Tax Debt Assistance: 5 Options If You Can’t Pay Taxes

0
49


Knowing you’re getting a tax refund can be almost fun filing your taxes. However, if you suspect that you owe the IRS money that you don’t have, it can be difficult to even get the process started.

According to a NerdWallet survey, 24% of those who hadn’t filed an application by July 15, 2020 knew they owed money but couldn’t pay, and 18% didn’t know if they owed something but were afraid of receiving a bill that they couldn’t pay.

The tax bill you know is better than the tax bill you don’t know

As with most problems, putting your tax bill in a drawer and forgetting about it won’t go away.

If filing your taxes is a hassle at first, help may be possible. The federal government has some programs to provide free tax assistance to qualified individuals, such as: B. Voluntary income tax assistance and tax advice for the elderly. Many accountants also offer one free version of their software for those with simple tax situations, and the IRS itself offers a free file program for those who qualify.

However, if you postpone filing because you have concerns about owing taxes, understand your options for Tax relief. Here are five ways to get help with tax debt.

1. Pay what you can

No matter what you owe, you should still try to file (or submit an extension if you cannot meet the deadline). Filing an extension gives you more time to file your taxes and not more time to pay your bill. However, skipping overtime can result in more severe penalties.

If you fail to pay your taxes, the IRS will charge interest on your debt. You may not be able to afford all of your tax bill, but paying part of that bill will reduce the amount of interest you have to pay on the remainder of your tax owed.

2. Consider an IRS payment plan

An IRS payment plan, also known as an installment payment arrangement, allows you to pay the taxes owed over a longer period of time.

According to Jordie V. Neth, chartered accountant and owner of RainCity CPA in Seattle, once you have established a monthly payment schedule, you cannot renegotiate these payments. “You can pay it off with the IRS [up to] 72 months. If you choose that option, you can always pay extra, but you can never pay less, ”says Neth.

Neth recommends pausing your payments for as long as possible so that they are fixed at the lowest possible amount. “That way, when the surge comes and you’re in a tough spot, you actually have the option to pay the minimum amount due for a given month,” says Neth.

Note that there are some interest and penalty fees associated with a payment plan. You may also have to pay a processing fee for using a debit or credit card and a setup fee, depending on the length of your payment plan and whether or not you apply online.

3. Request a compromise offer

You can settle your tax debt with a compromise offer. According to Tina Pittman, CPA and owner of your accountant in Chambersburg, Pennsylvania, one of the main benefits of a compromise offer is that you end up paying less than you really owe. According to Pittman, a compromise offer offers other advantages, such as: B. Avoiding call-ups and letters from the IRS.

Applying for a compromise offer is a long process that involves a variety of documentation to prove you can’t afford your tax bill, a $ 205 filing fee, and an initial payment on your bill. While your application is being reviewed, your payments and fees will be counted towards your balance that you may have to pay out – even if the IRS agrees to reduce it.

Note that the IRS will turn down most no-compromise proposals. If so, your first payment will likely be applied to your balance. Your registration fee can be refunded in certain situations.

If you meet the requirements for low income certifications, you may not have to pay the application fee or the first payment. You also don’t have to make monthly payments while your offer is being evaluated.

4. Ask about “Currently not collectable” status

Those unable to pay their tax bills can apply for “Currently Uncollectible” status by the IRS. This means that the IRS will temporarily delay the collection until your financial situation improves. Note that this is just a temporary label that the IRS will add to your account. The status is not permanent and you may have to pay your tax bill. (The IRS can still hold a lien on you as long as you have that status.)

To receive currently non-collectible status, you will need to fill out a form and provide information about your assets, monthly income and expenses.

5. Contact a specialist if you can

Pittman advises people to consult a tax advisor before taking action with the IRS.

“People don’t realize that there are different options with the IRS. They automatically assume that all they have is the installment payment arrangement, for which you will have to pay the penalties and interest. “

If you can’t afford to work with a tax advisor, resources are available for free tax assistance this can make it clear which options would be right for you.

LEAVE A REPLY

Please enter your comment!
Please enter your name here