If you’re struggling to come up with the amount owed for taxes, don’t worry you have options. The IRS offers a fresh start program that entails payment plans where you can make smaller payments over time. You could also apply for an offer in compromise, which is basically when both you and the IRS agree on a lower settlement amount for your tax debt.
But if you do not have the capacity to do your taxes at all. You can request a delay in payment from the IRS. If you are going through tough financial times, the agency may be willing to temporarily halt actions related to your account until things improve for you again.
It is not easy to qualify because you will need extensive documentation showing why you cannot make payments right now. A tax attorney can help guide you through this process and give you the best chance at success.
Paying your taxes is important, but if you’re struggling to make ends meet, the IRS offers a few options. You need to be proactive though and reach out to them or hire a tax professional. If not, the government could seize your assets through involuntary collection actions.
Can I Negotiate With The IRS?
Tax bills can be expensive and stressful, but try negotiating a payment plan or reduced amount with the government. An expert tax representative will help you negotiate with the IRS and reduce your payments or waive penalties. You can also apply for an Offer in Compromise.
Offer In Compromise (OIC)
The Offer In Compromise enables taxpayers to negotiate a lower total amount of owed taxes with the IRS. You and the IRS agree on a settlement sum that is less than your original debt.
The IRS typically rejects OICs (offers in compromise) when they believe they can collect the entire amount from either a lump sum payment or a periodic payment.
How To Qualify With IRS Offer In Compromise?
In order to qualify for an Offer in Compromise, you must provide documented financial proof to the IRS that demonstrates beyond reasonable doubt your inability to pay the full amount of taxes you currently owe. Your documentation must include income records, expenses, assets, and liabilities. And you need to fill out IRS Form 656 and submit it along with a $205 user fee.
This financial information will be used by the IRS to determine if they approve your request for an OIC. Furthermore, it is important to keep this documentation up-to-date as your financial situation changes over time.
You must also demonstrate that you have attempted to pay your taxes and are not just trying to evade payment. It means you must show that you have tried to pay your taxes in full but are unable to due to financial hardship.
Finally, the IRS will look at your ability to pay the amount offered in an Offer in Compromise. They will look at things like income and expenses to come up with a reasonable payment plan you can afford. If the amount offered is too low, they may deny your Offer in Compromise.
Other Options To Settle My Taxes
If you cannot qualify for an Offer In Compromise, the IRS does offer other options.
If an Offer in Compromise isn’t a good fit, another option is to apply for an Installment Agreement. This allows you to pay off your debt over time with smaller payments. You’ll need to provide financial information and agree to make payments as agreed.
To set up an installment agreement, you need to complete Form 9465 and submit it along with your tax return.
If this is your first time not paying taxes on time, or if the fees for penalties are too high for you to pay, the IRS may give you a breakthrough in what’s called Penalty Abatement. This requires that you show a reasonable explanation for why you didn’t pay your taxes when they were due.
Currently Not Collectible Status
If the IRS finds that you are not able to pay your taxes due to financial hardship, they may grant you a Currently Not Collectible Status. This means that the IRS will not take any collection action against you and any penalties and interest on your debt will be stopped.
However, even with this status, you are still responsible for filing your taxes on time and paying any taxes due.
Request For A Payment Extension
You can also request a payment extension with the IRS. This will give you more time to pay your taxes and avoid penalties. To get an extension, you will need to provide financial information so the IRS can consider your request.
Do I Need Professional Help?
Hiring a professional is always a great idea when you have tax implications. They will assist you with developing a payment plan and give direction on the most ideal way to take care of your tax debt. They can also help you understand the different options available to you and ensure that you are taking the right steps to resolve your tax debt. If you are behind on your taxes, hiring a professional can help you get back on track quickly and efficiently.
If you owe the IRS and can’t pay, it is important to explore all of your options. An Offer in Compromise or an Installment Agreement may be a good way for you to get on track with paying back your taxes. However, if those don’t work for you, then Penalty Abatement, Currently Not Collectible Status, or a Payment Extension may be the better option.