Watch television long ough and you’ll evtually find someone touting their ability to solve tax debts for “pnies on the dollar.” Pay very close atttion (and get out a magnifying glass) and you’ll also find the fine-print disclaimer stating that such are unusual and not to be expected. Although settling a $50,000 tax debt for $2,500 is a tax professional’s occasional pleasure, such reductions in tax liability are more oft the result of correcting taxpayer, third- party, andor IRS errors rather than heated negotion.

The IRS has, however, made some meaningful changes to ease the burd on those owing back-taxes. Today, I will discuss rect changes made to IRS installmt agreemt by the IRS’s Fresh Start Initive program – the IRS’s attempt to help delinqut taxpayers pay their taxes while navigating the rocky economy. I will also highlight two of the professionals use to help taxpayers pay and reduce their tax debts: the Offer in Compromise and the Parl Paymt Installmt Arrangemt.

Installmt Agreemts Made Easier: In early 202 the IRS increased the upper limit for taxpayers who will qualify for the Streamlined Installmt Agreemts Program from $25,000 to $50,000. It also added a full year for qualifying participants to pay their back-taxes by increasing the maximum repaymt period from 60 to 72 months. Although the liability threshold and repaymt period have increased, certain requiremts must be met to qualify. These requiremts vary based on the amount of back-taxes owed.

Tax Debt $0,000 or Less: Gerally, individual taxpayers requesting an installmt agreemt will not be turned down if they: ) Owe less than $0,000, 2) Have filed their tax returns on time and p all taxes due for the previous five years, 3) Agree to pay their tax debt in full within three years, and 4) The IRS agrees they need additional time to pay.

Tax Debt $25,000 or Less: Those who owe $25,000 or less in back-taxes and do not qualify for a “guaranteed” installmt agreemt may qualify for the Streamlined Installmt Agreemt. The agreemt is requested by completing Form 9465. If accepted it will give taxpayers up to 72 months to pay their back taxes. Although this request can be refused by the IRS, it will gerally be accepted if all tax returns have be filed and the taxpayer has not defaulted on a previous agreemt.

Tax Debt $25,000 to $50,000: The changes mtioned above have made it possible for those owing from $25,000 up to $50,000 to also qualify for a Streamlined Installmt Agreemt. Although applying is a bit more complex for those who owe this amount of back-taxes, it is much simpler than before and will also give taxpayers 72 months to pay their taxes.
Tax Debt Greater than $50,000: Those owing this amount of back taxes were not largely affected by Fresh Start Initive. Although the process seems to run a little smoother, these taxpayers will still need to supply a fair amount of financial information to the IRS on forms 433-A or 433-F unless they can pay their debt to below the $50,000 threshhold.

Offer in Compromise: An Offer in Compromise (OIC) occurs wh a taxpayer offers less than total tax due to settle a tax deficicy. It is a valuable tool for the Tax Professional but successful OIC are relatively rare. Although the IRS criterion for an acceptable offer was made less stringt (and significantly less expsive for those who can fully pay the offer within 24 months of acceptance) by the Fresh Start Initive, the criterion remains fairly narrow. So narrow, in fact that, based on raw historical data, only about 27% of OICs have be accepted by the IRS over rect years. OICs can also take many months to craft, submit, and guide through the application process. As a result, one of the primary tasks of the tax professional is to determine which taxpayers will make successful Offer in Compromise candi.

Parl Paymt Installmt Agreemt: A third tool Tax Professionals have to help taxpayers is called the Parl Paymt Installmt Agreemt (PPIA). The PPIA contains aspects of both the Installmt Agreemt and the Offer in Compromise. Like an Installmt Agreemt, an agreed-upon paymt amount is made each month. But, these paymts are only made until the t-year collection statute expires. Any balance remaining after the statute has expired is extinguished as uncollectible.

Today I have discussed rect changes made to the IRS installmt agreemt program and shared two other options available to taxpayers who owe back taxes. I did not, however, discuss many of the requiremts and limitations of these options or any other factors that may influce your situation or paymt strategy. As always, remember that this (or any) article does NOT titute tax advice. If you have or need assistance, please feel free to contact our office for more information.

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