Hope everyone had a Happy New Year! Now that all of the holiday sales are over & all of the bowl games have been played, it officially feels like we are in 2015.
Another indicator that 2015 is in full swing is the fact that we only have a week to go before tax season officially opens.
While the majority of Americans receives a tax refund each spring, a percentage of individual taxpayers and small business owners end up owing the IRS back-taxes. For these delinquent taxpayers, there are options for getting back into the good graces of the IRS, but understanding each option is critical.
Anyone who can afford to repay their entire tax debt in one lump-sum payment should pay the debt as soon as possible to avoid excessive interest and penalties. Of course, not everyone is able to do this, so the IRS has other available options.
Taxpayers who are unable to repay their liability in one lump-sum have the option of setting up an Installment Agreement to make consistent monthly payments to repay their tax debt.
Fresh Start – Offer in Compromise
It is possible that taxpayers who are undergoing financial hardship situation may qualify for the Offer in Compromise (OIC) program. The OIC program allows taxpayers to pay only a portion of their tax debt to settle their account with the IRS.
The IRS Fresh Start program has made a significant impact on the OIC process. The IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers.
The program is usually seen as a win-win for both the IRS and the taxpayer. The IRS collects part of a tax debt they may not have otherwise collected, as well as getting the taxpayer back into filing and paying their taxes each year. The taxpayer wins when they settle for less as it alleviates the tax burden and gives them a fresh start.
Grappling With Tax Issues Alone?
All tax resolution options will require gathering financial documentation on your part, to show your current financial situation. The risk here is that you, unknowingly, might expose unnecessary financial information that can negatively effect your settlement. This is why having professional tax resolution help is necessary.
If you are not versed in tax law, settling your own tax debt with the IRS can be tricky. All taxpayers must remember the function of the IRS is to collect revenue for the Department of the Treasury. You have the right to representation before the IRS. Lawyers, CPAs and Enrolled Agents are the three designated professionals who are allowed to represent you before the IRS. If you go to the IRS without a professional representing you, you are at the mercy of the IRS. It is always in the taxpayer’s best interest to seek a professional’s assistance.
The real stress that comes with having back-tax issues is a result of not knowing your options. This is with good reason, since it is the case that the IRS attempts to collect as much as possible, as soon as possible. I’m here to let you know that, as many of my clients have discovered (See Example), there can be an easy & less expensive way out.