IRS Tax: How to Pay For Less Than You Settle

If you have not paid your taxes or have unpaid part of the taxes, the IRS will retrieve it at some point. You can most probably bring to a close an IRS installment payment agreement (a form of settlement) that is a payment plan to pay your taxes over time or a series of payments (typically 5 years).

 

An installment payment agreement makes taxpayers pay more than they owe the IRS in the long run due to interest. Before a settlement can be carried out, it is very essential that you submit your taxes. If you have not submitted your taxes in years, there is a good chance that the IRS has done a replacement return for you. What this means is that you have to send the IRS a corrected return for the tax year you want to make corrections on.

Every taxpayer tries to pay their taxes for less than they owe them. There are quite a lot of ways to do this. Everyone has a level of complicatedness. A taxpayer cannot qualify for every settlement option. The IRS typically approves a severance payment option if the taxpayer is in financial difficulty or can provide justified reasons for not paying. If anything, penalties and interest should be reduced or totally removed.

 

Installment payment agreementInstallment payment agreement

 

A taxpayer with an amount of about $ 10,000 or more can tender an application for an installment payment agreement (PPIA). A PPIA is one of the newer IRS programs where the IRS determines how much your monthly payments should be based on a survey information statement (433A of 433B).

 

Form 433 shows the IRS all of your possessions, income, and liabilities. It is used to determine if you meet the requirements for a PPIA. Form 9465 must also be completed. The IRS can even tell you that you need to use or sell equity in possessions to pay off part of your debt before a PPIA can be accepted. Know that you cannot settle for less while keeping significant properties.

 

A PPIA is a form of billing for less than you owe because your monthly payments do not go with your total tax liability for years. Anyone with basic accounting skills can fill out a collection information statement. Help is usually necessary to calculate the acceptable monthly IRS payment.

 

Offer in CompromiseOffer in compromise

 

A offer in compromise (OIC) is another form of IRS tax settlement through which you for less than you owe. An OIC is not often accepted by the IRS because the IRS must be convinced that it will cost them more money through further collection efforts to get the full amount owed. To put your unpaid taxes at risk or qualify for an OIC, a taxpayer must meet one of the following three requirements:

 

  • Liability Doubts – You must provide the IRS with evidence that there are doubts that the total amount owed is wrong.
  • Doubts as to liability – confirmation to the IRS that the chances of repaying the total amount owed are slim
  • Effective tax administration – The taxpayer acknowledges that the tax is correct and most likely to be recovered; Repayment of the total amount, however, will result in an excessive financial burden for the taxpayer.

In most cases, when you send an OIC to the IRS, it must be accompanied by a payment that is 20% of what you owe. This payment is non-refundable.

 

To commence this process, IRS form 656/656-A must be completed along with a survey information statement (IRS form 433A for individuals or 433B for businesses). If you choose to pursue this option yourself, you will simply find that it is highly recommended that you use a tax advisor as most OICs are rejected. The usual reasons for rejection are that the forms are incorrectly complete or the requirements are not met. A tax advisor can usually ensure that you have a fair chance of getting an OIC accepted.

 

Abatement

Another regular way to reduce the total amount of taxes for which you are liable is to ease your IRS penalties. Know that the penalties apply every day after the due date of your payment. You cannot pay less than the credit you owe or the original amount. Only reduce or eliminate the penalties that have been summed up to your total balance.

 

On average, sanctions usually make up 15-25% of the total tax balance sheet. In disparity to the other two usual settlement options, a penalty reduction is much simpler to achieve. The IRS emphasizes or uses sanctions and interest as a means of persuading taxpayers to pay sooner rather than later. A taxpayer should take away fines if they feel that they are liable for taxes but are not responsible for the IRS penalties.

 

Usually, you want to have a reason that illustrates unforeseen events that you don’t keep. Some common reasons the IRS will accept are divorce, serious illness, family death, home or personal record destruction, and widespread unemployment.

 

To follow the IRS Penalty Abatement, you can send a letter to the IRS knowing why you think you are not responsible for the punishment, visiting an IRS office for an interview, or making an application by using IRS Form 843.

The examples above illustrate a few common ways to pay taxes or unpaid IRS taxes for less than you. If you are not approved for any of the settlements mentioned above, it is because you did not submit your taxes first or that you do not meet the requirements of this particular form of tax regulation.

It is recommended that you try to pay IRS taxes owing to a taxpayer turning to a professional company that provides tax accounting services and consists of CPAs and / or tax attorneys. Tax experts make available guidance on which accounting method is most appropriate, and they can also increase the likelihood of an IRS acceptance. This is basically because they can ensure that forms like the Offer in Compromise and procedures are completed and followed in the approved manner.