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Do You Owe More in Back Taxes Than You Can Afford to Pay? Our IRS Debt Resolution Process Takes 3 Easy Steps (Discovery, Compliance, and RESOLUTION).
If you have a big tax bill that you can’t pay, life can seem pretty bleak.
Don’t ignore the problem. The IRS will not. Even if you can’t pay what you owe, file your return on time or, if that’s not possible, file for an extension. The late filing penalty is 5 percent of the tax owed per month up to a maximum of 25 percent of the balance. There is also an underpayment penalty of 0.5 percent to 1 percent per month of the balance owed, also up to 25 percent. If you don’t file your return or make any payment on your obligation, your tax debt will grow rapidly.
Offer In Compromise
If you cannot realistically pay off your tax debt, the IRS may consider accepting an offer in compromise (OIC). An offer in compromise allows a taxpayer to settle the debt for less than what they owe, with the settlement amount determined on the basis of what they can actually afford to pay. There are three reasons the government will generally accept an OIC request:
- Doubt as to Collectability
If the IRS doubts a taxpayer will ever have the ability to pay off their outstanding balance in full, they may consider declaring Doubt as to Collectability on the account. This involves an examination of your assets and income, which helps the IRS determine whether they’ll be able to collect more by enforcing traditional collection methods or by settling for an offer in compromise.
- Doubt as to Liability
Are you convinced your tax debt as presented by the Internal Revenue Service is incorrect? If you can prove that your assessed tax liability is wrong, thanks to examiner mistake, missing information, or new information, the IRS will change the total tax owed to the appropriate amount. Our Tax professionals can help you determine if there’s any government fault in assessing your outstanding balance.
- Effective Tax Administration
If a taxpayer isn’t contesting their collectability or liability, but can prove that their current circumstances prevent them from paying their debt, or that doing so would cause undue hardship, the IRS may be more willing to accept an OIC request.
Schedule a call with one of our CPAs or email us with your questions – info@southjerseytax.com .