to liability or collectability

    Offer in Compromise - Who is NOT Eligible?    

    Taxpayers who are not eligible for consideration of an Offer in Compromise based on doubt as to collectability or effective tax administration if:
  • Taxpayer has not filed all federal tax returns, or
  • Taxpayer is involved in an open bankruptcy case.
    Furthermore, if an ongoing business taxpayer files an Offer in Compromise for payroll taxes, that business must have filed and deposited all payroll taxes on time for two quarters preceding the Offer in Compromise. The taxpayer must further deposit all payroll taxes on time during the quarter in which the Offer in Compromise was submitted.
    The Offer in Compromise program requires that subsequent to acceptance of an Offer in Compromise, the taxpayer must remain current on all tax obligations for a period five (5) years. Therefore, if the taxpayer's Offer in Compromise is accepted and paid in full, but he later fails to pay current income taxes or other taxes, the Offer in Compromise might be revoked by the IRS.
     Owe Taxes to The IRS?

    Contact the Tax Lawyers at 
    Marini & Associates, P.A.  
    for a FREE Tax Consultation
    Toll Free at 888-8TaxAid ((888) 882-9243)

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