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Why an IRS Installment Agreement Will Cost You More

Manny Davis — Fri, 12 Feb 2010 13:20:45 +0000

Did you know that an installment agreement will end up costing you way more money in the long run? Many people think that applying for a payment plan with the IRS will help them save money – this is not the case. It is very important to realize that you will be spending more money than you have to in order to pay off your debt.

Why does an installment agreement end up costing me more money? This is the question you need to ask yourself before you apply and move forward. Generally speaking, with a payment plan you are asking the IRS to let you pay off your debt over the course of many months. There is nothing wrong with this, but since you are carrying debt they are going to charge you interest. So as you can see, the longer it takes to pay back your debt the more money you are going to owe.

Throughout the duration of the payment plan you will be charged interest on the unpaid portion. Sure, this amount will get smaller as time goes by, but nonetheless you are still paying more than just your original debt.

What can I do to avoid paying more? The IRS suggests that you attempt to pay your debt in full. If you have enough cash available to pay your entire debt you should do so. This may deplete your cash reserves, but in the long run you will save money because you will not have to pay penalties and interest to the IRS.

If you cannot pay your taxes in full an installment agreement is a good choice most of the time. If you just don’t pay your taxes you will be charged with multiple other penalties that will make your tax balance grow much faster. It is a good idea to assess your different options and decided which is best for you over the long term.

As you can see, an installment agreement will cost you more than if you decide to pay your tax debt in full. Yes, there are times when an installment agreement is the only way to go. Many times the interest and penalties that you will pay when entered into an installment agreement will be less than if you borrowed money in a different way, such as a credit card. This is why thousands of people wind up with a payment plan. But remember this: if you don’t have to apply for an installment agreement you should avoid it. This way you can get rid of your debt without paying the IRS extra money. Don’t you owe them enough?

Why it’s Important to File Your Taxes Even if You Can’t Pay

Manny Davis — Fri, 18 Dec 2009 13:58:39 +0000

So, it’s time to file your taxes and you realize that you can’t afford to pay the IRS. This is a tough position to be in. For many, the answer to this problem is to hide from the IRS and hope that they do not come around for a long time. Unfortunately, this is never what you should be doing.

If you cannot afford to pay your tax bill, follow this advice. It can save you a lot of money in additional penalties and interest that you would receive if you did fail to file:

File your taxes anyway. The last thing you want to do is pass by on filing your return because you know you cannot pay what you owe. This is not something that the IRS is going to look kindly upon – you must file no matter what. The harshest penalties that the IRS imposes is the failure to file penalty. The failure to pay penalty is much less than the failure to pay penalty.
Pay what you can. Sure, it would be nice to pay your entire tax bill in full so that your account is in good standing with the IRS. The only problem is that you may not have enough money to make this happen. In this case, you should pay as much money as you can. Not only will this reduce your liability, but it will also show the IRS that you are trying your best to pay. It is better to pay less than what you owe than nothing at all.
The IRS is willing to work with you. If you have a history of filing and paying on time the IRS will try to make things as easy on you as possible. For instance, if your tax bill is less than $25k you will probably qualify for an installment agreement. This allows you to pay your liability over many months, as opposed to all at once. But remember, you do not qualify for installment agreement unless you have filed your most recent return as well as subsequent ones from the past.
You will not fall any further behind. If you do not file your taxes and neglect to pay you have two things going against you. But if you at least file the only problem you are facing is how to come up with the money that you owe. If you are having trouble coming up with the money to be you can be assured that there are many different tax settlement methods offered by the IRS. The IRS ensures they offer settlement methods that can accommodate just about any taxpayer with just about any type of financial situation.
By paying as much as you can you may be able to avoid all or some penalties and interest. The longer you wait the more you will owe the IRS when you finally decide to come around. All penalties can be avoided if you set up some sort of agreement with the IRS prior to the taxes amount being due but you will always be liable for the interest that ads up on the outstanding tax amount.

