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Dealing with tax issues with the IRS can seem overwhelming, especially if you have fallen behind on your taxes and into collections. Taxpayers who have an unpaid bill with the IRS risk wage garnishments, bank levies, as well as penalties and interest on their unpaid taxes.
Those who have unfiled tax returns, owe a tax liability or face an audit with the IRS should look into tax relief options that can resolve their outstanding issues. Tax relief can assist those in collections by getting a taxpayer set up on a payment plan or hardship agreement or by negotiating a compromise with the IRS that brings them into compliance with the IRS.
The IRS offers taxpayers multiple options to resolve outstanding tax liabilities. Here are four commonly available options to taxpayers who owe back taxes to the IRS:
If you require an extended period of time to pay off your tax bill, the IRS will typically accept a payment plan, also known as an installment agreement. Individuals who have a balance over $25,000 are required to use direct debit. Businesses with balances over $10,000, must also pay with by direct debit.
If you are experiencing extreme financial hardship, the IRS may allow you to resolve your tax liability for less than what you owe. Called an Offer in Compromise, the IRS extends this is an option only when a taxpayer has proven that they are unable to pay their tax balance in full or that doing so would create a significant financial hardship. The IRS considers the following factors when deciding if a taxpayer qualifies for an Offer in Compromise:
If you’re facing penalties for not filing or paying your taxes on time, you may be able to get those penalties removed through either a penalty abatement or a penalty adjustment. Abatement is the elimination of an assessed tax liability, while an adjustment is simply a reduction or alteration of it. In some cases, you can even get past penalties and interest refunded.
If you have the ability to pay your balance in full but need some time to get the money together, the IRS will allow you to request a one-time extension. You can request up to 120 days to pay your tax balance in full. It is important to keep in mind that the IRS will apply a 0.5% penalty per month for the unpaid balance and will only allow you to make this extension once. If you do miss the extension date, you will fall back into collections.
As part of the U.S. government’s ongoing response to the Covid-19 pandemic, some tax rules have changed, and new coronavirus tax relief initiatives may be available. Find the latest coronavirus news for taxpayers, families, business and tax-exempt entities on our blog.
Americans that have been affected by hurricanes, floods, wildfires, pandemics, earthquakes, and other natural disasters could be offered special tax relief. Disaster victims may qualify for extensions and could possibly claim casualty losses on their federal income tax returns.
Our seasoned experts bring a wealth of knowledge in tax law, accounting, and financial consulting to the table, ensuring that you receive the highest standard of service.
