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 choose to work with the IRS on their own, or to hire an attorney. In either situation, taxpayers should start the process by paying as much of their debt as possible, so that penalties and interest are minimized. Taking out a home equity loan, or even a credit card cash advance, could be cheaper that the charges imposed by the Internal Revenue Service.
The agency will typically allow a 120-day grace period. Interest will build up during this time, but penalties may be forgiven, if certain circumstances apply. If taxpayers still cannot pay after the grace period, they may file Form 9465, which initiates a request for an installment agreement.
An Offer in Compromise will allow taxpayers to settle for less than they owe. In order for the settlement to move forward, taxpayers must prove one of three situations. One is doubt as to liability, which entails proving that the IRS is assessing the incorrect amount. Another is doubt as to collectibility, which entails proving that the agency has no chance of collecting the debt. In addition, effective tax administration entails proving that, while the taxpayer does not dispute the amount owed, requiring payment will result in 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 choose to work with the IRS on their own, or to hire an attorney. In either situation, taxpayers should start the process by paying as much of their debt as possible, so that penalties and interest are minimized. Taking out a home equity loan, or even a credit card cash advance, could be cheaper that the charges imposed by the Internal Revenue Service.
The agency will typically allow a 120-day grace period. Interest will build up during this time, but penalties may be forgiven, if certain circumstances apply. If taxpayers still cannot pay after the grace period, they may file Form 9465, which initiates a request for an installment agreement.
An Offer in Compromise will allow taxpayers to settle for less than they owe. In order for the settlement to move forward, taxpayers must prove one of three situations. One is doubt as to liability, which entails proving that the IRS is assessing the incorrect amount. Another is doubt as to collectibility, which entails proving that the agency has no chance of collecting the debt. In addition, effective tax administration entails proving that, while the taxpayer does not dispute the amount owed, requiring payment will result in 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.
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If you are one of the many citizens who have outstanding tax bills, there are tax solutions available. You can set up arrangements for tax settlements in most cases, you just have to take action.