If you do not understand your position and how to move forward, hire a tax professional. He can help you file your current tax return, as well as any you have missed in the past. Along with this, a professional knows what the IRS is looking for and can offer tips and advice on how to best deal with your situation in the future. At some point you will have to pay the IRS. It is always nice to have an expert on your side that can help you solve your problem while paying the least amount possible.

3 Common Tax Relief Methods if You Can’t Pay Your Taxes

Manny Davis — Mon, 14 Dec 2009 12:42:48 +0000

When you can’t pay your taxes on time or in full you have various options available to you. This year, more than ever, taxpayers are receiving tax bills that they are unable to pay. The IRS is well aware that there are situations that arise that will make it difficult for everyone to comply with their tax obligations. For this reason the IRS has created various methods that are available to the taxpayers to pay back the taxes they owe without causing severe financial strain.

The IRS is pretty particular as to what methods they allow certain people qualify for. There are some methods that just about anyone can qualify for and then there are methods that you need to prove your financial situation through various complex form filings and detailed financial statements. Below are three common methods used by individuals that do not have enough money to pay the IRS in full for the taxes they owe.

Installment Agreement: An installment agreement is the most common method used by taxpayers to pay back their taxes when they cannot pay in full. An installment agreement is fairly easy to qualify for and does not require a very detailed filing like other methods. An installment agreement allows the taxpayer to pay back the taxes they owe in monthly increments until the balance is paid off. There are various forms of installment agreements and the one you use is dependent upon how much you owe in taxes. If you owe under $10,000 and can pay off the amount in a period less than 3 then a guaranteed installment agreement should be used. If you owe less than $25,000 in taxes and can pay off the entire tax balance in a period of less than 5 years then it is best to file for a streamlined installment agreement. If you owe over $25,000 in taxes you will be required to file for a financially verified installment agreement which requires a bit more paper work to show you will financially be able to make the minimum payments required.
IRS Financial Hardship: If your financial situation is to the point where you cannot pay your taxes and you can’t even make the minimum payments required with an installment agreement then proving financial hardship to the IRS could be an option. When someone proves financial hardship they are declared temporarily uncollectible. When they receive this status the IRS does not pursue collections on the individual for a time being. This is only a temporary tax relief method but it does allow the taxpayer some time, often years, to try to improve their financial situation. When one’s financial situation has been improved enough then the IRS will require the taxpayer to pay back the taxes they owe.
Offer in Compromise: If your financial situation is to the point where you cannot pay your taxes owed and don’t think you will ever be able to pay the taxes owed then an offer in compromise may be for you. With an offer in compromise the taxes owed can be negotiated for less. The amount that they are negotiated for should be equal to or greater than the amount the IRS would ever expect to collect from you, even through forced collection mechanisms. This is a very detailed filing with a low acceptance rate. It is suggested that you hire a tax professional to help you with this kind of filing if you feel you meet the requirements.

If you know you will not be able to pay your taxes it is a good idea to work with the IRS as soon as possible on order to come up with a resolution. If you do not put in place a resolution you will be charged with various penalties and interest after the due date for taxes. If you are unsure of what resolution method to use it is a good idea to talk with a tax relief professional.

Former NBA Star Robert Traylor Owes $178K in Back Taxes

Manny Davis — Thu, 17 Sep 2009 23:31:54 +0000

Former NBA star Robert Traylor has about 13 days to set up a payment plan with the IRS for the $178,000 dollars that he owes or he could go to jail for 60 days, according to The Boston Herald. US District Judge Avern Cohn stated that if he doesn’t set up the payment plan (most likely an Installment Agreement) within two weeks, he will be sent to jail.

Traylor, who has been playing basketball outside the country, stated that he fell behind in making payments.

Tax Services: Use a Large, Nationwide Firm or Small Local Firm?

