Owe Back Taxes?
Taxpayers who can’t pay the balance of tax owed to the IRS have alternatives:
Installment Agreement
The easiest alternative is to negotiate a payment agreement with the IRS. An Installment Agreement arranged with the IRS will allow you to make monthly payments to pay the amount due in full. Payments may be made by mailing a check or money order, or arranging to have your monthly payment electronically withdrawn from a bank account that you own. In either case you will need to decide on a day of the month (first through twenty-eighth day) that the IRS can expect to receive your payment. There is a $105 fee to set up the arrangement (a smaller fee is involved if you choose automatic payment withdrawal from your bank account). On large balances due a financial disclosure statement may be required. It is important that you adhere to the terms of the agreement, since deviating from the terms (like failure to make a monthly payment) will cause the agreement to default. It can be reinstated, but an additional fee will be involved. Interest and penalties for late payment will continue to accrue on the remaining balance, until paid in full. If the balance due is on your current Individual Income Tax Return, a form to propose an Installment Agreement may be attached to your tax return. To qualify for an Installment Agreement you must have filed all past required Income Tax Returns.
Offer in Compromise
An Offer In Compromise is a way for taxpayers to settle all prior tax liabilities at less than full value. An Offer may be accepted on three grounds:
Doubt as to collectability – Doubt exists that the taxpayer could ever pay the full amount of the liability within the remaining time frame allowed for collection by the IRS.
Doubt as to Liability – The taxpayer believes that the amount actually owed is less than the amount of the stated tax liability. The IRS may have interpreted the law incorrectly, or failed to consider evidence that the taxpayer presented, or the taxpayer has new evidence.
Effective Tax Administration – There is no doubt that the tax liability is correct, and the potential for collection of the full amount exists, but there are special circumstances that make consideration of an Offer In Compromise possible. The taxpayer must demonstrate that payment of the full amount would create a hardship, or be unfair or inequitable. For instance the taxpayer has sufficient assets to pay the amount owed, but a disabled child is being cared for, and assets must be retained in expectation of future medical expenses.
A special form is used to submit an Offer In Compromise, which includes a financial disclosure of income, assets, and expenses. A fee of $150 is required, except for an Offer based on doubt as to liability. The fee is to cover the cost of processing the Offer, and is non-refundable. The fee will reduce the acceptable amount of the Offer. If it is determined that the Offer is being made to delay collection, the Offer will be returned with no further consideration. The Offer In Compromise should be prepared carefully and diligently since a significant majority of them are rejected. The use of a tax professional to prepare an Offer should be considered.
Taxpayers who can’t pay the balance of tax owed to the IRS have alternatives:
Installment Agreement
The easiest alternative is to negotiate a payment agreement with the IRS. An Installment Agreement arranged with the IRS will allow you to make monthly payments to pay the amount due in full. Payments may be made by mailing a check or money order, or arranging to have your monthly payment electronically withdrawn from a bank account that you own. In either case you will need to decide on a day of the month (first through twenty-eighth day) that the IRS can expect to receive your payment. There is a $105 fee to set up the arrangement (a smaller fee is involved if you choose automatic payment withdrawal from your bank account). On large balances due a financial disclosure statement may be required. It is important that you adhere to the terms of the agreement, since deviating from the terms (like failure to make a monthly payment) will cause the agreement to default. It can be reinstated, but an additional fee will be involved. Interest and penalties for late payment will continue to accrue on the remaining balance, until paid in full. If the balance due is on your current Individual Income Tax Return, a form to propose an Installment Agreement may be attached to your tax return. To qualify for an Installment Agreement you must have filed all past required Income Tax Returns.
Offer in Compromise
An Offer In Compromise is a way for taxpayers to settle all prior tax liabilities at less than full value. An Offer may be accepted on three grounds:
Doubt as to collectability – Doubt exists that the taxpayer could ever pay the full amount of the liability within the remaining time frame allowed for collection by the IRS.
Doubt as to Liability – The taxpayer believes that the amount actually owed is less than the amount of the stated tax liability. The IRS may have interpreted the law incorrectly, or failed to consider evidence that the taxpayer presented, or the taxpayer has new evidence.
Effective Tax Administration – There is no doubt that the tax liability is correct, and the potential for collection of the full amount exists, but there are special circumstances that make consideration of an Offer In Compromise possible. The taxpayer must demonstrate that payment of the full amount would create a hardship, or be unfair or inequitable. For instance the taxpayer has sufficient assets to pay the amount owed, but a disabled child is being cared for, and assets must be retained in expectation of future medical expenses.
A special form is used to submit an Offer In Compromise, which includes a financial disclosure of income, assets, and expenses. A fee of $150 is required, except for an Offer based on doubt as to liability. The fee is to cover the cost of processing the Offer, and is non-refundable. The fee will reduce the acceptable amount of the Offer. If it is determined that the Offer is being made to delay collection, the Offer will be returned with no further consideration. The Offer In Compromise should be prepared carefully and diligently since a significant majority of them are rejected. The use of a tax professional to prepare an Offer should be considered.
Paramount Tax and Accounting LLC offers expert advice and guidance for tax preparation, tax planning, IRS representation and accounting services. We are currently serving the Suwanee, Buford, Sugar Hill, Flowery Branch, Oakwood, Gainesville, Duluth, Johns Creek, Cumming, Alpharetta, Roswell, and surround cities in North Atlanta out of our Suwanee and Oakwood offices. We also work with clients virtually by using technology to our advantage.
Office Location Financial Links
Buford:
4315 S Lee Street
Suite 400
Buford, GA 30518
4315 S Lee Street
Suite 400
Buford, GA 30518
Copyright 2008-2024 | Paramount Tax and Accounting LLC.