What if you owe federal income tax but can’t pay it? Many thousands of taxpayers find themselves in this exact situation each year. Though each case is different, it may require you to speak to the IRS about a repayment plan or negotiate to try and get your taxes lowered. The average taxpayer is not well equipped to do a good job of negotiating with an agency like the IRS. That’s why many people hire financial professionals to help them.
If you can get a portion of the fees and penalties reduced, it could save you hundreds of dollars. You may also be able to set up a repayment plan that could fit in your budget. There are cases where you can get your back tax obligations permanently forgiven. There are numerous programs available, some that even seasoned accountants aren’t aware of.
Installment Payment Agreement
The Installment Payment Agreement is often the best strategy for most people. Be sure to try and get something that fits your budget so that you don’t have to struggle to make the payments. Missing one payment can nullify your agreement with the IRS. You can also choose the payment date that you desire. In most cases, you’ll need to set the payments up to be automatically withdrawn from your bank account. This gives you an extra bargaining tool since the government can be fairly well assured of being paid on time each month.
Partial Payment Settlement Agreement
Perhaps you have extenuating circumstances that would make it hard to repay the full amount. You can submit a letter explaining these special circumstances, along with a Form 9465 and a Form 433-F. If your reasons are compelling enough, you may be granted a partial payment settlement agreement. You will be required to submit substantiating financial documents. Once your case is approved, you can then set up a regular installment payment arrangement to pay off the amount agreed upon. Of course, if you can pay this off right away (such as with a credit card), you can save further interest and fees.
Offer in Compromise
This program can allow you to settle your tax bill for less and there are three categories that are acceptable by the IRS for Offer in Compromise programs. These are:
- Doubt as to Collectability: The most common category. The taxpayer must demonstrate that he will most likely never be able to pay the full amount of tax owed due to some financial hardship.
- Doubt as to Liability: The amount of tax assessed is incorrect.
- Effective Tax Administration: The amount is not in dispute. Instead, the taxpayer is claiming that paying off the amount would be unjust and unfair. This category is often used by elderly or disabled people.
Tax Penalty Abatement
This negotiation seeks a decrease in the overall penalties that have been tacked on. The taxpayer must provide a compelling excuse in order to be successful. Perhaps there’s been a death or serious illness in the family. Request a Tax Penalty Abatement by submitting Form 843 Claim for Refund and Request for Abatement. You will also need a letter stating why you’re asking for the abatement.
Numerous other programs exist such as the Currently Not Collectible or Financial Hardship status. In many cases, your chances of success are greatly improved if you hire a professional to help you. The IRS laws are very complicated and forms need to be completed correctly and include supporting documents. If you’d like help to explore the many possibilities, then The Tax Resolvers can help. Our firm works with taxpayers who believe they may qualify for one of these tax negotiation programs. Please call The Tax Resolvers today to learn more.
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