Learn about IRS tax debt resolution and relief program or programs with Credow.
Annually, seven million Americans still need to submit their taxes by the due date, and even more file on time yet end up financially over their heads. This is inevitable. The IRS is eager to collect overdue taxes. Still, they also accommodate small business owners who may need to catch up on their payments.
Many programs and services exist to assist individuals and small businesses in resolving their tax debt with the IRS. Generally, when you owe money to the IRS, they want to collect it, not put you out of business through punishment.
Sometimes, letting things slide when you’re running a small business is easy. In reality, calm down if you find out you still need to file your taxes or that you can’t pay what you owe. You and the IRS both want to see your tax situation improved.
Catching up for unpaid taxes
You may be behind on taxes for several reasons. Therefore, if you filed incorrectly, endured financial hardship, or have disorganized bookkeeping, it may be challenging to calculate your IRS debt. Although many small businesses anticipate payments throughout the year, filing time estimates must be precise.
Tax bills are often sent by the IRS when you owe unpaid taxes. They don’t know your bookkeeping system, so their estimates may be off—especially if you qualify for small business tax deductions or credits to minimize your payment. Generally, bookkeeping is essential to determine how much you owe the IRS while resolving your tax debt.
Keeping precise bookkeeping information lets you understand your income, expenses, and the relationship between these figures and your tax deductions and credits.
IRS tax debt resolution programs
The IRS Fresh Start program was launched in 2011 as a new initiative by the IRS. However, the primary objective of the Fresh Start tax relief program is to assist taxpayers who have accrued tax debt in restoring their excellent standing with the IRS.
The IRS offers four distinct choices for individuals facing a substantial tax burden as part of the Fresh Start program. Surely, the quickest and most secure approach to settling back tax debt is to deal directly with a reliable financial expert, such as a tax attorney, after identifying a program suitable for your business’s demands.
Installment Agreement
When you owe the IRS money, you can arrange a payment plan called an installment agreement to take care of it. Two installment agreements are available to taxpayers: one that brings you current on your taxes within 80 days and another that goes beyond 80 days. Generally, the purpose of the former is to offer you additional time to pay the fines and accrued unpaid taxes.
Both payment options can be applied for online. While applications for shorter repayment plans are free, those for more extended repayment plans incur expenses. A paper application costs $107, whether submitted by mail, in person, or over the phone, compared to $31 when submitted online through irs.gov.
You can apply online for $149 by phone, mail, or in person for $225 to make monthly payments without automated withdrawals. Indeed, only automated bank account withdrawals are eligible for IRS installment payments if you owe more than $25,000.
An IRS installment plan can help you manage your tax obligations. Still, it does not stop interest or penalties for late payments. Of course, they’ll keep adding till your balance is paid.
Offer in Compromise
To settle your account with the IRS, you can make a counteroffer by submitting an Offer in Compromise. If the IRS accepts your offer, you can pay less than the total owed on your past taxes. Remember that the IRS is far more amenable to a payment plan than a settlement offer lower than your actual debt.
It could be not easy to prove that you qualify for this choice. Certainly, the IRS accepts less than half of the Offer in Compromise submissions; however, you must prove that paying down your entire debt would be extremely difficult or impossible.
There are strict criteria that must be satisfied before an Offer in Compromise can be considered:
- A non-refundable fee of $205 is required.
- If your payment plan is more than six months, you’ll need to be able to cover the whole amount in the first month. A 20% non-refundable deposit is necessary if your payment plan is smaller.
- All federal income tax returns that were due have to be filed.
- You need to pay all your expected taxes for the current year.
- For example, you are a business owner with employees. In that case, you must make all federal tax deposits for the current and two quarters before that.
- Tax authorities may place liens on your assets until you receive payment for your offer.
- An open bankruptcy case is something other than something you can be involved in.
- Your identity, whereabouts, and potential tax burden may be disclosed with your compromise offer.
- If the IRS rejects your compromise, you can still file an appeal.
Currently Non-Collectible
In particular, ask the IRS to mark your back taxes as “Currently Non-Collectible” if you’re having trouble paying them while still paying for living necessities. If you can show your financial hardship, the IRS will put off paying your tax bill for a while.
