IRS Payment Options: Try IRS Penalty Abatement, IRS Installment Agreement, or IRS Currently Not Collectible
Learn about IRS Payment Options like IRS Installment Agreement, IRS Currently Not Collectible or IRS Penalty Abatement
For those in need, the IRS offers the penalty abatement program. This is not a free-for-all program. This is only for people who display reasonable cause for having the penalties removed from their debt. People who qualify include victims of natural disasters, individuals who neglected to pay on time due to sickness, or people who had their tax records destroyed in a fire or by another unavoidable accident. In order to qualify, proof of need has to be presented. You need evidence like hospital records and police reports. Present your evidence to the IRS along with Form 843 "Claim for Refund or Request for Abatement," to request Penalty Abatement.
Installment Agreement
Setting up an installment agreement with the IRS is similar to making monthly payments like on your credit card bills. With some big exceptions. For one, the IRS is going to choose the amount you pay them based on your calculated disposable income. And secondly, defaulting on your payment with the IRS imposes severe consequences. You will be discharged from your installment agreement and additionally, you will not be able to sign up for another installment agreement for another year. If an individual knows they can pay their bill off in installments over the course of three years, an installment agreement is a good idea.
Unfiled Tax Returns
Neglecting to file is a fatal mistake. The IRS has a solution for individuals who do not file their taxes. They can file a substitute for a return, which usually does not include the proper amount of deductions. That's why it's important to file unfiled taxes on your own. You can contact the IRS to receive the forms from prior tax years. If that is not possible you are allowed to send a substitute tax form, which should resemble the original IRS tax form as closely as possible.
Currently Not Collectible ("CNC")
"Currently Not Collectible" is a disposition the IRS uses for accounts that have special circumstances. Perhaps the person is on disability, has been unemployed for years, or is a single mother with little income. If an individual proves there are external circumstances beyond their control preventing them from paying their debt to the IRS, the collections activity will cease. If you have a permanent disability, the account may stay in Currently Not Collectible status until the ten year statute of limitations runs out. However, the IRS is going to check on the status of the individual every few months to a year. If the individual's financial situation has changed, the status will be lifted and collections activity will continue.
Payroll Taxes
Payroll taxes are the amount of your income the IRS withholds. They include Social Security Tax and Medicare Tax. Social security taxes are to provide for retired workers and the disabled. The Medicare Tax provides for qualifying individuals aged 65 and older. On the other hand, Federal income taxes go towards paying for national defense programs, such as law enforcement and community development.
Innocent Spouse Relief
When you file your tax returns jointly, the law makes both you and your spouse liable for the taxes. If tax debt or fraud is involved, both spouses take the blame. But what if only one spouse is guilty of a crime? The innocent spouse may be abated of the debt along with its penalties and interest. This is known as innocent spouse relief. In order for the innocent spouse to qualify they need to prove they had no idea their spouse did something unlawful (usually understating tax). It's a good idea to provide supporting documentation along with IRS form 8857.
Tax Lien Solutions
The IRS commonly implements liens on individuals whom owe taxes. It's an effective method of collections, but it ruins the credit of those it is applied to. Although it is hard to remove a Tax Lien once it has been applied, there are a couple of solutions:
The obvious answer is paying the debt off in full. Once your debt is paid off, the Tax Lien will be lifted.
Secondly, if you can prove the Tax Lien is preventing you from paying your debt, the Lien will be lifted. For example, if a Tax lien is preventing an individual from obtaining a bank loan to pay off the IRS debt, the Tax Lien can be lifted.
But keep in mind, the IRS Tax Lien is usually never lifted unless the debt is resolved or the statute of limitations to collect on the debt has expired. That is because the Tax Lien is one of the IRS's most effective weapon for collecting on IRS debt.
