Need Help Paying For Your Taxes? The IRS Has Several Options For You
For the many Americans who have experienced financial hardship as a result of the pandemic, or are generally unable to pay taxes, the IRS has an entire online section dedicated to the different resources available to you.
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Payment Plan
The IRS offers a program to meet your tax obligation in monthly installments by applying for a payment plan. This also includes the option of an installment agreement, wherein you pay off your bill in monthly payments instead of a lump sum. You may even qualify to apply online for a long-term installment payment plan if you owe $5,000 or less in combined tax, penalties and interest, and filed all required returns. For a short-term payment plan, you may qualify to apply online if you owe less than $100,000 in combined tax, penalties and interest. If you are a sole proprietor or independent contractor, you may apply for a payment plan as an individual, as well.
One of the benefits of applying online for an installment plan: setup fees may be higher if you apply for a payment plan by phone, mail or in-person. Details can be found here.
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Offer In Compromise
Just as you might be able to do with a credit card, you can negotiate with the IRS to cut down on a tax bill you cannot afford. An offer in compromise is just that. It allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you cannot afford your full tax bill or if doing so will create financial hardship. The IRS will consider your particular set of circumstances to make a decision. These include your ability to pay, income, expenses and asset equity. Asset equity, for example, means that if you have three homes but owe the IRS money, the agency might determine you’re not in a position of financial hardship.
In order to be eligible, you will have to have filed all required tax returns and made all required estimated payments. Those who are in an open bankruptcy proceeding are not eligible.
You can use the Offer in Compromise Pre-Qualifier tool to confirm your eligibility and prepare a preliminary proposal.
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Delay Collections
If the IRS determines that you are unable to pay any of your owed tax bill, they might be able to report your account “not collectible” and temporarily delay any collection efforts until your financial situation improves. This does not mean the debt is erased, but that the IRS has determined you cannot afford to pay the debt at this time. You will likely be asked to provide proof of your financial status, like assets and monthly income and expenses.
Its important to note that if you are granted a temporary delay in collections, your debt will increase because penalties and interest are charged until you pay the full amount. During the temporary stop to collections, the IRS will again review your ability to pay.
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Temporary delays to collections are serious and should be treated as such. It is possible the IRS also files a Federal Tax Lien against you to protect the government’s interest in your assets.
For more information see Collection Procedures: Filing or Paying Late.
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Last updated: July 28, 2021
This article originally appeared on GOBankingRates.com: Need Help Paying For Your Taxes? The IRS Has Several Options For You
