In today’s life, many people are struggling financially due to common economic problems we face now such as inflation, recessions, unemployment, and debt. On top of this, they then have to come up with the money to pay their taxes. Often when it comes to buying food or paying their taxes, they will obviously buy food and thus a lot of the time they never even file returns to the IRS in the hope that they will go unnoticed. This however, often lands them in even more litigation.
What many people fail to think of is to approach the IRS directly to get some form of IRS relief. We often fear the IRS so much that we would rather ignore the situation and hide than approach them to explain our situation. Below we will look at how approaching the IRS to get IRS relief is often your best option. We will discuss three ways the IRS can assist you in paying your taxes as well as why not filing your returns is a big mistake.
You Can Run But You Can’t Hide…
Trying to escape the IRS may work for a little while, but not for very long. By not submitting your tax returns, it often causes raises a red flag. This is because the IRS receive tax reports from a variety of people which could include your banks, your company or other people who pay you smaller amounts of money that you would think would go unnoticed – however, it is noticed as when they receive these reports and cannot find your tax return, warning bells go off as you were dishonest in declaring what you earned.
This problem will only get worse over the coming months because for every month you do not declare your income, a penalty fee between 5% – 25% of what you owe will be added to your ‘account’. It doesn’t end there… If you then default on your payment, 0.5% penalty is added on every month. Furthermore, you will still owe the interest on all amounts outstanding beginning at the first month where you failed to file your return.
So as you can see, these avoidance techniques can be an extremely costly exercise. So consider the following three options in getting IRS relief instead.
Your Options In Obtaining IRS Relief
Over the last couple of years, the IRS began a new program called the Fresh Start Initiative in which they focus on the best way for citizens to pay their taxes whilst considering their predicaments and thus coming to an arrangement that helps the government retrieve taxes realistically and gives the tax payer room to breathe. To get IRS relief one should analyze their financial situation and then approach the IRS. The IRS will then, based on your situation, offer you a payment plan to suit your needs. The following common options are available to tax payers who are battling to keep their head above water:
- If you are in a bind but you know that it will only be short-lived then your best option would be to contact the IRS online or telephonically and request that they allow you a bit more time. The IRS wills give you a 120-day extension to pay the tax money that you owe. This in combination with an automatic 6-month file return extension will help you to not incur any more penalties for failing to file your returns. All penalties that were incurred before in addition to the interest and the tax you woe will need to be paid in full within the 120-day grace period. This type of request does not cost anything.
- If your financial situation is really bad and you require more than just a 120-day grace period then you will need to setup an installment plan to get IRS relief. It is important to note that all these plans have a fee attached. It is $120 to set up a standard agreement and $52 for a direct debit. There are three installment plans available and you will be assigned on based on your situation.
- If you owe less than $50,000 (tax + interest + penalties) to the IRS, then monthly payments can be made via direct debit, credit card, money order, OPA or payroll deduction. An application can be completed online or complete the IRS form 9465. It is important to be able to pay these monthly installments and installments can be over a 6-month period.
- If you owe more than $50,000 you need to complete Form 9465 as well as Form 433-F. individuals will have to provide financial statements and credit situations as well as declare the assets you own in order for the IRS to work out how you will afford to pay the tax you owe and what installment amount should be set up.
- If however you have no means to pay off the tax that you owe in full, the IRS will allow for an ‘Offer in Compromise’. This allows the taxpayer to strike a deal with the IRS to pay less than the full amount they owe. This can either be paid once off or monthly installments can be agreed upon. The IRS will look into your income, assets, debt, etc. to determine if this is the best course of action for them to obtain as much of the taxes owed as possible.
So, there are options available to tax payers if they seek out IRS relief. Whilst it’s not the most ideal situation and there may be interest and penalties incurred, it does buy you some time to come up with the money you owe.