Have Pending tax bills with the IRS? Work directly with the federal tax agency to resolve the unpaid taxes problem.
If you have pending tax bills, the Internal Revenue Service (IRS) would like you to contact them directly to work out a solution. The IRS recommends to not go to unscrupulous tax companies that use local advertising and falsely claiming they can settle your tax debt for pennies on the dollar.
If you go through the companies that make these outlandish claims, you will pay them a fee to get the same deal that you could have gotten on your own by working directly with the IRS. No one can get a better deal for you than you can usually get for yourself by working directly with the federal tax agency to resolve your tax issues.
Case study : you prepare your annual tax return and have a balance due. However, you cannot afford to pay immediately the full amount of the tax that you owe. You were wondering whether it’s worth e-filing your tax return on time.
AIMLON CPA P.C.’S RECOMMENDATIONS
E-file your tax return
We recommend you e-file your tax return by the due date and pay as much tax as possible with the tax return. That would help keep your tax bill low. If you don’t file timely, the IRS will charge you late-filing penalty and late-payment penalty. And these penalties can add quickly:
- The failure to file penalty is 5% of the tax that you owe for each month or part of a month that your tax return is late. The maximum amount of the penalty is five months. However, this penalty amount is reduced by the failure to pay penalty amount for any month where both penalties apply. If a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.
- The failure to pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached.
Offer in Compromise (OIC)
Once you file your tax return, pay what you can, you should work with the IRS to settle your tax debt. You may consider an offer in Compromise (OIC). Both businesses and individuals may apply for an OIC. If you’re an individual, you may use the Offer in Compromise Pre-Qualifier Tool to find out whether you’re eligible or not.
An offer in compromise is an agreement between you and the IRS that settles your tax debt for less than the full amount you owe if:
- You can’t pay the full amount of tax that you owe, or
- You’ll experience financial hardship if you pay your full tax liability.
You’re eligible to apply for an OIC if you:
- Filed all required tax returns and made all required estimated payments.
- Aren’t in an open bankruptcy proceeding.
- Have a valid extension for a current year return (if applying for the current year)
- Are an employer and made tax deposits for the current and past 2 quarters before you apply.
If you feel like you need help to navigate the process, Aimlon CPA P.C.’s team of tax professionals may help.
Hundreds of millions of tax returns are filed with the IRS every year. Taxpayers who filed their tax return but cannot pay in full the amount of tax due must make a settlement offer based on their true ability to pay. However, applying doesn’t guarantee that the IRS accept your offer.