If You Owe Federal Income Taxes but Cannot Pay
How does a taxpayer negotiate with the IRS? If the thought of IRS enforcement sends chills down your spine, you can relax. IRS Tax Attorneys at Flat Fee Tax Service, Inc. specializes in helping you resolve your tax dilemmas. Depending on your financial circumstances and how much you owe, you may be able to make payments over time or pay a reduced amount, either in a lump sum or in installments. In some cases, you won’t have to pay your back tax debt at all, at least for now. In some cases, you can have your back tax obligations permanently forgiven
Installment Payment Agreement
If you can afford to make monthly payments to settle your tax obligations, an IRS installment agreement may be the best strategy you can take. However, the IRS may require for you to complete Form 9465: Installment Agreement Request and Form 433-F: Collection Information Statement by mail. A taxpayer should be careful what they disclose to the IRS as their main purpose is to collect past due income taxes the Department of Treasury. If you have assets or income, you may want to consider contacting our tax relief team prior to submitting financials. In addition, while you are making payments through a payment agreement, don’t look for any tax refunds – they will be appropriated to offset your past due to balance.
Partial Payment Settlement Agreement
If a taxpayer wants to negotiate a partial payment settlement agreement, a taxpayer will need to submit Form 9465 along with form 433-F and a letter explaining why you wish to be granted a reduction in your total back tax obligation. You will have to provide financial substantiation, and you may want to consider having all IRS installment agreements reviewed by an IRS Tax Attorney prior to submission. If your request is granted, you will make installment payments just as you would with a regular installment payment arrangement.
Offer in Compromise – The Ultimate IRS Settlement
When you see or hear those ads promising to settle your tax bill for “pennies on the dollar,” the program those ads refer to is the Offer in Compromise. There are three categories under which the IRS accepts Offer in Compromise requests:
- Doubt as to Liability: The amount of tax assessed is incorrect
- Doubt as to Collectability: This is the category most often used. The person filing under this category must demonstrate that he or she will likely never be able to pay the full tax obligation due to financial hardship or some other compelling reason.
- Effective Tax Administration: Requests for relief under this category do not dispute the amount of the tax. Rather, the claim is that collecting the tax would create an injustice. Elderly or disabled taxpayers often use this category.
THE CATEGORY YOU SHOULD BE CONCERNED WITH IS “DOUBT AS TO COLLECTABILITY”.
Traditionally, an Offer in Compromise involves tedious paperwork and long waits while the IRS processed requests. However, in 2011, the Fresh Start program was instituted which will provide additional relief and a more streamlined process under certain conditions. To request an Offer in Compromise, file Form 656: Offer in Compromise and Form 656-A: Income Certification for Offer in Compromise Application Fee and Payment. Offer in Compromises have a very low acceptance rate, and you may want to consider hiring a professional to help your chances of success if you feel that you may qualify.
95% OF FLAT FEE TAX SERVICE, INC.’S CLIENTS HAVE HAD A SUCCESSFUL IRS SETTLEMENT.
PER IRS STATISTICS, IN 2016 THE IRS APPROVED 42%
OF ALL OFFER IN COMPROMISE SETTLEMENTS.
Tax Penalty Abatement
If you are able to pay your entire back tax debt, but just want a break on the IRS penalties that have been tacked on, the Tax Penalty Abatement program may provide tax relief. You must provide a compelling reason for requesting a tax penalty abatement, such as a death in your immediate family, long-term unemployment or significant property damage or loss due to a natural disaster. You can request a tax penalty abatement by writing a letter explaining your circumstances, by requesting an in-person interview with a tax professional or by filing IRS Form 843Claim for Refund and Request for Abatement. You only get one opportunity at an IRS tax penalty abatement, so, you better do it right.
Currently Not Collectible Status a/k/a Financial Hardship
If you simply cannot pay what you owe to the IRS, you may request that your account is placed in Currently Not Collectible or Financial Hardship status. You will need to provide detailed financial information through a Form 433A Collection Information Statement for Wage Earners and Self-Employed Individuals. If your request is granted, you will still owe taxes to the IRS, but collection efforts will be temporarily halted.Your circumstances will be re-evaluated under certain conditions and your stay of the collection could be lifted. If you owe less than $10,000, this is “the way to go”. If you owe more than $10,000, you should be looking for an Offer in Compromise settlement.
Waiting Out the Statute of Limitations
Depending on your circumstances, you may be able to wait out your tax obligations and have back tax debt wiped from your record. The statute of limitations for federal income taxes is generally ten years unless fraud is involved. But calculating the statute of limitations can be tricky. The clock does not begin to run until taxes are assessed by the IRS, and the clock stops temporarily if you file bankruptcy or if you file a dispute or a lawsuit against the IRS. If you intend to take this strategy, you must consult with an experienced IRS Tax Attorney to obtain accurate dates and other essential information.
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