Manny Davis — Tue, 01 Sep 2009 23:36:59 +0000

If you have tax problems and are looking for professional help it is important to find a reliable tax company to help. There are many companies out there that can help, large and small. Both large and small companies have their benefits. Depending on what you are looking for in a tax company and what your tax situation is should determine what type of company you should use.

Small tax firms are typically better for establishing a long standing relationship to file taxes and maintain accounting records. If you own a business and you need someone to help maintain your books and do normal tax filings that every business needs to make, it is a good idea to go with a local company since this will be an ongoing relationship. Even if you are looking for a professional to help with tax returns and general accounting a local tax firm would be the way to go. Small firms are not better for handling complex tax debt and back taxes issues. Small, local tax companies tend to focus on the normal tax filings and don’t have the manpower and expertise needed to efficiently and effectively handle the complex tax issues that are not seen as frequently.

Large tax firms that serve individuals nationwide have a great advantage over the small tax firms that tend to serve local communities. These large tax firms are able to achieve efficiencies on more complex tax issues. Many of the large firms will hire a variety of different tax professionals (Tax attorneys, CPAs, Enrolled Agents, CPAs & Ex IRS Agents) to handle complex tax issues such as unfiled tax returns, large amounts of tax debts, tax levies, tax liens etc on a daily basis. A tax professional that handles tax levies every day is going to be more efficient and effective than a tax professional that handles them occasionally. Most small firms only see these types of cases occasionally, so it would be a wiser choice to go with a large firm in these cases. Large firms are typically cheaper as well because they know how to navigate IRS issues quicker and more efficient, therefore billing out less total hours on your case. Below are some instances where it would be a good choice to hire a large tax firm that helps individuals nationwide:

Most people have an apprehension to using a large tax firm that they cannot sit down with directly because they are not local, they shouldn’t. Tax cases are slow moving and are all done by mail and email and there is no need to use a local firm. Everything can be done more efficiently over the phone and through email. Hiring a large nationwide tax firm is a great idea to resolve complex tax issues because you have all the best resources and professionals in one central location to help you with your problem.

Paying Back Taxes Owed in a Down Economy

Manny Davis — Sun, 12 Jul 2009 06:21:33 +0000

As you know, the economy is affecting millions of people in a number of different ways. Some are losing their homes, others are losing their jobs, and many are finding it difficult to pay the taxes that they owe the IRS.

Over the past year, the IRS has run into problems with people not being able to pay their taxes due to a job loss or another problem that has been caused by the down economy. If you find yourself in this position, remember one thing: the IRS is not going to let you go just because the economy has taken a hit. They may realize that many Americans are in trouble, but this doesn’t mean that they will “write off” your taxes and let you off the hook.

But I really can’t pay my taxes. This is the way that many people feel. Being one of them is no fun. Even though you may be in a horrible position, and not knowing when things will get better, you can still stay on the good side of the IRS while paying them what you owe.

The first question to ask yourself is simple: can I pay my tax liability in full in any way, shape, or form? Do you have savings that you can use? Are you expecting severance from your past employer? If you can pay in full you will want to do so because you never know when the economy will take its toll on your finances once again. Unfortunately, most people find that they do not have the money to pay a lump sum and end up searching for another solution.

Your next best option, and the most common, is asking the IRS for a payment plan. What is this, exactly? A payment plan allows you to pay back taxes over the span of several months or years. Instead of paying a lump you can send smaller payments each month that are more affordable. The IRS knows that a lot of Americans are having a difficult time paying taxes, so they are expecting the number of requests for payment plans (installment agreements) to increase.

Don’t want to get involved with a payment plan? There is another option that you can consider. Have you ever thought about taking out a loan to pay back the IRS? With a payment plan this is essentially what you are doing. The IRS is more or less the lender, and they will require that you pay them on time while also charging interest. If you can borrow the money and get a better deal you should consider this. Not only will you be able to save money, but there is a good chance that you can find a lower monthly payment. On top of this, the IRS will get what they want and they will once again put your account in good standing.

