Articles Posted in Tax Payment Plans

Starting January 1, 2016, the Internal Revenue Service will be given the power under new legislation to deny, rescind, or limit a passport of anyone who owes the IRS more than $50,000. This threshold amount includes both taxes, interest and penalties. From a practical perspective, this threshold dollar amount is not  difficult to amass for the average self-employed taxpayer who can have tax rates close to 50% once social security taxes are factored in, or individuals with significant income. From my perspective, if the law was limited to criminal matters, it would make more sense.

The good news, is that the IRS will not rescind or hinder the ability of an individual to have a passport where 1) that individual has entered into an installment agreement with the IRS to pay the back taxes, 2) for humanitarian reasons, or 3) if the taxpayer is contesting the tax liability in Court or an administrative proceeding.  This new legislation will be under section 7345 of the tax code, called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”

While different from New York States revocation of a taxpayers drivers license if they owe NYS taxes, it is very troubling nonetheless in that it restricts the ability to travel (or in NY’s case simply drive) which can directly impact a persons ability to generate income to pay for their tax obligation. I doubt this legislation will cause delinquent tax collections to rise dramatically, and may have the unfortunate impact of hurting taxpayers who are already hurting economically.

Did you let Tax Day come and go without filing a return or paying what you owe to the IRS? If so, you are certainly not alone, but that doesn’t make the consequences that you face any less serious.

Chances are that you didn’t file a tax return because you can’t afford to pay the money that you owe. Maybe you don’t even know how much you will owe, you just know that you can’t afford to pay the IRS anything.

Or maybe this isn’t the first time you have avoided filing a tax return, and you got away with it in the past so you figured you would just try to avoid paying again this year.

Tax day, April 15, is just a few days away and if you are like many New Yorkers, you may be hoping to win the lottery before then in order to be able to pay your tax bill on time.

Believe it or not, you may not need a winning lottery ticket in order to make good with the IRS this tax season.

A tax payment plan, or an IRS Installment Agreement, is a great way for people who cannot afford to pay their tax debt to avoid getting into trouble — and more debt — with the IRS. Here is how it works:

If you know you won’t be able to afford to pay the income taxes you owe in full this year, you might be starting to panic as tax season approaches.

As we all know, failing to pay taxes can result in significant fines as well as criminal charges, so it’s smart to get a plan in place now. The good news is that there are options available for people in your situation.

These options from the IRS help you to avoid the interest and penalties that are normally associated with failing to pay the taxes you owe. They include:

At first glance, it might seem that the inability to pay taxes is something only people of limited means might encounter; having too little withheld in taxes on one’s paycheck could lead to a big tax bill in the spring, and someone with a limited income stream might have a tough time coming up with a large sum of money to deliver to the Internal Revenue Service or state taxation authorities.

However, in reality, people of all income levels might be susceptible to having unmanageable amounts of tax debt. One example of this is actor Stephen Baldwin, of the famous Baldwin acting brothers. Stephen Baldwin pleaded guilty earlier this year to failing to pay New York state taxes for three years; between the amount he owed, plus interest and penalties, the state was due a staggering $400,000 from Baldwin.

However, that amount has now decreased by roughly half. Baldwin’s attorney announced recently that $100,000 would go toward the tax debt; this is in addition to another $100,000 that Baldwin put toward the debt earlier this year. When he agreed to plead guilty to not paying taxes earlier this year, the actor agreed that the full amount would be repaid by March 2014. If he does that, he won’t have a criminal record. Should he not live up to the bargain, however, he could be on the hook for five years’ probation.

When New York readers think of the various reasons why a person might need a tax attorney, an audit from Internal Revenue Service might top the list. However, effective tax planning requires more than defensive approach. A tax attorney might agree that a proactive approach to the issue of tax liability might yield better results.

One area that could benefit from advance planning is the issue of inheritances. Readers likely know that an inheritance typical triggers tax liability for the beneficiaries. Yet a recent article highlights a lesser-known problem: As many as ten percent of estates might have unresolved — and ongoing — tax liabilities or issues.

What that means is that a beneficiary may have to step in the shoes of the former property owner and deal directly with the IRS. The beneficiary’s receipt of assets or funds from the estate might be delayed until the state or federal tax authority has released any liens.

