By Alvin Maglan, CPA
There are payment options if you owe the IRS. An estimated 17 percent of federal taxes go unpaid each year. People who owe tax money to the Internal Revenue Service (IRS) may have claimed too many exemptions on their employee withholding forms, failed to file a tax return, under-reported income or made any number of other errors. Or they simply have decided not to pay up.
If these debts to the IRS are not resolved in a timely manner, unpaid taxes can have serious consequences ranging from property seizure to jail time.
If you owe taxes for any reason, including an inability to pay the bill, the IRS has programs that can help you settle your debt.
IRS Repayment Options
Depending on your financial situation, you may be eligible for a tax repayment plan through the IRS. Your main options include an installment agreement, an offer in compromise (OIC) and a temporary delay of payment.
Installment Agreement
An installment agreement, also known as a payment plan, is a means of paying off your taxes over time. The total debt is finalized and you make predetermined monthly payments.
Some taxpayers can complete an installment agreement within four months and avoid additional fees. But if your plan lasts more than 120 days, there could be a fee of up to $105 for setting up a long-term agreement.
Offer in Compromise
Much like debt settlement, an offer in compromise allows you to negotiate with the IRS. This agreement allows you to have some of your tax debt forgiven. If your offer in compromise is accepted, you only have to pay part of what you owe.
There are two payment options with an offer in compromise. The first is a short-term offer, which gives you five months to pay off your debt. The other is a Partial Payment Installment Agreement (PPIA), which takes longer.
Temporary Delay
If you can’t pay any portion of your debt because of a short-term financial hardship, the IRS may deem your debt as not collectible. In this case, the IRS can grant you a payment deadline extension.
An extension will give you more time to collect funds, but it may lead to penalty charges on top of your current debt amount.
Alvin Maglan, CPA has more than 30 years of experience in tax matters having worked with accounting firm of SyCip, Gorres, Velayo & Co. and other Fortune 500 companies in the U.S. He works at Taxsaverspro, Inc. a tax consulting company that has a complete staff of Attorney, CPA and tax consultant that can help you save more on your taxes and in all problems in taxes. For free consultation you may call 1-877-456-9266.
