Kinder, Gentler Tax Collections

Watch television enough and you’ll eventually find someone touting their ability to solve tax debts for “pennies on the llar.” Pay very close attention (and get out a magnifying glass) and you’ll also find the fine-print disclaimer stating that such results are unusual and not to be expected.  Although settling a $50,000 tax debt for $2,500 is a tax professional’s rare pleasure, such reductions in tax liability are more often the result of correcting taxpayer-errors than heated negotiation with the .

The has, however, made some meaningful changes to ease the burden on those owing -taxes.  Today, I will discuss recent changes made to the ’s Streamlined Installment Agreement Program.  I will also share two other tools Professionals use to help taxpayers pay and reduce their tax debts: the Offer in Compromise, and the Partial Payment Installment Arrangement.

Installment Agreements Made Easier: On January 20, 2012 the ineased the upper limit for taxpayers who will qualify for the Streamlined Installment Agreements Program from $25,000 to $50,000.  It also added a full year for qualifying participants to pay their -taxes by ineasing the maximum repayment period from 60 to 72 months.  Although the liability threshold and repayment period have ineased, certain requirements must be met to qualify. These requirements vary based on the amount of -taxes owed.

Tax Debt $10,000 or Less: Generally, individual taxpayers requesting an installment agreement will not be turned wn if they: 1) Owe less than $10,000, 2) Have filed their tax returns on time and paid all taxes due for the previous five years, 3) Agree to pay their tax debt in full within three years, and 4) The agrees they need additional time to pay.

Tax Debt $25,000 or Less: Those who owe $25,000 or less in -taxes and not qualify for a “guaranteed” installment agreement may qualify for the Streamlined Installment Agreement.  The agreement is requested by completing Form 9465.  If accepted it will give taxpayers up to 72 months to pay their taxes.  Although this request n be refused by the , it will generally be accepted if all tax returns have been filed and the taxpayer has not defaulted on a previous agreement.

Tax Debt $25,000 to $50,000: The changes mentioned above have made it possible for those owing from $25,000 up to $50,000 to also qualify for a Streamlined Installment Agreement.  The agreement is requested by completing Form 9465-FS and will give taxpayers up to 72 months to pay their taxes.  Although applying is a bit more complex for those who owe this amount of -taxes, it is much simpler than before.  lculations must be made to determine whether the taxpayer n meet their payment obligation for the up-to 72 month period.

Offer in Compromise: An Offer in Compromise (OIC) occurs when a taxpayer offers less than total tax due to settle a tax deficiency.  Although a valuable tool for the Tax Professional, successful OIC are relatively rare.  The iteria for those who qualify is so narrow that, based on raw historil data, only about 20% accepted.  OICs n also take many months to aft, submit, and guide through the applition process.  As a result, one of the primary tasks of the tax professional is to determine which taxpayers will make successful Offer in Compromise ndidates.

Partial Payment Installment Agreement: Tax professionals have a third tool to help taxpayers lled the Partial Payment Installment Agreement (PPIA). The PPIA contains aspects of both the Installment Agreement and the Offer in Compromise.  Like an Installment Agreement, an agreed-upon payment amount is made each month.  But, these payments are only made until the ten-year collection statute expires.  Any balance remaining after the statute has expired is extinguished as uncollectible.

Today I have discussed recent changes made to the installment agreement program and shared two other options available to taxpayers who owe taxes.  I did not, however, discuss many of the requirements and limitations of these options or any other factors that may your situation or payment .  As always, remember that this (or any) article es NOT constitute tax advice.  If you have s or need assistance, please feel free to contact our office if you wish to speak with a tax professional.

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