Nonetheless, you should expect something other than tax relief or a waiver from the IRS through this program. Even if your financial condition improves, the IRS still wants you to pay your unpaid taxes. On top of that, the IRS will look into your tax situation once a year and can put a tax lien on your property while they wait for payment.
Penalty Abatement
Tax penalties and costs build up when the IRS receives a taxpayer’s payment after the due date. Generally, these computations rely on algorithms and estimations; the IRS occasionally prepare to lower or eliminate these penalties.
Your penalty abatement letter to the IRS explains why your taxes are late and requests that the penalties eliminate. You must provide acceptable grounds for the late payment, such as natural disasters, fire, record loss, family death, or severe sickness. In this case, the IRS will require healthcare records or natural disaster documents to prove the cause.
All federal tax returns must have been filed to be eligible for tax reduction or forgiveness programs the IRS offers. Once you inform the IRS of your precise tax debt via tax forms, they will not be able to assist you with your taxes in any further way.
Organizations that provide IRS tax debt resolution program
There are options available to small business owners seeking to settle past-due taxes or IRS tax resolution programs with the IRS, but sorting through them can be daunting. Many IRS Fresh Start applications are reject annually due to insufficient or incorrect information.
For this reason, collaborating with a tax expert can be a lifesaver for many. For example, you need assistance deciding which tax relief program is best for you or exploring additional choices. In that case, a public accountant, accountant, tax attorney, or Enroll Agent can significantly assist.
Consulting a tax debt assistance or relief firm may be a good option if you aren’t eligible for the IRS’s tax relief programs or require further assistance. While some organizations are helpful, unfortunately, many more prey on people and small businesses in need.
Locating a trustworthy IRS tax resolution programs firm
Anxiety over unpaid taxes is natural, and sadly, scammers prey on people and firms who find themselves in a jam with the IRS. Instead of assisting you, these companies prioritize their financial gain. They may even put you in a worse situation than before you hired them.
Following are some warning signs to keep an eye out for when dealing with an IRS debt relief agency:
They promote themselves continuously
While it’s true that all businesses employ marketing to attract and retain clients, tax experts aren’t car salesmen, and their ads shouldn’t make you think of daytime infomercials. Be cautious of their services if you continually hear advertisements on the radio, TV, or in unwanted emails.
In their claims, they exaggerate their abilities
Because everyone’s tax situation is unique, you should be wary of any business that promises to “stop wage garnishment” or “significantly reduce your tax debt” without first learning your specific circumstances. Therefore, no matter how good your settlement offer or Offer in Compromise is, the IRS will likely reject it.
For their services, they want a hefty payment in advance
The basic strategy of a con artist is to collect as much money as possible upfront and then disappear. Generally, an unethical business may “negotiate” for further funds from you after you pay a high upfront price, or they may disappear with your money.
Their online ratings are negative
Nowadays, you should read company reviews online before buying. Fraudulent companies are quickly exposed on consumer review and complaint websites. The company you’re considering may have few reviews, indicating its inexperience. Therefore, this makes sense for scammers who start new “businesses” and close them fast after complaints, then open another under a new name.
They don’t give any references
You should be able to verify the legitimacy of a tax relief service using their references before providing them with your financial data. After all, inquire about referrals or suggestions for tax relief programs and companies from reputable financial service providers like banks and bookkeepers. Generally, good financial advisors usually know how other people in their field regard them.
Free services are charged to you
There are several things that the IRS has made accessible to accomplish for free. There is no need to hire a service to handle them for you; you should be careful of any business that claims differently.
As a general rule, you can usually perform the following at no cost:
- Find out if there is any money you need to pay the IRS.
- Tax transcripts are available from the IRS.
- Collaborate with the IRS to establish a payment plan.
- Find out whether an Offer in Compromise is suitable for you.
Addressing the issue of tax debt
IRS Tax Resolution Programs
Few business owners look forward to interacting with the IRS, particularly when facing tax trouble. In reality, realizing that things have gone wrong with the IRS can be unsettling, to say the least, and downright alarming all at once.
Even if your IRS debt exceeds your budget, you can settle it. In conclusion, after you’ve managed your past bookkeeping and tax concerns, returns, and payments, you’ll be well-equipped to meet your IRS financial commitments.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.