Finance Tax Time

Dealing with the IRS when you owe back taxes is a fairly scary thing. The IRS realizes you do not want to talk with its agents and has come up with a solution.

Resolving Your Back Taxes Without Talking to the IRS

Imagine picking up the phone, calling the IRS and telling them you have not paid taxes for a few years. In a poll of the scariest scenes from movies, that has to rank right up there with the stomach scene from Alien and so on. Truth be told, most people will put it off for as long as possible. Many will just stick their head in the sand and hope nothing ever comes of it.

The IRS realizes it has a big, bad reputation. It likes it. If people thought the IRS was friendly, how motivated would they be to actually pay their taxes? Not very! While the IRS likes to maintain this reputation, it does have a backlash impact. Taxpayers that get behind on their tax payments often do not move to resolve things because they fear the IRS ripping them apart if they act. This, of course, means the back taxes don’t get paid until the IRS takes action. It costs the IRS man hours it doesn’t have and puts otherwise law abiding citizens in a worse situation. After years of contemplating this situation, the IRS has come up with a possible answer.

If you owe back taxes to Uncle Sam, it is critical that you take voluntary action to resolve the problem. The IRS takes a much different view towards those who come forward versus those that hide. The IRS even has instituted payment plan programs to help voluntary reporters resolve their issue and get back into the system. The problem with these programs, however, was most taxpayers feared calling the IRS so much that they didn’t take advantage of them.

The IRS has now implemented a new online system for people that owe back taxes. Instead of speaking with an IRS agent, you can now go online and fill out an application for a payment plan to resolve your back taxes. To use the system, you must have filed all relevant tax returns, even if you couldn’t pay the actual tax. If you have not done this, you need to before applying online. Once you have the returns in, you will need to wait for a balance due notice from the IRS. You then go online and apply. You will need the balance due, your social security number, and a pin number that is on the balance due notice.

This new program is a very smart move by the IRS. Imagine resolving your tax problems without every talking to anyone at the agency! To access the program, just go to the IRS site.

Share This

Filed under: Finance by admin
No Comments »

The Tax Increase Prevention and Reconciliation Act of 2005 has ushered in new rules for settling tax debts with the IRS. Here is the scoop on the compromise procedures.

New Procedure for Settling Tax Debts with the IRS

If you owe the federal government back taxes, there are two approaches you can take to resolve the issue. The first is to file an installment agreement wherein you agree to pay off the debt by making monthly payments. The second is to try to settle the bill with a one time payment, which is often relatively low given your position you will not reasonably have the money to pay back the total bill. This rules and procedures related to this second approach have changed dramatically.

The settlement process, often called an offer in compromise, underwent a massive change with the passage of the Tax Increase Prevention and Reconciliation Act of 2005. Starting July 16, 2006, the new rules go into affect and they are a bear. The biggest issue is you now must pay 20 percent of your offer amount to even have the settlement offer considered!

The procedure now works as follows. To file an offer in compromise, you must prepare and file Form 656. This form essentially lays out your assets, income, debt amount and the offer you are making given these figures. You must pay $150 when submitting the bill. You must also now pay 20 percent of your offer amount. Neither of these amounts is refundable.

It may take the IRS up to two years to get around to making a decision. If the agency accepts your offer, it will send you acknowledgement and the terms thereof. If the agency does not accept the offer, it keeps your deposit and comes after you. Welcome to the wonderful world of taxes!

There are two exceptions to the 20 percent deposit rule. If you are a low income taxpayer under IRS rules, you need not make the deposit. Further, if you are contesting the taxes due because you believe there has been an error and you are not reasonably responsible for them, you need not file the deposit. Keep in mind the reason must be reasonable, not one of the arguments that nobody has to ever pay taxes.

The new procedures for filing for tax debt settlement are odd given the new 20 percent deposit amount. However, this still represents the best way for dealing with tax debts.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

Share This

Filed under: Finance by admin
No Comments »

Most people go into panic mode when they realize they don’t have enough money to pay the taxes they owe. The IRS offers fairly painless solutions and is making them easier to access.

Contrary to popular belief, the Internet Revenue Service is not particularly interested in making your life hell. Well, at least the service is not listing this as a goal. One area, however, where you can get into problems is not paying your taxes. Most people pay if they can, but what if you are a bit short in the bank account?

Most people that cannot meet their tax obligations go with the Ostrich approach. Essentially, they simply stick their head in the sand and hope for the best. This approach is the recipe for disaster because the IRS will eventually catch up with you. It may take a few years, but by then you will be in big trouble given the amount you owe will have increased with penalties and interest.

A better approach is to deal with the problem. As surprising as this may sound, the IRS has made a major effort to help such people instead of terrorizing them. The solution is a payment plan. Essentially, you fill out a form indicating what you owe, what you make and ask for a plan. The IRS then sends you a payment plan that typically pays off over a number of years. The payment plans are like credit cards, to wit, the balance goes down slowly if you make the minimum payment. As such, you want to pay the amount due off as soon as possible to avoid throwing away money on interest payments. While the payment plan isn’t a great option, it does keep the IRS off your back.

If you owe back taxes or are having trouble meeting this years obligations, the IRS is moving to make payment plans easier to obtain. Simply put, the agency is going digital. The program is called the Online Payment Agreement. It is not currently active, but should be soon. The advantage of this digital application is it lets you apply without talking to the IRS. For most taxpayers, particularly those in arrears, this is a dream come true.

If you owe back taxes or are having problems now, a payment plan with the IRS is probably your best solution. Soon, the online payment agreement system will mean you don’t even have to talk to an agent.

Share This

Filed under: Finance by admin
No Comments »