The IRS considers delinquent taxes over $50,000 to be severe. When you owe this much in unpaid, constantly taxed, the agency can and will pursue aggressive collection measures (asset seizure, bank levy, etc.) to get their money. The IRS may even request that the State Department cancel your passport or refuse to grant you a replacement. However, The taxpayer might avoid these collecting operations by arranging agreements.
IRS payment plan alternatives
A monthly IRS payment plan known as an installment agreement has historically been a popular choice for tax debtors. According to IRS data from the prior two years, over three million taxpayers established IRS payment plans.
If you owe above $50,000, you have more alternatives.
For those with debts above $50,000, the alternatives get more complex. In the past, the IRS did not ask many questions if you owed between $50,000 and $100,000 and could repay it within 84 months or within the collection statute (whichever was longer).
The IRS required taxpayers who owe more than $100,000 to disclose their assets, income, and spending. Then, the IRS would analyze the financial data to determine the taxpayer’s capacity to pay by liquidating assets, borrowing against them, and making monthly payments. Completing these ability-to-pay agreements typically took months, and the financial disclosure and analysis required of individuals and the IRS were considerable.
One essential point for persons with substantial tax debt
Suppose you owe more than $1,000,000 and do not have an arrangement with the IRS (such as a payment plan, presently not collectible status, an extension of time to pay, or an offer in compromise). In that case, IRS protocols require that a revenue officer be assigned to your case.
In certain situations, you have little choice but to negotiate terms depending on your capacity to pay. Your revenue officer will determine how you may pay your tax as quickly as possible, which may involve selling assets.
Individual taxpayers who owe up to $250,000 now have an easier time obtaining an IRS payment plan. In addition, you may constantly renegotiate the conditions of the agreement depending on your ability to pay if your financial situation changes.
IRS Forgiveness Program
New IRS Forgiveness Program Aids Taxpayers in Debt The Internal Revenue Service has extended its “Fresh Start” initiative to aid taxpayers in debt.
A portion of the initiative absolves certain unemployed taxpayers of late-payment penalties. Penalties are one of the most significant components of a financially troubled taxpayer’s tax bill. An installment agreement is a payment alternative for people who cannot fully pay their tax bill by the due date. The Fresh Start program allows more taxpayers to employ simplified installments to catch up on delinquent taxes and provide them additional time to pay.
The barrier to requesting a payment plan has increased from $25,000 to $50,000. This option needs minimal financial information, significantly reducing the tax burden for taxpayers. In addition, the maximum period for simplified installment agreements has increased from five to six years.
If your debt exceeds $50,000, you must still submit a Collection Information Statement to the IRS (Form 433-A or Form 433-F). In addition, you must have a balance of $50,000 or less to qualify for this payment plan.
An installment arrangement will reduce penalties, but interest will continue to accrue on the unpaid sum. In addition, you must consent to monthly direct debit payments to qualify for the new, expanded, streamlined installment arrangement.
The IRS acknowledges that many taxpayers continue to struggle to pay their payments. Therefore the agency has been working on commonsense modifications to the OIC program to reflect real-world circumstances better.
Generally, the IRS will not accept an offer if they feel they can settle the liability in whole through a lump amount or payment plan. The IRS does this because the IRS determines taxpayers’ ability to pay based on their income and assets.
Get expert help
In most cases, the IRS will try as hard as possible to ensure that no part of the debt is relieved and that the total amount is collected as soon as possible. However, do not forget that as a taxpayer, you have rights, and the IRS is not allowed to cause financial hardship. Together with the IRS, a taxpayer can come to a reasonable solution. If you’re willing to fight to get a significant share of your debt, it may be better to contact a tax professional. For example, the tax specialists at Idealtax.com will be able to help you negotiate the most desirable outcome with their advanced knowledge of IRS processes and negotiation tactics.
Interesting related article: