If you owe an actual tax liability and you have exhausted any legal and accounting-based defenses you may have to the amount. you still have a number of options for repaying or compromising the tax amounts and avoiding IRS collections such as tax liens and tax levies.
Extension of Time to Pay Taxes
We can request an extension of time to pay taxes. You may qualify for an extension of time to pay. In appropriate cases, the IRS will allow extensions of time to pay of up to 120 days. If you qualify for an extension of time to pay, then you will generally will pay less in penalties and interest than if the debt were repaid through an installment agreement. Of course, the time period in which you pay the taxes will also be substantially shorter.
Call us today at 513-229-2900 to learn more.
Application for Installment Agreement
A more effective solution when you owe substantial taxes is for us to apply for an installment agreement. An installment agreement allows for the payment of the taxes over a substantially longer period of time than an extension of time to pay taxes will allow. There is a filing fee associated with the application for the installment agreement and penalties and interest will continue to run on the amount to be paid in installments. An advantage of this approach is that many times we can also negotiate a reduced amount of taxes for you so that the installment agreement in effect becomes a compromised installment payment. Generally, we can work out plans ranging from three to five years or more depending upon the amount of the taxes owed and the circumstances.
Approval of installment agreements is not automatic and the application for an installment agreement will require us to produce and provide substantial and detailed financial information, valuations of assets and debts, and a detailed payment proposal. The IRS will verify the information supplied. The IRS will review the arrangement every two years determine if your financial situation has improved and whether the payments can be increased.
Call us today at 513-229-2900 to learn more.
Making an Offer in Compromise
In cases of financial hardship, the IRS will consider an offer in compromise which may allow you to pay less than the full amount you owe. Offers in compromise are complicated and turn on a number of factors and the acceptance of an offer may have unintended consequences, such as delaying the availability of other forms of relief, such as discharge of the taxes in bankruptcy.
The offer in compromise must reasonably reflect the amount you can pay. The IRS has become increasingly vigilant in weeding out offers in compromise that it considers to be mere haggling over tax payments. The U.S. government has taken the position that this program is designed only for extreme cases, and few filers qualify for the program.
In evaluating an offer in compromise, the IRS will consider:
- your ability to pay;
- your income and your projected future income;
- your reasonable and necessary expenses and projected future expenses; and
- your equity in assets.
Lump sum offers in compromise must be accompanied by a non-refundable initial payment of twenty percent (20%) of the compromise amount. Even if the offer in compromise is not accepted, the IRS will keep the payment and apply it to your outstanding tax liability. Likewise, periodic payment offers in compromise must be accompanied by a non-refundable first installment.
An offer in compromise is a complex subject and generally requires the assistance of competent tax attorneys and accountants to prepare an offer that will be accepted by the IRS. The IRS has stressed the importance of hiring a “qualified” tax professional to assist you in filing the offer in compromise. In hiring a tax professional, the IRS advises you to “be sure to check his or her qualifications.”
Call us today at 513-229-2900 to learn more about Payment Arrangements.
Serving Southwest Ohio clients in Cincinnati, Mason, Lebanon, West Chester, Montgomery, Hamilton, Middletown, Batavia, Wilmington and surrounding areas.
Warren County • Butler County • Hamilton County • Clermont County • Clinton County
