When you owe taxes to the Government but cannot pay them all, do not worry. There are several options for you. Continue reading →
When you owe taxes to the Government but cannot pay them all, do not worry. There are several options for you. But all options might not be ideal for you which is why it helps to sort them through and consider the pros and cons before moving forward. According to professionals at Rush Tax Solution, “a lot of people in this situation prefer to set up IRS payment plans which are known as installment agreements but there are other options too.” Let us take a look at installment agreements in detail.
When you owe taxes for more than one year, it is possible to bundle all the taxes into one installment agreement since the IRS has 10 years to collect the tax debts. This means if your expiration date is nearing, you might be asked to make higher monthly payments, or you could be disqualified from certain agreements. You need to provide your financial documents to the IRS which will verify them before agreeing to the installment agreements. Based on this information, the IRS will decide how much you can practically afford to pay every month. But once you agree on this, you will have to pay on time and not default on the agreement. Many agreements also come with a federal tax lien, and this means it will have an impact on your ability to get a loan.
There are simple and easy-to-set-up agreements that do not always come with the federal tax lien. You simply need to use the IRS online payment application or contact IRS. Remember to set an agreement before the IRS begins the process to collect your dues.
The IRS will have to grant this agreement in case you qualify for it and request it. If you want to apply for it, you must owe lower than $10,000 and you should have the ability to pay the total balance in a period of three years. That said, in your documentation, you need to prove that you have filed the necessary returns and did not have the same agreement in the past five years. If you need any help, you can contact tax relief attorneys to help you with the documentation.
Another alternative is the streamlined installment agreement where you qualify if you owe $50,000 or lower. This does not include the interest or penalty amount. You must be able to pay the taxes in a period of six years. In case you owe higher than $25,000, it is essential to set up direct debit payments but if the amount is more than $50,000, you might want to pay the balance over $50,000 so that you can be eligible for this agreement.
There are other complicated agreements if you are in a situation other than the ones mentioned above. You might want to consider them if you owe a lot or the monthly payments are too high for you. Even in this case, the IRS will require your documents and will consider the situation, and then figure out your ability to make the payment. However, you will have to ensure that you pay the entire tax balance before the end of the collection statute expiration day.
You can request this agreement, but IRS will file a tax lien in case your outstanding amount is more than $10,000. That said, you need to provide all the financial information to the IRS, and they could restrict a part of your expenses. Consider selling some of the assets and using the money to pay the tax balance in order to have the IRS grant you this agreement.
This is a type of agreement where you can have expenses that are higher than the financial standards of the IRS. So, the monthly payment could be less, but you will have to pay the total tax balance in a period of six years.
In this agreement, you will have to make the necessary changes to your lifestyle in order to pay the IRS collection. Your expenses must meet the financial standards of the IRS.
The agreement is very similar to the ability-to-pay agreement but here you do not have to pay the entire amount before the end of the collection statute expiration. Here you pay each month until the period to collect the balance expires. After that, there will be a re-evaluation of the agreement every two years in order to see if you can pay a higher amount every month.
If you are unable to pay taxes on time, these are the different types of instillment agreements you might want to consider.
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