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By Simon Volkov
Having IRS debt looming overhead is a stressful experience. Those who owe money to the Internal Revenue Service must become proactive in resolving tax debt. Otherwise, taxpayers could be subjected to serious legal consequences and end up owing much more due to accrued interest, late fees, and penalties.
Solutions are available to clear IRS debt. Taxpayers who seek help at the onset will improve chances of achieving a positive outcome. Depending on the situation and amount of taxes owed, the IRS might agree to reduce or write-off outstanding amounts.
The first step to resolve tax problems requires contacting the Internal Revenue Service taxpayer assistance center. The number for individual taxpayers to call is 800-829-1040. Business owners and self-employed taxpayers can contact the IRS at 800-829-4933. Office hours are Monday through Friday from 7 am to 10 pm.
Taxpayers owing less than $25,000 can setup a tax payment plan via the IRS website. Individuals are required to fill out a Form 9465 Taxpayer Installment Agreement request prior to establishing a payment plan.
Once approval is granted, taxpayers select from three payment options which include: setting up a short term extension and paying outstanding IRS debt in full within 90 days; paying via monthly installments; or paying taxes in full.
When establishing payment plans, taxpayers should be prepared to provide a user fee in the amount of $105. If taxpayers establish a direct deposit account the fee is reduced to $52.
Authorization to enter into payment plans is not granted until taxpayers file all past due tax returns. The IRS charges a failure-to-file penalty of 5-percent per month for every delinquent tax return. The maximum penalty allowed is 25-percent.
When tax returns are filed, but taxpayers do not remit payment in full, the IRS can assess a failure-to-pay penalty of 1/2-percent per month. Failure-to-pay penalties are assessed from the date of filing until back taxes are paid in full.
Taxpayers who owe more than $10,000 in IRS debt may qualify for a partial payment installment agreement. It is best to consult with a tax attorney when taxpayers owe this level of tax liability. The IRS requires taxpayers to file all past due returns prior to applying for partial payment installment plans.
Once approved, the IRS agrees to reduce the amount of past due taxes as long as taxpayers comply with the terms of their agreement. Taxpayers are required to remit monthly installments until the agreed upon amount is paid in full. Once agreements are fulfilled, the IRS discharges remaining back taxes.
Taxpayers who are financially incapable of paying IRS debt in full can submit an Offer in Compromise agreement. This arrangement is generally the last option offered to those with outstanding tax debt. If accepted, the IRS agrees to accept less than the full balance owed.
The IRS only enters into Offer in Compromise agreements if there is minimal chance of collecting the full balance owed. When taxpayers enter into this tax relief option they remit monthly installments until the agreement is fulfilled and agree to allow the IRS to retain future tax refunds which are credited against remaining IRS debt.
Taxpayers who lose their home to foreclosure may qualify for tax relief under the Mortgage Forgiveness Debt Relief Act. Taxpayers are only allowed to claim the amount of debt forgiven through foreclosure or mortgage refinance of their primary residence.
Taxpayers who had debt discharged through business or personal bankruptcy may be eligible for tax relief under IRS908 bankruptcy tax codes. Bankruptcy tax matters should be managed by a tax lawyer or certified public accountant.
While IRS debt can seem insurmountable, there are solutions available to solve existing problems. Taxpayers can review available tax payment plans at IRS.gov.
About the Author: Overcoming
IRS debt
may seem impossible, but it is not. Learn more about available tax relief options, along with strategies to improve personal finance from California real estate investor, Simon Volkov at
SimonVolkov.com
.
Source:
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