Those who owe federal taxes have a couple of options to make themselves current with the IRS.
August 24, 2013 /24-7PressRelease/ -- Do you owe federal taxes? You have options
Article provided by Lana Kurilova Rich PLLC
Visit us at http://www.mytaxdebtattorney.com
Many people find themselves unable to pay the amount that they owe in taxes and find themselves with serious tax problems as a result. Although owing taxes that one cannot afford is bad enough, many people in this situation do nothing, which can make things much worse with the IRS. If you are in this situation, it is important to realize that how you decide to approach your tax debt can determine how much trouble you ultimately end up in.
For those who owe taxes to the IRS, there are two tools that can help the situation from becoming worse: tax payment plans and tax settlement agreements. Although both types of approaches share some similarities, there are important differences concerning how they work and when they may be used.
Tax payment plans
Taxpayers who cannot pay the amount that they owe to the IRS in full may have the option of negotiating a tax payment plan (also called installment agreements). The tax payment plan works like other payment plans in that it allows the taxpayer to make several smaller payments towards his or her tax liability over a certain period of time in lieu of paying the full amount all at once.
A tax payment plan requires approval from the IRS. In determining whether to approve the tax payment plan, the IRS will look at the applicant's assets, liabilities, income and expenses. In addition, if the individual has suffered financial hardship such as a layoff, this will also be considered in the decision. Assuming that the taxpayer owes less than $50,000 in taxes, penalties and interest, the IRS typically will routinely approve a payment plan for as long as 72 months with monthly payments as low as $25.
Tax settlement agreements
Tax payment plans pay the full amount of taxes owed over a certain period of time. However, tax settlement agreements work differently. Instead of providing a means of full repayment of taxes, tax settlement agreements allow the taxpayer to settle their debt with the IRS for less than the full amount owed. This type of agreement is also called an offer in compromise.
Typically, in determining whether to accept an offer in compromise from a taxpayer, the IRS looks at his or her current and future income as well as assets. From the analysis, if it appears that the taxpayer could pay back the full amount of his or her tax debt--either in full or by using a tax payment plan--the IRS typically does not accept the offer in compromise.
Starting earlier this year, the IRS has become sensitive to those who have suffered financially because of the recent financial downturn. As a result, the IRS has made the approval process for offers in compromise more lenient by changing how it calculates future income (as well as other changes). These changes have increased the number of taxpayers that qualify for the offer in compromise program.
Consult an attorney
If you owe back taxes or anticipate having trouble meeting your future tax obligations, doing nothing is the worst thing you can do. An experienced tax attorney can advise you of the options available to you and help you resolve your tax issues with the IRS before the situation deteriorates further.
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