Taxpayers facing potential collection action from the Internal Revenue Service might have good reason for alarm. Garnishments and tax liens are aggressive collection methods that can be hard to remove, once attached. Even in contexts like foreclosure or bankruptcy, tax liens may receive priority or remain with property, despite a transfer in ownership.

When facing a disputed tax liability, many taxpayers might take comfort in a consultation with a tax attorney. Although the IRS has administrative remedies for resolving tax controversies, an attorney might provide extra peace of mind by reviewing proposals such as installment agreements, partial pay installments, or offers in compromise.

For example, tax installment agreements often require some negotiation with IRS officials. Partial pay agreements, which may resolve a tax liability for a reduced amount, typically must be repaid within a period of two years. Yet arriving at the amount of monthly payments often requires negotiation. Such variables might include specified maximum allowances for rent and living expenses, child support or parenting obligations, vacation budgets, and transportation needs.

When a taxpayer does not pay the back taxes owed, the debt will accrue interest and penalties. The amount owed to the Internal Revenue Service will only increase, until steps are taken to remedy the tax problem. One way to help settle back taxes owed is through the IRS Form 433 payment plan.

IRS Form 433 gives the IRS information about the income, assets, debts, and obligations of the taxpayer. There are three types of Form 433; 433-A, 433-B, and form 433-F. Form 433-A is a lengthy document that goes in-depth into the taxpayers income, assets, debts, and obligations. 433-A requires a lot supporting documents to prove the taxpayers financial situation, and it is cumbersome to fill out. Form 433-B is only for businesses that are experiencing tax problems. Form 433-B will require information on the assets and debts of the company as a whole. Form 433-F is very similar to Form 433-A, but much shorter. It still requires information on the taxpayers’ assets, debts, expenses, and obligations, but is only two pages in length.

Our firm has currently been working on preparing Form 433-F for many of our clients. By using the Collection Information Statement, we are able to create tax payment plans that are affordable to our clients. Form 433-F is broken up into seven sections, and below will explain the information needed to accurately and completely prepare your form:

The Internal Revenue Service Partial Payment Installment Agreement option was created on January 17, 2005 as an option to the Offer in Compromise to pay off tax debts. In a partial payment installment agreement, taxpayers enter into an installment agreement that can result in a partial payment of their tax liability over the lifetime of the collection statute.

Previously, taxpayers who had tax liabilities could not enter into an agreement with the IRS unless they could pay the liability in full. This meant that taxpayers who were unable to pay in full had limited options to pay off their tax debt. This new payment program became possible through the passage of the American Jobs Creation Act of 2004. This statute amends the tax code to allow the IRS to enter into installment agreement for both full as well as partial payment for the taxes owed.

To set up the partial payment installment agreement program, you will need to know the total amount owed to the IRS in unpaid taxes. This amount will be the original tax due, as well as penalties and interest. An experienced New York tax attorney can help you find the correct amount that you owe the IRS. The calculation of the actual installment payment will be based upon IRS collection financial standards in 2013. After the terms of the partial pay installment agreement are fulfilled, the remaining tax debt will be forgiven.

Frequently taxpayers are unable to pay taxes due. This can happen on their Form 1040 U.S. Individual Income Tax Return, their State Income Tax Return, or both. Though it is suggested and encouraged that taxpayers pay as much as possible to avoid penalties and interest, this is not always possible for all taxpayers.

If a taxpayer is unable to pay the liability owed, they should contact an experienced tax lawyer. When you begin to correspond with the IRS, they will ask for documentation and forms to be filled out, and will try to negotiate payment plans with the taxpayer. The process is difficult, especially since IRS Agents are experts in the Tax Code. By working with an experienced tax lawyer, you can have your own agent who works with the IRS on your behalf and explain your situation. An experienced tax lawyer can negotiate with the IRS and may serve to reduce the amount owed.

After working with the IRS through a tax lawyer, the taxpayer could qualify for a payment option. Based on the individual circumstances for each taxpayer, an agreement can be made for the taxpayer to pay in full within 60 or 120 days. The IRS offers these agreements to help tax payers pay tax debt in full. A taxpayer can request an agreement length of either of these amounts. It is advised to try to enter into this payment option because penalties and interest incurred will be less than if a taxpayer entered into an installment agreement.