With some exceptions, U.S. citizens must generally file tax returns – and pay taxes. Nevertheless, sometimes through no fault of your own, you may be unable to pay the taxes owed. An unexpected accident, loss of a job, or an illness can place an individual under heavy financial duress. If you are facing financial difficulties and owe unpaid tax debts to the Internal Revenue Service (IRS), there may be options available to reduce what you owe or make payments more manageable. For example, you may be able to set up an IRS payment plan using an installment agreement. In this article, our tax lawyers for installment agreements explain eligibility requirements for setting up a payment plan with the IRS in California, and discuss an alternative tax resolution option called an “offer in compromise” (OIC).
Applying for IRS Payment Plans and Installment Agreements
If you owe taxes to the IRS, there may be options available to you. A Roseville tax resolution attorney can help you understand which are most suitable. Some of the potential tax resolution strategies available for individuals and businesses include:
Installment payment plans
Offers in compromise (OIC)
IRS Payment Plans for Individuals and Businesses
The IRS offers several payment plans for taxpayers, depending on the amount of tax debt owed. Potential options include the following:
Short-Term Payment Plans – Be advised that a short-term payment plan is not an installment agreement. However, it allows up to 120 days, or about four months, for the taxpayer to make the required payments. Short-term payment plans are meant for taxpayers who owe under $100,000, including penalties and interest.
Long-Term Payment Plans – The IRS offers two long-term payment plans, both of which are installment agreements, that can be applied for online:
The first plan is designed for individual taxpayers who owe up to $50,000, including interest and penalties.
The second plan is meant for business entities with tax debts of $25,000 or less. Note that both plans require the taxpayer to have filed all tax returns, meaning unfiled tax returns will disqualify the taxpayer.
The above criteria apply only to online applications for IRS payment plans. Even if you do not meet the requirements above, you may be eligible to apply via mail and make installment payments. To do so, you will need to file Form 9465 (Installment Agreement Request) and Form 433-F (Collection Information Statement).
Your payment options depend on your total tax liability. For example, if you owe the IRS more than $25,000, you may only pay using direct debit. The same applies to businesses whose tax debts exceed $10,000.
Finally, be advised that you may need to pay various fees as part of your payment plan. For instance, the IRS charges setup fees that range anywhere from $31 to $225, while certain payment plans do not have any setup fees.
Offer in Compromise
An offer in compromise (OIC) is an agreement made between a taxpayer and the IRS. The purpose of an OIC is to allow the taxpayer to pay less than what he or she owes the IRS. This should not be confused with a Franchise Tax Board (FTB) OIC.
Both arrangements, while similar, do not substitute one another. Furthermore, any taxpayer looking to qualify for an OIC agreement must meet specific criteria, which are discussed below.
FTB OIC
According to the FTB, an individual who wishes to apply for an OIC must meet certain criteria. For instance, the FTB will evaluate whether an individual has filed their tax returns and has sufficient income or assets to pay their tax liabilities in the present or near future, taking into consideration the taxpayer’s bills and expenses. After you make an offer, the FTB will examine your request and decide whether or not to accept it within 120 days.
IRS OIC
Like the FTB, the IRS will evaluate a taxpayer’s present and foreseeable financial circumstances to determine whether they qualify for an OIC. Keep in mind that the IRS will only accept offers that can realistically be paid within a “reasonable” amount of time.
If your offer is accepted, you must make sure you comply with the terms of the agreement to prevent further complications. However, if the IRS rejects your offer, you can appeal the decision by filling Form 13711 (Request for Appeal of Offer in Compromise). You must file Form 13711 within 30 days of the date on the rejection letter you received from the IRS.
Roseville Tax Resolution Attorneys for IRS Payment Plans and Offers in Compromise
If you are facing financial difficulties and are having trouble making full and timely payments to the IRS, you should act immediately to resolve the situation. The Roseville tax attorneys at NewPoint Law Group, LLP can help you set up a payment plan with the IRS, request an offer in compromise, or explore other alternatives to managing tax debt. To learn more in a free consultation, contact us online, or call our law offices at (800) 358-0305 today.
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