Debt of any kind can be burdensome, but tax debt has a tendency to be plain worrisome! Why? Three words: Internal Revenue Service. Most people have a secret fear of being audited by the IRS as a result of overdue income taxes. However, the truth is that instead of being intimidated by the IRS, you can actually turn to them for tax help. The IRS can offer you some tax debt payment strategies to help you overcome your overall debt; among them are an Installment Agreement and Offer in Compromise.
An IRS Installment Agreement – What is it and How Does it Work?
Because the IRS usually tries to get “delinquent” tax payers back into the system, they tend to grant an installment agreement to individuals who qualify. The installment agreement allows you to make monthly payments against your IRS tax debt over a certain time period (usually 5 years or so). However, bear in mind that before they can grant your request for an IRS installment payment plan, you have to file any past tax returns that you may have neglected.
You can apply for the installment agreement by filling out and attaching the appropriate form (9465) to the front of your tax return. You will most likely need to specify the amount of your requested monthly payment as well as the date you will begin making your installments each month. It’s also extremely important for you to ensure you are able to make your payments on time.
The IRS usually charges a $43 fee for setting up an installment agreement. Some of the other costs you should be aware of include interest and late payment penalty charges on overdue taxes. The best way to avoid incurring any extra fees is to file your tax return in a timely manner. Once you have filed, the IRS will typically work with you to resolve payment issues.
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Offer in Compromise – Do You Qualify?
What exactly is an “offer in compromise”? Much like the name implies, it’s essentially an offer of financial compromise which you make with the Internal Revenue Service in the case of exceptional circumstances, such as your inability to pay IRS tax debt. An offer in compromise allows you to dispute outstanding tax debt in situations where there is doubt concerning accuracy of tax payment amount. It can also be made if you’re incapable of paying the entire tax debt owed. In order to be deemed officially eligible for an offer in compromise, you must be able to legitimately prove to the IRS that if the outstanding taxes are collected, it will impose tremendous financial hardship on you.
Applying for an offer in compromise can often be a lengthy and complicated process. Personal and income details, as well as a number of financial documents need to be submitted for IRS review. Many offer in compromise requests are often declined by the IRS as a result of poor representation. Additionally, if you’re not so familiar with the various tax legalities and rules and regulations that apply to IRS procedures, you can actually wind up facing further difficulty with your taxes. Therefore, it would be in your best interest to seek the assistance of tax professionals to help you through this process. With the aid of a qualified tax attorney, you can make a successful offer in compromise with the IRS and settle your tax debt once and for all.
Additional Tax Debt Information: