The stress of paying tax bills haunts many taxpayers throughout the year. The worry begins long before tax season. It’s always good to keep tax liabilities in mind, especially if the amounts owed are typically larger than the taxpayer can afford. Government officials do understand that people have money troubles. The IRS will provide relief – if you qualify.
Tax liability relief is by no means a ‘get out of jail free’ card. It is almost impossible to clear your debt completely without paying something. There are those rarities, but it would probably do you more good to use your time to find a program which will help you pay your tax dues. Just like any other debt, when you are late or miss payments, there will be late fees and penalties as well as interest charged. The sooner you make a plan with the IRS to pay your taxes, the easier it will be. Financial advisers would expect their clients to think ahead and start planning for next year’s tax liabilities. IRS.gov offers free tax information on all of their assistance programs.
These 6 tips may help direct your search as to which solution may fit your individual tax case.
1. The installment payment option includes a small fee. It is a great way to work out solving debt problems with the IRS. Negotiate the minimum payment based on your financial situation. The total debt is then split up into several payments to make payments more affordable. The IRS would like to see taxpayers pay the most possible by the regular due date and then split the remaining debt up. This will all be part of the negotiation efforts.
2. Depending on the size of the debt, a charge card may be used to pay the debt off and then solve payment options according to the terms and conditions of the creditor. You will have escaped the IRS fee, but not the monthly interest charge on the credit card.
3. If you are in severe financial hardship, make a call directly to the IRS. They will want proof of your financial standings. This will not eradicate the debt, but it will put your debt on the back burner to be reevaluated with the IRS at a later date. It will give you a chance to get back on your feet.
4. Another negotiations process is to make an offer in compromise. This is a taxpayer’s request to settle the debt for less than what is owed. Extreme economic hardship is difficult to prove and the burden of proof belongs to the taxpayer. Remember, you may get a ‘no’ for an answer, but it doesn’t hurt to ask.
5. Form 1127 is a request for a 120 extension. Assets, expenses and income must be detailed thoroughly on the form.
6. Form 843 may save you money if you can prove your reasonable cause. The IRS will consider waiving penalties for late payments to those applicants who are currently in good standing with previous tax years.
Tax insolvency is not a good position to be in. The government has rights to garnish wages, hold future tax returns as form of payment, and place tax liens on property. Put honest efforts into preparing your finances for the upcoming tax year. Use a professional CPA for more complicated problems or to find the best solution for your money. Work diligently, prior to tax season, to relieve future stresses.