A common statistic you hear these days is that most people in the United States do not have enough savings to even handle a $400 emergency. That is a very scary thing to think about. And what does that mean for those who have significant tax debt?
If you feel that you might be among those without enough disposable income to get by or if you are currently facing a significant bill for back taxes, then you will at some point need to deal with the Internal Revenue Service (IRS) to make sure that you do not go deeper into debt.
Indeed, many people share the issue of being unable to save for a rainy day. By the same token, many people are similarly facing a tax debt owed to the IRS.
There is, however, a little bit of a silver lining. The IRS knows that people are struggling. Accordingly, the IRS has a few programs that are geared towards helping people with tax debt, so that they can start to put the black cloud of tax debt behind them, while still paying the IRS.
In this article, we will discuss the ways in which the IRS can help you clear up your back taxes – often for less than you owe. We will also discuss some strategies for dealing with the IRS to ensure that you have less difficulty taking advantage of the programs the IRS has to offer.
Settling Your Debts to the IRS
There are three main ways in which the IRS can work with you to ease the burden on the back taxes you owe:
1. Installment Plans
2. Penalty Abatement
3. Offer in Compromise
First, an installment plan is, as you would expect, a way in which to pay the IRS in installments to settle tax debt. This would help you avoid having to pay a tax bill in one lump sum, or simply go deeper and deeper into tax debt. The installment plan provides a great deal of flexibility that can be tailored to your specific circumstances.
The various installment options vary by the amount you owe. Specifically, if you owe less than $10,000, you may be eligible for a so-called “guaranteed installment agreement.” If you owe more than $10,000 but less than $50,000, then you may be eligible for a “streamlined installment agreement.”
If, however, you owe over $50,000 in back taxes and you are unable to pay that amount within six years, then you need to submit financial statements to the IRS, providing your income, assets, expenses, liabilities, and bank accounts. Armed with that information, you then may be able to show the IRS that you should be considered for a “partial payment installment agreement.” With a “partial payment” agreement, the IRS agrees to take less than the full amount of your debt and pay the partial amount in installments.
Second, a penalty abatement is another way to reduce your back-tax debt by working with the IRS. While this option does nothing to the actual amount of taxes you owe, asking for a penalty abatement will allow you to avoid money owed in fines and penalties. Taking away such penalties could significantly lower your debt – those penalties can really add up.
Third, an offer in compromise is a version of the “partial payment installment agreement” discussed above, except it, envisions a lump sum payment. An offer in compromise is a way in which you can settle your tax debt with the IRS for much less than what you owe. The IRS will engage in this arrangement if it is unlikely, based on your financials, that you could pay the full back taxes over the course of 10 years.
To be eligible for an offer in compromise, the following must be true:
1. It is impossible to pay your tax debt based on your current financials;
2. You offer to pay the maximum amount you can afford;
3. The IRS approves the offer amount, and lowers your debt in connection with the amount you can pay;
4. You pay the agreed-upon amount as a lump sum.
If you resolve your tax debts with an offer in compromise, then the IRS will remove all tax liens on your income, and you now can start with a clean slate.
Interacting with the IRS
In order to take advantage of any of the tax resolutions above, you need to interact with the IRS. That is easier said than done. As with any government bureaucracy, contact with the IRS will include numerous phone calls, and a lot of being put on hold. That could add a lot of frustration and stress to the process.
With that in mind, here are a few quick tips:
1. Always be truthful with the IRS. Do not let inconsistencies hurt your credibility when dealing with the IRS.
2. Stick to deadlines. Your issues will compound if you are unable to keep to important deadlines.
3. Keep your cool. Even though you might get frustrated, venting to an IRS agent will only cause more problems.
4. Agree only to those conditions you can follow. Avoid being unrealistic about the money you will be able to pay to resolve your case.
The Best Advice for Dealing with the IRS – Get an Experienced Tax Attorney
There are many options with regard to tax planning, and dealing with the IRS. In that regard, you would be wise to enlist the help of a seasoned tax attorney in your area.
Indeed, handling a tax debt in Florida on your own is generally not a good idea. You should see the big picture in connection with your business and talk to a tax attorney who can help. Mary E. King has spent her career concentrating in tax law and can help you with a tax debt in Florida and more. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax related issue – no matter how small or how large – setting up an initial consultation with Tax Attorney Mary E. King is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience handling IRS matters for many clients, Attorney Mary E. King can make sure that your tax issues are resolved efficiently and at the lowest cost to you. Fill out our online contact form, or call us at 941-906-7585.