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One of the ways you can resolve your IRS tax liability is through an installment agreement (monthly payment plan). When you set up your installment agreement, the IRS requires that you include all of the tax years that you owe for in the installment agreement. So, for example, if you owe taxes, penalties and interest for 2005, 2006 and 2007, you must include all three years in the installment agreement. You could not set up an agreement for just 2006.
So, what happens if you have set up an installment agreement and you find yourself owing more tax this year than you can afford to pay back. Well, the simple answer is that you will be re-negotiating your installment agreement. If you file your taxes with a balance due and you are unable to pay that in full, you have defaulted on your installment agreement and if you take no action, the IRS could begin active collection activity against you. “Active collection” is best known as wage or bank levies/garnishments or seizure of assets.
When you’re in this situation, you should immediately call the IRS and let them know you owe for the current year and you need to include that on your tax return. You should have a copy of the tax return you filed handy so you can fax it to the IRS if necessary. Depending on the total amount you owe and how long ago you negotiated your payment plan, you may have to go through the whole process of sending in a financial statement and negotiating with the IRS for your payment plan, or, they may simply add that additional tax to your plan and let things carry on as usual. In my experience, however; the IRS always makes you present new financial information in the hopes that things have changed and they will be able to require a higher monthly payment in your installment agreement.
Question:Should I go ahead and file my tax return even though I am unable to pay or should I wait until I can pay for my tax in full to pay for it? I guess I could file for an extension now and pay in October, right?
Answer: You should file your 2009 income tax [...]
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What is involved in submitting an offer in compromise? Is it just a short application? Unfortunately, no. The process of submitting an offer in compromise is fairly tedious. It requires you to complete several in-depth IRS forms about your financial situation to help you (and the IRS) determine if you will qualify for an offer [...]
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Recently, I was asked by a reader: “Will the IRS usually accept an offer in compromise when you owe taxes?”
“Usually” is probably not the right word. But, in the right circumstance, the IRS will accept an offer in compromise every time. You must show the IRS that you do not have the future income or [...]
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There are several different types of offers in compromise: doubt as to collectability (what we usually talk about and the most common type of offer in compromise which states that you simply do not have the money to be able to full pay your tax debt), doubt as to liability (where you believe you are [...]
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Setting up an Installment agreement can be a challenge, but it is also a great way to resolve some IRS cases. Very simply put, an installment agreement is a way to pay off your tax debt with a monthly payment plan. You may full pay your tax debt or you may not, depending on the [...]
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Question: I have filed an offer in compromise and want to know what the average time is for the IRS to approve my offer in compromise and finalize the process.
Answer: I’m glad that you have filed your offer in compromise and taken the first step towards resolving your tax problems with the IRS. The time [...]
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I met with a prospective client recently who was having their paycheck garnished by the IRS and didn’t know that it was coming. He was mad to say the least. Upon questioning him a little more, I found out that he had several years of unfiled income tax returns and had moved several times in [...]
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In the good ole days you could submit your offer in compromise to the IRS and it wouldn’t cost you anything except a filing fee. So, it didn’t matter how much you were offering to settle your tax debt with the IRS you knew that you were going to have several months before the IRS [...]
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There are several statues of limitations when it comes to how long the IRS has to collect tax debt from you. The first statute of limitations you have to worry about is the time the IRS has to go back and examine (or audit) your income tax return. The IRS has three years from when [...]
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