Paying taxes is an important civic duty and part of economic stability. When a person fails to meet their tax obligations, they may face serious consequences from the Internal Revenue Service (IRS) such as fines, liens, or even criminal prosecution. You also need to have an in-depth idea of the taxes you owe.
This article will provide an overview of what happens if you owe the IRS money, and discuss some Fresh Start Programs by the IRS to resolve the debt. These include: payment plans with the IRS, an Offer in Compromise (OIC), and Currently not collectible. We will conclude by summarizing these options and emphasizing the importance of taking action quickly if you owe money to the IRS.
Paying Back the Tax Debt with a Payment Plan
If you owe back taxes to the Internal Revenue Service (IRS) and are unable to pay the full amount due, you may be able to set up a payment plan to pay back your tax debt over time. The IRS offers several payment plan options to taxpayers who are unable to pay their taxes in full at the time they are due.
To qualify for a payment plan, you must meet certain requirements. To be eligible for the short-term payment plan, you need to have filed all necessary tax returns and owe less than $100,000 in total including tax, interest, and penalties. To be eligible for the long-term payment plan, you need to have filed all necessary tax returns and owe an amount of $50,000 or less in total for tax, penalties, and interest.
Making an Offer in Compromise (OIC)
Making an Offer in Compromise (OIC) is a tax settlement option offered by the Internal Revenue Service (IRS) to taxpayers who are unable to pay their full tax debt. It is a formal agreement between the taxpayer and the IRS in which the taxpayer offers to pay a reduced amount of their tax debt.
To qualify for an OIC, taxpayers must meet certain eligibility criteria:
1. First and foremost, they must have filed all their tax returns and made all required payments for the current year.
2. They must not be in an open bankruptcy proceeding.
3. They must prove that they are unable to pay their tax debt in full either immediately or through a payment plan over time.
The IRS will consider the taxpayer’s income, expenses, assets, and future earning potential to determine whether an OIC is appropriate.
Currently Not Collectible
Currently Not Collectible (CNC) is a status granted by the Internal Revenue Service (IRS) to taxpayers who are unable to pay their outstanding tax debt. If a taxpayer owes the IRS money, but they are currently experiencing financial hardship, the IRS may classify their account as CNC. This means that the IRS will temporarily stop all collection activities, such as wage garnishments, bank levies, or property seizures until the financial situation of the taxpayer improves.
To qualify for CNC status, a taxpayer has to demonstrate that they are unable to pay their tax debt due to a significant economic hardship, such as a job loss, a serious illness, or a natural disaster. The taxpayer needs to provide detailed financial information about their income, expenses, assets, and liabilities to the IRS, and show that they have no ability to make payments without causing undue financial hardship.
Seek Professional Help
Taxpayers who are unable to pay their tax debt can benefit from seeking professional help. A qualified tax specialist or attorney can provide valuable guidance on the best course of action for resolving outstanding tax obligations. They can review the individual’s finances, assess their eligibility for different payment plans, and negotiate with the IRS on behalf of the taxpayer.
Conclusion:
If you are in a situation where you owe the IRS money, it is important to take action immediately. Owing large sums of money can lead to interest penalties, wage garnishment, and/or freezing of your bank accounts; as a result, it is best to address your taxes early on. The IRS offers numerous payment options for those who owe including installment agreements and offers in compromise.
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