How To Settle Your Tax Debt By Negotiating A Payment Plan With The Irs: What You Need To Know If You Can?T Afford To Pay Your Tax Bill
July 24, 2010 by admin
Filed under Prior Year Taxes
How To Settle Your Tax Debt By Negotiating A Payment Plan With The Irs: What You Need To Know If You Can?T Afford To Pay Your Tax Bill
Qualify for an IRS Installment Agreement and Save Money by Negotiating the Lowest Possible Monthly Payments
IRS Announces Unprecedented Opportunity for Recession-Burdened Americans to Settle Outstanding Tax Debts
Struggling taxpayers may be eligible for tax breaks as the IRS eases enforcement and collection efforts to help Americans in financial distress. Because of the extraordinary challenges of today’s economy, the IRS is pledging to be more forgiving of Americans who have fallen behind on their taxes due to unusual financial hardship.
And one way you can settle your back taxes is by negotiating an Installment Agreement with the government that that allows you to pay liabilities over time.
If you cannot afford to make monthly payments and don’t qualify for another type of tax relief, such as an offer in compromise, there are other options including negotiating that your account be placed in a \”currently not collectible\” status so that you will not be required to make payments and the IRS will not pursue collection action.
What is an IRS Installment Agreement?
An Installment Agreement is a payment arrangement whereby the government allows a taxpayer to pay liabilities over time. Once a payment plan is established, the IRS will not take enforced collection action, including the levy of bank accounts or wages, as long as the taxpayer remains current with all filing and payment obligations. However, interest and penalties would continue to accrue until the outstanding balance is satisfied. Additionally, a tax lien may be filed as part of the terms of the installment payment agreement, depending on the amount of the total liability.
How to Negotiate an IRS Installment Agreement and Set Up a Payment Plan for Your Tax Debt
The IRS encourages taxpayers to pay what they owe as quickly as possible. For those individuals or businesses not able to resolve a tax debt immediately, an installment agreement can be a reasonable payment option. Installment agreements allow for the full payment of the tax debt in smaller, more manageable amounts.
In most cases, the IRS will accept some type of payment arrangement for past due taxes. In order to qualify for a payment plan with the IRS you must meet the following rules and provide the IRS with this information:
* You must have filed all tax returns (It\’s OK to owe money but you must file).
* You will need to disclose all assets owned including all cash and bank accounts.
* You must not have adequate cash available in a checking, savings, money market, or brokerage account to pay the IRS.
* You must not have the capacity to borrow the amount owed to the IRS from other sources (i.e., a second mortgage on your home).
* You must not have adequate equity in a retirement account from which you can borrow or liquidate; for example, IRA\’s or 401K\’s.
The total dollar amount you owe usually dictates with whom the negotiations will be handled.
* Typically, IRS Revenue Officers are not involved in cases where the amounts owed are less than ,000.
* The IRS will ask you to complete a personal financial statement and if a business is involved, you will also need a business financial statement.
* The IRS has determined allowable monthly expenses for individuals, which will be matched against your actual monthly expenses.
* The difference between your monthly income and your allowable monthly expenses will be the amount that the IRS will require you to pay on a monthly basis.
These monthly payments will continue until your outstanding tax liabilities are paid in full.
What the IRS May Not Tell You About Payment Plans
It is important to note that the IRS continues to add penalties and interest while you are making monthly payments. This may cause you to be paying what you consider a large monthly payment to the IRS and your outstanding balance may in fact be increasing due to additional penalties and interest.
The IRS may not explain this to you! So be careful!
Additionally, for taxpayers that enter into an installment agreement, the IRS may require a signed waiver to extend the time IRS can collect. While it is always in the best interest of the IRS to get a signed waiver, it may not be in the taxpayer\’s best interest. If you are asked to sign a waiver, protect your rights, seek the advice of a tax resolution expert first.
The IRS in most cases, to protect their interest, will file a Notice of Federal Tax Lien, with the County Recorder’s office in the county you reside. This will inevitably be reflected on your credit report decimating your credit (FICO) score. In addition a recorded Federal Tax Lien means the IRS has a monetary interest (claim) against all real and personal property owned (at time of filing) and any and all real or personal property acquired in the future while the lien is in effect. Generally, the lien is effective throughout the 10 year Collection Statute of Limitations.