The economy is down, and this is hurting many Americans. If you owe the IRS money, but cannot pay because of the negative impacts of the economy, it is important to consider every available option. Remember you can always receive professional tax help from a firm like ours to reduce your load, the possibility of errors with certain forms, and possibly the amount you have to pay the IRS.

Can’t Pay Taxes? Set Up an Installment Agreement

Manny Davis — Sat, 20 Jun 2009 01:25:03 +0000

So you can’t afford to pay your taxes right now? Its okay; the IRS has options for you. This is probably a more common occurrence than you actually think. The IRS literally handles thousands and thousands of taxpayers each year that cannot pay what they owe. You can be assured that the IRS will have a method available to you in order to stay in good standing with them, even if you can’t pay in full or even at all. All you need to do is make the appropriate filing with them.

What is an Installment Agreement?

An installment agreement is an agreement between the IRS and the taxpayer that allows the taxpayer to pay back the taxes owed in monthly increments until the tax owed, plus interest has been paid off. An installment agreement is fairly easy to apply for. The good thing about an installment agreement is that once a taxpayer enters into this agreement the IRS will stop or will not charge any additional penalties on the taxes owed as long as payments are made on time and in the monthly required amount. It is best to setup an installment agreement at the time you know you cannot afford the taxes owed but you can still setup at anytime. This agreement is also a great way to remove or prevent the IRS from placing a lien and stops the IRS from enforcing a levy. It is important to make the required monthly payments because the IRS can then take tax collection actions against you if they choose.

Applying for an Installment Agreement

There are three different ways to apply for an installment agreement. It doesn’t matter which you choose they will all accomplish the same thing, just some are quicker than others.

Complete the Installment Agreement Request Form: IRS Form 9465
File on the internet at the following address: Online Payment Agreement Application
Over the phone by calling 1-800-829-1040. They will not set it up completely, but they will give you some guidance and them mail you forms afterward or tell you where to get on the internet.

If You Don’t Qualify for an Installment Agreement

If you do not qualify for an installment agreement it is because the IRS believes you will not be able to make the monthly payments or they believe you making the filing to stall collections or one of various other reasons the IRS can come up with. In that case you can ask if you can qualify for a partial payment installment agreement that will allow you to make lower monthly payments than those required with regular installment agreement. It is a good idea to talk with a tax professional if you can’t qualify because they can figure out the best method for you to resolve your tax problem with the IRS and ensure the IRS accepts it.

Importance of Paying Your Installment Agreement On Time

Manny Davis — Wed, 06 May 2009 16:39:28 +0000

Are you entering into an installment agreement with the IRS? If so, you are making the move that is right for you and your tax liability. With an installment agreement in place you have the chance to pay what you owe without taking a large lump sum out of your bank account. Of course, you need to take this situation very seriously. The IRS is not going to let you do whatever you want when it comes to your installment agreement. One of the most important things to remember is that you need to make every payment on time. If you begin to miss payments or not send the total amount you will find yourself back at square one, and in a lot of trouble.

Your installment agreement payments must be made on time. This starts with the first one that you send, and ends with the very last one that brings your balance down to zero. If you do not feel that you will be able to pay on time every time you may want to consider another option for paying the IRS.

What if something changes that makes it more difficult for me to pay on time? In this case, you need to contact the IRS without delay to let them know what you are up against. Just like anything else that has to do with your taxes, hiding from the IRS is only going to make your situation worse.

If you do not make your payments on time the result could be a default of your installment agreement. In turn, this could lead to a tax lien or a levy by the IRS; both of which you do not want to deal with. As you know, a lien and/or levy can make things worse on you financially while also harming your credit score.

Entering into an installment agreement may be the best way for you to pay back taxes. But remember, you have no option but to pay the proper amount on time every month.