If you receive a tax bill you can’t repay, it is understandable to feel concerned. Anyone can end up in a situation where they owe a tax bill to the IRS that they can’t afford, whether due to unexpected medical expenses or a job loss. If you can’t pay your taxes, there are a few ways you can pay what you owe at a manageable rate or even get debt relief. Below are three options you may have to settle your tax debt with the IRS.
Apply for an Offer in Compromise
The term the IRS uses for being able to settle your tax bill for less than the amount you owe is known as an Offer in Compromise (OIC). You can only apply for an OIC if you have filed all relevant tax returns and made the required estimated payments. You can make your offer to the IRS as either a lump sum payment or a periodic payment. A fee of $186 applies when you make an offer to the IRS for less than the full amount of your tax bill; however, certain low-income applicants are exempt from paying this fee.
The IRS considers your income, expenses, and ability to pay when looking at your application for an OIC. The IRS accepts an OIC when the proportion of the bill you offer to pay is reflective of the amount the IRS expects to collect from you within a reasonable timeframe and given your circumstances.
Come to an Installment Agreement
In many cases, taxpayers are unable to pay their tax bills when they are required to pay the amount that they owe in one lump sum. If your tax bill is higher than expected, you simply might not have the liquidity to pay your bill all at once, particularly if you are experiencing other financial pressures.
The IRS has installment plans available in which you pay your tax bill as a series of payments. The short-term payment plan enables you to settle your tax bill plus interest and penalties in 120 days or fewer. A long-term payment plan is also available that gives you more than 120 days to pay your tax bill in installments.
Qualify as Currently not Collectible
You could be eligible to qualify for Currently Not Collectible (CNC) status. The IRS assigns a CNC status to taxpayers they deem unable to pay their tax liabilities. Qualifying for CNC status means the IRS pauses its normal tax collection procedures, including letters, phone calls, and threats of tax liens. To qualify for CNC status, that taxpayers need to demonstrate that paying off their tax debt would create a hardship, thus leaving them unable to meet necessary living expenses.
If you can’t pay your tax bill in full, you need to find a way to repay what you owe to the IRS at a manageable rate. Whether manageable means making an Offer in Compromise for a reduced amount or settling your bill in installments, find an IRS debt relief program that’s right for you, based on your circumstances. If you really can’t pay, the CNC status is available.
About the author:
Nitin Maheta is the Founder of techiemates.com and a tech geek. Besides blogging he love reading books, Learning new things, and Hanging out with friends.