The Benefits of Hiring Professional Tax Representation to Negotiate your IRS Payment Plan
Whether the IRS demands full payment up-front or a payment plan that is substantially higher than what you can afford to pay, a professional tax resolution specialist can help you negotiate an arrangement for the lowest possible monthly payment and also provide you with various options for making those payments.
Additionally, if you owe more than ,000 to the IRS, you will be required to provide full financial disclosure and you will need to hire specialized tax representation to negotiate on your behalf with the IRS.
IRS Pledges Greater Flexibility to Help Distressed Taxpayers
Although the IRS is pledging to be kinder and gentler to taxpayers in these challenging times, you will still need to meet your installment payment requirements. However, the IRS has announced that they will try to be more flexible with taxpayers who miss an installment payment.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” IRS Commissioner Douglas Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
If a taxpayer with an existing installment agreement is worried about missing a payment because of a job loss or other financial hardship, Shulman has assured the public that a missed payment will no longer lead to an automatic end to that agreement.
Additionally, the IRS has announced that it is more likely to forgive a missed payment and they’ve instructed staff to not automatically default someone who is having trouble.
Frequently Asked Questions about IRS Payment Plans
What do you have to do to be eligible for an installment agreement?
To be eligible for an installment agreement, all returns that are due must first be filed.
What are the payment terms?
Installment agreements generally require equal monthly payments. The amount of an installment payment will be based on the amount owed and on the taxpayer’s ability to pay that amount within the time legally available for the IRS to collect. By law, the IRS has the authority to collect outstanding federal taxes for ten years from the date of assessment.
What are the conditions of an installment agreement?
As a condition of an installment agreement, any refund due in a future year will be applied against the amount owed. Therefore, taxpayers may not get all of their refund if they owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. The IRS will automatically apply the refund to the taxes owed. If the refund does not take care of the tax debt, then the installment agreement continues until all of the terms are met.
Does interest stop with an installment agreement?
Interest does not stop accruing until the entire obligation is paid. An installment agreement is more costly than paying all the taxes owed now. Penalties and interest continue to be charged on the unpaid portion of the debt throughout the duration of an installment agreement.
Are there fees to set up an installment agreement?
The IRS charges a user fee of to set up the installment agreement. And it is possible for an installment agreement to be reinstated if the agreement defaults.
Also, installment agreements may be restructured to include additional amounts owed in one agreement. Reinstating or restructuring an existing installment agreement will cost an additional user fee.
What are enforced collection actions?
Generally, IRS enforced collection actions (levy against personal or real property) are not made while an installment agreement request is being considered, or:
While an agreement is in effect,
* For 30 days after a request for an agreement has been rejected, and
* For any period while a timely appeal of the rejection or termination is being evaluated by the IRS.
Can my installment agreement be defaulted?
Yes. Failure to make timely payments can default the agreement. A defaulted installment agreement could subject a taxpayer’s account to enforced collection action and potentially have a negative effect on a taxpayer’s credit standing.
What is an annual statement of balance due?
In accordance with the law, installment agreement taxpayers receive an annual statement from the IRS. The statement provides the amount owed at the beginning of the statement period, the payments (credits) posted to account(s), any fees or assessments, and the ending balance. Currently, the annual statement is sent each year in July.
For more information on negotiating an IRS Installment Agreement or to get professional tax advice on reducing your IRS debt, visit www.taxresolution.com for a free tax relief consultation or call 866-477-7762.
Michael Rozbruch is one of the nation\’s leading tax experts. A Certified Tax Resolution Specialist (CTRS), licensed CPA in the state of Maryland and the founder of Tax Resolution Services (http://www.taxresolution.com/), he helps individuals and small businesses solve their IRS problems and is dedicated to educating the public on tax planning and other strategies for managing their personal and business finances.
Michael Rozbruch is one of the nation’s leading tax experts. A Certified Tax Resolution Specialist (CTRS), licensed CPA and the founder of Tax Resolution Services. He helps individuals and small businesses solve their IRS problems and is dedicated to educating the public on tax planning and other strategies for managing their personal and business finances.
Prior Year Tax Preparation Online
Payment of Residential and Commercial Property Taxes in Texas
October 9, 2009 by admin
Filed under Property Taxes, Tax Articles
April 19, 2009
Property Tax Payment
Taxing units usually mail their tax bills in October. The date of delinquency is normally February 1st.? If you have not received your tax bill by January 1st, you should contact your tax assessor to determine the amount owed.?
