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How to go about an IRS payment plan

Article by Ask Bill

If you are reading this, then you have either stumbled upon this page by chance, or you are someone who had just had part or all of his or her debts pardoned. This means that whatever you owed to the financial institutions had been eliminated through a settlement as you were not able to pay off by any means. Firstly, allow us to offer you our congratulations. Secondly, allow us to assist you in dealing with the obstacles in terms of the IRS payment plan ahead of you. We like to think that once our arrears have been settled, we are finally debt free. Well, that is partially true. Let’s not forget about our government taxes. As responsible citizens of the United States of America, we are expected – nay, we are required, to pay a percentage of our income to the Internal Revenue Service (IRS). Unfortunately for the once-indebted citizens, the amount of debt cancellation that you’ve been given is considered as a form of income to the IRS. Their rationale is this: since your debts have been forgiven, the money that you initially need to pay them off can now be used for yourself. Hence, you have a gain in income. Whether or not you agree with this, you are still legally required to pay a tax on your forgiven debts. The big question is, how would you come out with the money to pay the tax, when the lack of income or money was the sole reason you needed debt forgiveness in the first place? This is where an IRS payment plan comes into play. Treat this taxation the same way you would any other debt and come up with a plan. The first thing to do is to determine if you would be able to complete all the payments within 120 days. This is crucial because if you are unable to do so then you may have to turn to other alternatives which would likely require communication with the IRS. In the event that you are not able to make full payment in 120 days, then the alternative is to have an installment agreement. This can be done by filling up the Form 9465, which can be found on the IRS website. The pay-in-full option is obviously the best as you can also avoid the fees needed to set an installment agreement, but not always feasible to most people. Also, you may be charged with interest too, and late penalty if the tax is not paid by the due date. Now back to our big question, what if we still have no money? With an ordinary creditor, you may attempt debt settlement. With the IRS, you need to go for the IRS tax debt settlement. They are both essentially the same; an agreement is set up between the taxpayer and the IRS to settle the liabilities for less than the full amount owed. This, however, is based on special circumstances where the IRS is certain and truly believes that the payment cannot be made in installments or in a lump sum. So beware of the promises made by some promoters that ‘guarantee’ a tax settlement. Don’t waste your money or time believing the middlepersons who have no authority in the IRS. This settlement is also known as the Offer in Compromise with the IRS where the average discounts in accepted offers are about 88%. There are three primary factors that the IRS uses to determine if you may be eligible for the Offer in Compromise (OIC):1. Doubt as to Collectible: There is doubt that taxpayer will be able to pay the full amount within the collection period.2. Doubt as to Liability: There is doubt that the liability amount is correct.3. Effective Tax Administration: There is no doubt that the liability amount is correct, but that collecting the full amount would cause economic hardship to the taxpayer.

About the Author

http://www.freedomtaxrelief.com/oicfacts.php

http://www.freedomtaxrelief.com/settlement.php

http://www.freedomtaxrelief.com/

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