Under certain circumstances, taxpayers may find themselves unable to pay what they owe to the United States government. In any situation, the key is to try to find tax settlements and solutions early, before crippling penalties and interest are added to the bill. By cooperating with the IRS themselves, or by retaining a tax attorney to represent them, taxpayers may be able to resolve their tax debts.
Taxpayers may contact the IRS directly, or have an attorney initiate contact. In either circumstance, the bill should be paid, to the greatest extent that the taxpayer can afford. Applying for a home equity loan, or even obtaining a credit card cash advance, may be less expensive than the penalties and the interest rates charged by the Internal Revenue Service.
The agency will grant a 120-day grace period for payment. During this period, interest will accrue, but penalties may not, depending on the circumstances. If this extension will not work, then taxpayers may file a Form 9465, requesting an installment agreement.
Settlement for less than is owed may be possible. This program is called an Offer in Compromise, and one of three criteria must be proven in order to negotiate. Taxpayers may be able to prove doubt as to liability, which means that the amount, which the IRS claims to be owed, is incorrect. Doubt as to collectibility means proving that the IRS will not be able to collect the debt, under any circumstances. Under effective tax administration, taxpayers do not contest the debt, but list extenuating circumstances proving that paying the debt will create extreme financial hardship.
Penalties and interest may be abated, under certain conditions. Innocent Spouse Relief will erase penalties and interest, if a taxpayer proves that the liability came about as the result of actions by his or her spouse. Other mitigating circumstances may include major family problems, illness, incarceration, lengthy unemployment, bad tax advice, or financial harm caused by an act of God.
Bankruptcy may be a final consideration, if bills are not settled. Bankruptcy courts will either sell non-exempt assets to pay the liability, or work with the taxpayer to create a payment plan proposal. This option has an extremely negative effect on a taxpayer's credit score, and will stay on a credit report for up to ten years.
Taxpayers find themselves owing the IRS money for a variety of reasons. Unforeseen circumstances, like job loss, or financial emergency, may leave taxpayers unable to pay what they owe. When the inevitable collection actions begin, taxpayers should take immediate steps to pay their liabilities, asking for tax settlements and solutions, or bankruptcy protection, if necessary.
Taxpayers may contact the IRS directly, or have an attorney initiate contact. In either circumstance, the bill should be paid, to the greatest extent that the taxpayer can afford. Applying for a home equity loan, or even obtaining a credit card cash advance, may be less expensive than the penalties and the interest rates charged by the Internal Revenue Service.
The agency will grant a 120-day grace period for payment. During this period, interest will accrue, but penalties may not, depending on the circumstances. If this extension will not work, then taxpayers may file a Form 9465, requesting an installment agreement.
Settlement for less than is owed may be possible. This program is called an Offer in Compromise, and one of three criteria must be proven in order to negotiate. Taxpayers may be able to prove doubt as to liability, which means that the amount, which the IRS claims to be owed, is incorrect. Doubt as to collectibility means proving that the IRS will not be able to collect the debt, under any circumstances. Under effective tax administration, taxpayers do not contest the debt, but list extenuating circumstances proving that paying the debt will create extreme financial hardship.
Penalties and interest may be abated, under certain conditions. Innocent Spouse Relief will erase penalties and interest, if a taxpayer proves that the liability came about as the result of actions by his or her spouse. Other mitigating circumstances may include major family problems, illness, incarceration, lengthy unemployment, bad tax advice, or financial harm caused by an act of God.
Bankruptcy may be a final consideration, if bills are not settled. Bankruptcy courts will either sell non-exempt assets to pay the liability, or work with the taxpayer to create a payment plan proposal. This option has an extremely negative effect on a taxpayer's credit score, and will stay on a credit report for up to ten years.
Taxpayers find themselves owing the IRS money for a variety of reasons. Unforeseen circumstances, like job loss, or financial emergency, may leave taxpayers unable to pay what they owe. When the inevitable collection actions begin, taxpayers should take immediate steps to pay their liabilities, asking for tax settlements and solutions, or bankruptcy protection, if necessary.
About the Author:
If you are one of the many taxpayers who owe outstanding tax bills, there are tax solutions available. You can set up arrangements for tax settlements in most instances, you just have to take action.
