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Resolve Your IRS Debt: Installment Agreements

As an alternative to the Offer in Compromise (OIC) program, if you find yourself with a tax debt to the IRS and/or the State of Vermont that you are unable to pay in full at one time, you might consider requesting a payment plan.  

The IRS offers several types of payment plans, called Installment Agreements (IA), depending upon the taxpayer’s circumstances:

  • Streamlined Installment Agreements
    – If your total unpaid tax debt, including assessed interest and penalties does not exceed $50,000, the IRS may approve you for this type of IA;
    – The minimum monthly payment under this type of IA is the total amount owed divided by 72.
    Example:  $50,000 owed/72 = $694.44 minimum monthly payment.
  • Guaranteed Installment Agreements
    – Under certain circumstances, if your total IRS debt is $10,000 or less, the IRS is required to allow you to pay according to an Installment Agreement.  The general guidelines are:
      – – you cannot pay the tax immediately;
    – – you agree to pay the full amount owed within three (3) years;
    – – you agree to file and pay all tax returns during the term of the agreement;
    – – you have not entered into an installment agreement during the preceding five
          taxable years;
    – – you have filed and paid all income tax returns during the preceding five taxable years.
  • In-Business Trust Fund Express Installment Agreements
    The IRS may approve an express installment agreement for business taxpayers who have an aggregate unpaid balance of $25,000 or less, including assessed penalties and interest.  Under this arrangement:
    – – The amount owed must be paid within 24 months or before the statute of limitations runs out on the debt, whichever is earlier;
    – – No financial statement is required.
  • Partial Payment Installment Agreements
    – Under this arrangement, you make monthly payments to the IRS towards your tax debt, but the payment amount is less than under a traditional Installment Agreement.  In order to apply, you will complete a financial statement form, the 433-A or 433-B, disclosing to the IRS information about your assets, liabilities and income. In addition, you must meet at least the following criteria:
    – – You owe more than $10,000 in combined taxes, penalties and interest;
    – – You have filed all prior-year tax returns;
    – – You have some ability to pay, but cannot pay the entire tax debt;
    – – You are not in bankruptcy;
    – – You cannot sell or access equity in assets to cover the tax debt.  

 

Whether to apply for an Installment Agreement and if so, which type, requires careful consideration of your unique circumstances. 

If you are interested in learning more about Installment Agreements, contact Diana at Essex Junction’s locally-owned Tax Resolutions, LLC:  diana@taxresolutionsvt.com for a free consultation or call (802) 662-4127

Resolve Your IRS Debt: Offer in Compromise

If you find yourself with a tax debt to the IRS that you are unable to pay, one possible solution is the Offer in Compromise.  Under this program, the taxpayer submits an application, IRS Form 656, together with detailed financial information to the IRS.  The taxpayer offers to settle the outstanding debt for a lesser amount, and chooses between two payment options: 1) a “lump sum” payable in five monthly payments or 2) a payment plan extending from six to 24 months.  Generally, the total acceptable offer amount will be lower under the “lump sum” option.

Before applying to this program, you must have filed all previously-due tax returns.  In addition, the following preliminary threshold requirements must be met:

  • You do not have an open bankruptcy case;
  • All required estimated payments have been made;
  • If you are self-employed with employees, all required federal tax deposits have been made;
  • You have received a bill for at least one IRS tax debt.

Once these requirements have been met, it’s time to gather information.  The IRS requires a detailed description of your cash balances, investments, available credit, assets, income and debt.  You must also provide your household’s average monthly income and actual expenses. Assembling and organizing this information permits calculation of an acceptable offer to settle the debt.

Your detailed financial information is entered onto an IRS Collection Information Statement, which is then included as part of your application, together with the actual Offer in Compromise form, a $186 application fee and supporting documentation.

As with all other parts of the Offer in Compromise application, the proper inclusion of supporting documentation is critical.  Documents required include:

  • Most recent paystub from each employer;
  • Most recent statement from each investment and retirement account;
  • Most recent three months of bank statements for each individual account.  If business, most recent six months of bank statements;
  • Most recent secured debt statements, such as mortgages, car loans, etc.
  • Verification of state and local tax liability, if any;
  • Statement of any exceptional circumstances – if payment of the full amount of taxes owed might impair your ability to provide for yourself and your family.

Once the Offer in Compromise package is submitted, there are several key factors to consider:

  • You must continue to timely file all required tax returns and pay amounts due;
  • You must continue to file and pay estimated taxes and federal tax payments;
  • Penalties and interest will continue to accrue during the time the IRS is considering your offer.

If you are interested in learning more about the Offer in Compromise process, call or email Tax Resolutions at (802) 662-4127 or Contact Us for a free consultation.

Why Do Tax Payers Fall Behind

As practitioners of a full service tax resolution firm, we work with taxpayers who are behind on their taxes on a regular basis.  There are many reasons that taxpayers find themselves in this predicament. Some have life-changing events, some feel that they owe so much that they cannot deal with it, and some don’t worry about the situation.

Our job is not to judge but help each taxpayer in this position to resolve their issues in as stress-free a manner as possible.  Each taxpayer is entitled to have a representative deal with the IRS. Enrolled Agents, CPAs and Attorneys are professionals that can represent taxpayers before the IRS.

Ignoring the problem will not make it go away.  It just makes things worse. There are many actions the IRS can take if they do not get a response. Even if the taxpayer is unable to pay the tax owed it is imperative to at least file the tax returns.  Simply filing the tax returns timely will reduce the taxpayer’s penalties dramatically. There are additional avenues available to further reduce penalties and settle the outstanding debt.

When Tax Resolutions engages a client, our first order of business is to assist the taxpayer in getting current.  We file all tax returns and get the current taxes paid if possible. Next we assess the taxpayer’s ability to pay the outstanding tax and offer a reasonable strategy. Strategies may include applying for an Offer in Compromise, setting up an installment agreement, or applying for non-collectible status.

If you are in this predicament, please call Tax Resolutions, LLC to assist you.  We are a local company based in Essex Junction. We can put our faces to the name as we are known in the community.

We are not one of the large firms you see on the commercials that promise you will pay pennies on the dollar.  We meet with each client personally regarding their particular situation and discuss available options.

The firm owner and operators are Mary Hall, Esq. and Diana J. Sheltra, EA, CFE.  We both have vast experience in tax preparation and representation. For more information, contact Tax Resolutions, LLC at (802) 662-4127

Best Ways to Settle Tax Debts

Settling your taxes is inevitable if you want a normal day to day life instead of living with a stressful burden. The most important action to take is  to file your returns even if you cannot pay. Doing this avoids the failure to file penalty which is quite steep. The second action to take is to pay your current taxes, including estimated taxes if you are self-employed.  Despite the boom in the economy in recent years, taxpayers still struggle significantly to settle tax debts. The amount of taxpayers that find themselves in trouble with the IRS grows significantly every year.  The IRS’s job is to reduce the tax gap.

Never ignore the IRS

Do not ignore the IRS.  Penalties and interest keep growing.  The IRS will take certain steps which will make your situation worse. Even with this burden there are quite a few remedies to ensure you settle your tax debt. A few are explained below:

Set up an Installment Plan

An installment plan will help you settle tax debts depending upon the amount of our IRS debt. A settlement plan involves monthly payments which helps you to settle tax debts.

Offer in Compromise

If you qualify for an Offer in Compromise it is a great way to settle your debt for much less than you owe.  It is a process but in the last few years the IRS has relaxed some of the rules to qualify. Commercials that state “You can settle for pennies on the dollar” are very misleading.  It really depends upon your tax situation and an estimate of your future income.

Apply for Bankruptcy

In the United States Constitution, there is a law that allows you to apply for bankruptcy. It is important to contact a tax specialist before doing so. It is not always the best route for everyone but if everything else fails it can relieve you of certain tax debt. . There are many guidelines to follow to determine which IRS debt, if any, will be relieved with filing bankruptcy. For example, payroll trust fund debt is not excusable with bankruptcy

Not Currently Collectible

If you have a reasonable cause as to why you cannot pay or why you  accumulated the debt, there may be grounds to file for non-collectible status.  The IRS has ten years after assessment of the tax to collect the debt. Filing for non-collectible status  may allow you time to regain your financial position. It is important to plan how you will effectively be in a position to settle tax debts if you find yourself in that situation.

For more information on settling your tax debt contact us or call Tax Resolutions, LLC at (802) 662-4127.