IRS Tax Relief - Consider an IRS Payment Plan If You Can't Pay Your Taxes


It’s never good news to find out you owe taxes to Uncle Sam (the IRS). It’s even worse to find out you can’t afford to make the tax debt payment.

If you find yourself in that situation, be sure to seek professional tax relief advice. If you don’t, the IRS will charge you a penalty that amounts to 5 percent of the balance; each month that you don’t pay, it will add another 5 percent, up to 25 percent. That balance will also be subject to interest, which the IRS will adjust each quarter. The rate is currently 5 percent.

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Then consider these options to help you pay:

Request a payment extension. If you haven’t applied for a payment extension before, this could be an option. After you file your tax forms on time without payment, the IRS will contact you to ask whether you would be able to pay within 120 days. If you choose this option, the agency will charge you a monthly fee of 0.5 percent of the amount owed.

Make a partial payment. Even if you can’t pay the whole tax bill, pay as much as you can. This will cut down the size of the penalty and interest you’ll have to pay the IRS.

Such an approach could easily backfire, should the partial amount you owe is large and you pay it using a credit card. It would make no sense for you to put that on a credit card to carry a compound interest rate of 29 percent and potentially have your credit rating take a hit,” he notes.

In that instance, you’re better off arranging to pay off the entire amount using an IRS-sponsored installment plan with its lower interest rate, he says. Unlike credit-card companies, the IRS doesn’t report on its debtors to credit bureaus—as long those taxpayers aren’t subject to any IRS liens or other serious collection situations.

PLEASE NOTE: IRS INSTALLMENT AGREEMENTS HAVE MANY DIFFERENT RULES. IF YOU OWE LESS THAN $10,000, THERE IS ONE RULE. IF YOU OWE MORE THAN $25,000, THERE IS ANOTHER. IF YOU OWE MORE THAN $50,000, THERE ARE DIFFERENT RULES.

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"Do-it-Yourself" installment plan: This is a good option if you need more than 120 days to pay your tax bill and you owe less than $50,000.

When you file your tax return, fill out IRS Form 9465, Installment Agreement Request. The IRS will then set up a payment plan for you, which can last as long as six years. You’ll incur a setup fee, which ranges from about $31 to $225, depending on how much income tax you owe. The fee can drop significantly if you arrange for direct payments from your bank account.

It’s the easiest way to go as long as you submit a reasonable request to the IRS. As a rule of thumb, divide the balance owed by six and agree to pay that amount each year for six years. If you end up needing installment plans for more than one year, hire an IRS tax Attorney to negotiate a workable plan with the IRS.

There’s another benefit to signing up for an installment plan: If you’re unable to make payments, the failure-to-pay penalty, which begins to accrue the day after the tax-filing deadline, will grow at just 0.25 percent per month—compared with 0.5 percent if you don’t sign up for the agreement.

Ask for leniency due to hardship. You’ll need to prove that paying your tax debt would cause you a tremendous burden, perhaps forcing you to sell your home. But this could get you more time to make your payment, and in some cases, the IRS will also waive any payment penalties. Read Application for Extension of Time for Payment of Tax Due to Undue Hardship to see whether you meet the requirements.

There’s no rule book on the circumstances that qualify you for leniency. The IRS is getting tougher on what it agrees to should you try for a "hardship" on your own. Ultimately it is based on facts and circumstances of each case.

Apply for an “offer in compromise.” This is a way to reduce your tax debt permanently. The IRS says that an offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or if doing so creates a financial hardship.

Before applying for an offer in compromise, the IRS requires applicants to have filed all their tax returns. So if you didn’t file in previous years, you will need to finish those missing returns. It also requires that you pay the current year’s estimated tax payments. Refer to the IRS’ Booklet 656-B, “Offer in Compromise” (PDF), for details on the application procedure. To see whether you could be a candidate, the IRS offers a pre-qualifier online tool. There’s a $186 application fee.
YOU CAN CALL OUR IRS TAX RELIEF TO SEE 
IF YOU CAN SETTLE WITH THE IRS
An Offer in Compromise is granted 42% of the time 
per IRS 2016 statistics.

Flat Fee Tax Service, Inc. Clients Have 
a 95% IRS Settlement Success Rate

Don't Forget About Your State Taxes. States are less flexible than the federal government.
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