It is not unusual for people to find themselves in a precarious situation where they own the IRS a substantial amount of money even after they have made payments to cover their annual tax liabilities. There can be several reasons that may lead to such a situation, perhaps the tax payer incorrectly calculated the amount due or an error on the part of the IRS or any other reasons; however, the fact remains that a massive amount is owed and getting your hands on that kind of funds fast can pose a very bug problem. Fortunately, au contraire to popular perception, the IRS is not out to get you, as a matter of fact the taxman suggests several ways to handle such a scenario. One of the easiest methods in this list is that of setting up an installment agreement with the IRS; this can really help you to manage your tax liabilities. An installment agreement is a payment plan set up by the federal Government.
So , under this payment plan you will be able to decide the amount of money that you can pay each month and by what date. There are very good chances that the IRS may approve your installment agreement if your tax dues don t exceed $10,000. Also, tax payers with a good payment track record stand good chances of getting their installment agreement approved. However, you will need to justify the need for such a payment plan and will have to furnish information proving the fact that with your limited funds a limp sum payment will not be feasible.
One of the primary concerns that the IRS has when approving such an agreement is the assurance that you will be able to pay up all your dues within the three years. To apply for an installment agreement you will have to fill out Form 9465.
If you are in serious financial trouble and can prove it to the IRS, they may even offer a partial payment option. In order to avail this offer you will need to have very specific details about your equity assets. It is crucial to provide authentic information because the IRS will be able to verify all the details and lying will just diminish your credibility. Once such an offer has been granted the IRS will re assess the tax payer s case every two years to find out if the tax payer is in a better financial position and can make the complete tax payment. If the financial condition of the tax payer improves, the IRS will then increase the payments or may terminate the arrangement. This is a variation of the traditional installment plan.
Even though you get some much needed time to clear your tax liabilities, you need to understand that the longer you take to make the payments the more you will have to pay. When you seek an installment agreement you are requesting the IRS to give you more time to pay up your tax debts, of course, there will be certain expenditures that will have to be incurred incase the request is granted. For example, the IRS will charge you a one time fee of $105 if your installment plan is approved but the fee can be lowered to $52 if you get a direct debit agreement, under this scheme the tax liabilities are deducted each month from your bank account. If you fall in the lower income bracket the fee may be brought down to $43.
Although an installment agreement is a feasible solution to clear your tax debts and many people actually manage to clear their tax liabilities with in three years, there are others who cannot make the payments. For people who are in financial trouble and will not be able to handle the monthly IRS payments a more suitable solution will be an offer in compromise What this mans is that you are telling the IS to accept a considerably lower amount than what is actually owed at one go so that some of the debt is forgiven.
Remember that in both scenarios, to get an installment agreement as well as to reach an offer in compromise, you will be in a better position if you seek assistance from a tax attorney. In the Dallas area, you can find several tax attorneys who will be able to offer accurate advice in the matter.
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