Property tax bills often include more than one taxing jurisdiction because some taxing jurisdictions combine their collection operations.? Likewise, certain properties will be subject to multiple taxing jurisdictions collected by different assessors.? Contact the central appraisal district for your respective county to determine the taxing jurisdictions which apply to your property.? Many county central appraisal districts now post their property tax data online.?
If you escrow taxes and insurance, then your mortgage company will pay the property taxes on your home.? You should receive a receipt from the tax assessor indicating payment has been made.? The receipt is important to retain, as many homeowners deduct property taxes for federal income tax purposes.
When Is the Deadline for Payment?
In most cases, the deadline for paying your property taxes is January 31. Taxes that remain unpaid on February 1 are considered delinquent. Penalty and interest charges are added to the original amount.
Taxes are due in one lump sum.? Some tax collection offices provide payment options, such as:
- ?Payment by credit card, typically with additional fees of 3% to 5%
- ?Deferment or installment plans for taxes on homestead properties for disabled property owners or property owners over 65 years of age
- ?Discounts for early payment
- ?Partial payment of your taxes
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If you are qualified for the over-65 or disabled homestead exemptions, you may pay your current taxes on your home in four installments. You must pay at least one-fourth of your taxes before the February 1 delinquency date. The remaining payments are due before April 1, June 1 and August 1, without any penalty or interest. If you miss an installment payment, you will face a penalty and also pay interest at 1 percent for each month of delinquency. You must indicate on your first payment that you are paying your home taxes in installments. Installment payments apply to all taxing units on the tax bill.
Homeowners whose residences are damaged in a disaster and are located in a designated disaster area also may pay their taxes in four installments, in the same months as over-65 or disabled homeowners.
What If my Taxes are Delinquent?
The longer you allow your delinquent property taxes to go unpaid, the more expensive and risky it becomes for you.
- Penalty and interest charges will be added to your taxes.
Penalty charges and interest charges will be added to your tax balance. ?Private attorneys hired by taxing units to collect delinquent accounts can charge an additional penalty to cover their fees.? The following table details the potential penalties, interest, and attorney charges imposed on a delinquent property tax account.
Month?Penalties & Interest
February??????? 7%
March??????????? 9%
April????????????? 11%
May???????????? ?13%
June???????????? 15%
July?????????????? 32% to 37%*
*Collection Attorney Fees Vary by County, but are typically 15% to 20%.
Accounts not paid in full by June 30th of the year in which they become delinquent are normally referred to the delinquent tax attorneys for collection and incur an additional penalty equal to 15% - 20% of the total taxes, penalties and interest due.? Generally, any payment on the quarterly payment plan that is not paid before the delinquency date of the installment accrues a full penalty of 6% immediately, and begins to accrue interest at the rate of 1% per month until paid.
- You will receive delinquent tax notices.
The tax collector will send you at least one notice that your taxes are delinquent. They often send multiple notices and warnings. - You may have the option to set up an installment plan.
Some tax collectors will allow you to pay delinquent taxes in installments for up to 36 months. They are not required to offer this option. - You may be sued.
The tax collector can take a delinquent taxpayer to court. All court costs will be added to the delinquent tax bill. - Your property may be foreclosed upon.? You could lose your property!?
Each taxing unit holds a tax lien on each item of taxable property. A tax lien automatically attaches to property on January 1 each year to secure payment of all taxes. This tax lien gives the courts the power to foreclose on the lien and seize the property. The property then will be auctioned and the proceeds used to pay the taxes.
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?Are there other options available to pay property taxes?
?Yes, specialized lenders exist who focus solely on property tax lending.? These lenders provide an alternative to the lump sum payment of your property taxes.? A property tax loan will immediately stop the added penalties, interest, attorney fees, and pending lawsuits for the county.? Most lenders offer flexible loan terms with repayment schedules up to 10 years.? Loans are available for almost any type of real estate as long as the borrower is not in bankruptcy, there is no IRS lien on the property, and the property is reasonably maintained. This includes residential, commercial, investment properties, and vacant land.?
?To learn more about property tax loans and the lending programs available visit Property Tax Funding, http://www.propertytaxfunding.com/, or call a loan officer at 877-776-7391.
Jason Keller has extensive experience in real estate valuation and property tax assessment. Mr. Keller is the Director of Property Tax Services within the Private Lending Group at Resolution Finance, LLC.
