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Paying off the IRS
By Lacy Gallagher on September 6, 2011

IRS-(1).png“Nothing is certain but death and taxes.” Despite taxes certainty people will delay filing taxes if they know they will owe the Internal Revenue Service more than they can pay. Avoiding the tax returns only makes the problems worse. If a taxpayer who owes the IRS continually refuses to voluntarily file the return, then an IRS employee prepares the return with little concern for exemptions and deductions to which the taxpayer may be entitled. In addition to the lack of control in the preparation of the tax returns, taxpayers who repeatedly avoid filing will be subject to additional enforcement measures and legal issues.
The IRS can be an intimidating beast, especially if you owe them money, but transactions with the federal agency will run much smoother if the taxpayer bites the bullet, files the returns with taxes owed and discuss a mutually beneficial plan with the IRS.

Installment Agreement

Installment agreement is a payment plan determined by the taxpayer and the IRS to ease the heavy burden of a large tax debt by spreading the payment over time. These terms of payment are only set up if the IRS decides the particular taxpayer’s situation can be best resolved in this manner.

If the tax debt is $25,000 or less including the entirety of taxes, penalties and interest then the taxpayer may use the Online Payment Agreement (OPA), call the number listed on the bill from the IRS or mail the IRS a Installment Agreement Request.

If the entirety of the tax debt, penalties and interest exceeds $25,000 then a Collection Information Statement may need to be completed in addition to the Installment Agreement Request. The taxpayer should call the number on the bill to determine what all is required or mail the two above forms to the address listed on the bill.

Offer In Compromise

An offer in compromise (OIC) is an agreement between the taxpayer and the IRS that settles the tax debt for lower than the full amount. The IRS will only approve of an OIC if the agency believes that the full lump sum will not be able to be paid, considering assets, bank accounts and future income. There are three types of OICs: Doubt as to Collectability; Doubt as to Liability or Exceptional Circumstances. Once an OIC agreement is reached there are two payment options that the taxpayer may chose:

Payment Option 1: Must be paid in five or few installments. In addition to the $150 application fee the taxpayer must also pay 20% of the agreed upon amount with the filing of the Offer in Compromise: Form 656.

Payment Option 2: May be paid in installments for five months or more. Payments must be made during the offer investigation and the first payment is due with $150 application fee and the filing of the Offer in Compromise: Form 656.

An OIC agreement with the IRS is not bounding. During the offer investigation, it may be determined that the tax payer could pay a larger amount or over a shorter period of time.
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